HMRC Loses Against Matalan

The taxman has lost out to the tune of £84 million after the founder of the clothing chain Matalan convinced a court that HMRC took too long to investigate his tax returns.

 

As such Mr John Hargreaves, 75, who founded Matalan in 1985 won his battle which originated from a tax return submitted in 2002.

 

The dispute related to the sale of £230 million of shares in Matalan during May 2000. Prior to the sale Mr Hargreaves informed HMRC that he had moved to Monaco and was therefore no longer a UK tax resident.

 

Seemingly HMRC began investigating his affairs in 2004, after it emerged that he was working three days a week at the firm's head office in Skelmersdale. The £84 million bill was issued under the guise of unpaid Capital Gains tax.

 

Published last week the tax tribunal concluded that the delay in issuing proceedings meant HMRC's assessment had "gone stale" and it cannot claim the tax.

 

Judge John Brooks commented, "There was, at the very least, more than three years between the discovery and the assessment. In my judgment, given this delay, the discovery had lost its quality of newness and become stale by the time the assessment was made. Accordingly the assessment cannot stand." HMRC has the right to appeal and suggested they were, "considering the judgment carefully".

 

HMRC opened an inquiry in January 2004 after media coverage of Mr Hargreaves' working arrangements seemed to suggest he'd been living in a hotel, and on his yacht, whilst continuing to work in the UK. 

 

In January 2007 HMRC issued a "discovery assessment" for £84 million in unpaid CGT on the value of the shares. Mr Hargreaves has been contesting matters claiming they had failed to follow the corrrect procedures.

 

The tribunal papers reveal that in September last year he withdrew the first part of the appeal "accepting that he was resident" in the relevant period. However, it was found that HMRC were in error on a point of procedure.

 

The judge was critical of Mr Hargreaves for failing to seek sufficiently detailed advice prior to filing his tax return.