Hedge Fund Manager May Save $835,900 Due to a Typoby
British tax agency wrongly identified year-end as April 6
Legal dispute over whether the mistake invalidates inquiry
A hedge fund manager says the British tax collection agency can’t investigate his 2009 finances because of a mistake in the letter warning him about the probe.
Her Majesty’s Revenue & Customs wrote to Michael Mabbutt, then at Thames River Capital, saying it wanted to open an inquiry into the tax year ending April 6, 2009, according to evidence from a London court hearing. The U.K. tax year ends on April 5.
Mabbutt’s lawyers say the error invalidates the notice.
“HMRC have only themselves to blame for what happened in this case,” they said in documents from the hearing.
The legal dispute is over “a very short issue; whether the revenue gave the taxpayer valid notice of its intention to enquire into his tax return,” HMRC’s lawyer Akash Nawbatt told a specialist tax court Thursday.
Responses from Mabbutt’s advisers saying the letter didn’t identify the 2009 year were “disingenuous,” Nawbatt said.
Mabbutt, now fund manager and founding partner at 1167 Capital, participated in an unnamed “avoidance scheme,” Nawbatt said. The disputed tax amounts to about 650,000 pounds ($836,000), according to an earlier legal ruling in favor of Mabbutt, which HMRC appealed.
Penalized or Punished?
British tax collectors have raised about 130 billion pounds since 2010 by targeting tax evasion and avoidance, and introduced new rules that penalize individuals’ attempts to reduce rates. Meanwhile, the agency has faced protests from some taxpayers who say they are being retroactively punished for practices that were never challenged at the time.
Finance workers in London have been some of the biggest participants in investment products designed to legally reduce tax bills. The leak of law firm documents dubbed the Panama Papers showed the extent of offshore avoidance and added to the pressure on governments to tackle abuses.
Mabbutt and HMRC declined to comment.
“The taxpayer has to be made aware that the inquiry phase is underway,” Mabbutt’s lawyer Keith Gordon told the judges. “The notice was not sufficiently clear.”
HMRC also opened probes into his finances for the years ending 2008 and 2010. Its legal documents didn’t identify the disputed scheme that Mabbutt disclosed in his 2009 return, or reveal the status of the other inquiries.
The two-judge panel ended the hearing Thursday afternoon saying that a ruling would be issued later.