The Gardiner family (husband, wife and son) had taken part in a failed tax avoidance scheme. HMRC contended that they were negligent for having filed tax returns based on the assumption that the scheme was effective, up to the point where the Court of Appeal decided it was not. On the issue of negligence the tribunal found in favour of the taxpayers because:
1) the burden of proof was on HMRC to demonstrate negligence by the taxpayers, not on the taxpayer to demonstrate their innocence;
2) HMRC did not appear at the tribunal; and
3) the tribunal would not admit HMRC’s written evidence because “it would not be appropriate to admit documents in evidence without a witness adducing those documents and explaining the reliance placed on them.” However, taxpayers whose tax avoidance schemes are ruled ineffective cannot necessarily breathe a sigh of relief. It should not be assumed that HMRC will make the same mistake again.