A solicitor who became adviser to former F1 chief executive Bernie Ecclestone has lost in his appeal over the taxability of £40m worth of payments and whether HMRC penalties were correctly assessed.

Stephen John Mullens, a former partner at City firm Marriott Harrison LLP, worked for the Ecclestone family interests after resigning from the firm in 1999. He received a payment of £1.2m in 1999/2000 which the first-tier tribunal found was part of remuneration. In the tax year 2000/01 Mullens received £750,000 and £300,000 which were found by the court to be further financial rewards for Mullens' services but were not declared in self-assessment returns.

The judgment noted that Mullens received payments from Slavica Ecclestone, Bernie’s wife, which he contended were gifts. This includes payments of $38m in 2006/07, $19.5m in 2012/13 and £5m in the same year. The tribunal found those payments were made in return for Mullens' services to the family and none were declared on his self-assessment returns.

Mullens appealed against both the assessment of the payments and the penalty assessments.

Mr Justice Richard and Judge Andrew Scott noted in Stephen John Mullens v The Commissioners for HMRC a ‘clear asymmetry in information between taxpayers and the tax authorities: taxpayers know about their affairs while HMRC can, in the absence of information as to those affairs, often do little more than make inferences from such information as they do have’.

The 21-page judgment added: ‘If HMRC wish to make a discovery assessment, they will, almost inevitably in those egregious cases [such as fraud on the part of the taxpayer], struggle to do the job that the taxpayers are required by law to do, namely analyse a full and complete set of facts and then produce an accurate assessment of their tax liabilities.’

It found that the law does not require HMRC ‘to do something that they are not equipped to do in those cases’.

Dismissing the assessment appeal, the judgment said the first-tier tribunal's findings 'show that HMRC had established that (i) all of payments 1 to 4 were consideration for services that Mr Mullens had provided and (ii) Mr Mullens knew that they should have been disclosed on his tax returns for the tax years in question, but he made a conscious and deliberate decision not to disclose them.

‘It is difficult to conceive of a clearer prima facie case than this. It is clear, when the FTT’s decision is read as a whole, that the FTT found Mr Mullens’ answer to that prima facie case entirely unsatisfactory. Given the FTT’s factual findings, which cannot be challenged in this appeal, it was correct to hold that HMRC had satisfied their Section 36 Burden.’

Mullens' appeal against the penalties was also dismissed.