The Upper Tribunal (UT) has upheld an FTT decision that HMRC did not satisfy the necessary conditions for making a discovery assessment, and so the taxpayer escaped a tax bill of £475,498.
The taxpayer made a clear disclosure in the white space of his tax return for 2009 stating that he had followed a treatment contrary to HMRC’s view of the law, and expressly invited HMRC to open an enquiry into the return.
Not only did the tribunal decide that the discovery assessment was out of time, it also ruled that there had not even been a valid discovery in the first place.
The taxpayer had provided HMRC with more than enough information to be aware that (on HMRC’s understanding of the law) there was an inadequacy in his self-assessment. No enquiry was opened, so no discovery could be made later unless there had been deliberate inaccuracy – which there was not.
Even worse: if there had been a discovery, it must have happened in 2009 when HMRC first wrote to Tooth denying his claim. Not issuing an assessment for another five years meant that discovery had gone “stale”. As something can only be discovered once, HMRC cannot have been acting on a “new” discovery made in 2014.
Full details are on AccountingWeb.
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