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From Accounting Web
The Court of Appeal's decision last month in Lansdowne Partners demonstrated that if a taxpayer has given HMRC all the relevant information, HMRC cannot use section 29 (5) TMA 1970 as a basis of the discovery assessment.
Section 29, in particular sub section 5, allows HMRC investigators to re-open cases when they’ve discovered that tax has been underpaid and inadequate information was provided to identify the issue within the normal inquiry deadline.
Keith Gordon of Atlas Chambers told AccountingWEB: “Since the case of Langham v Veltema the Revenue has taken a robust view in that, short of telling the Revenue on the tax return that the tax return was wrong, the taxpayer cannot be protected from a discovery assessment. The Revenue has repeated this argument on many an occasion with mixed success before the tribunals and courts.
“The Lansdowne Partners decision confirms that the true position is much more balanced and that therefore if the Revenue should have picked up the potential underassessment, they will be precluded from raising a discovery assessment at a later stage.”
A similar approach seems to have been taken by the first tier tribunal judge Howard Nowlan in the Charlton case last summer, which was purely focused on the discovery issue.
Commenting on AccountingWEB's report on the Hankinson decision, which appeared to reaffirm HMRC discovery powers, Gordon explained that it dealt with a relatively minor point - whether the discovering officer needs to be aware which limb of section 29 applied when raising the assessment.
HMRC has long been entitled to raise discovery assessments when they discover errors outside the normal SA enquiry timetable, and that it would be a shame if HMRC were to suggest that the Hankinson case had given the department new powers, Gordon added.