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Worrying tribunal decision

A recent case before the First Tier Tribunal (FTT) looked at whether or not a discovery assessment made by HMRC was valid.

The facts are that the taxpayer had incorrectly (albeit innocently) claimed to set losses arising from capital allowances in a yacht chartering business against other income.  Relief was not available, as he had not personally been involved in the business.

The question was whether HMRC should have been aware of the underassessment of tax before the enquiry window closed.

The FTT stated that, for the time limit to apply the factual information contained in the return must indicate an underassessment; it is not enough for it to suggest that further enquiries may be necessary.

More worryingly, the FTT added that an ordinary HMRC officer could not be expected to know about the existence of a rule which was of rare application and consequently even if the return had contained a full disclosure, the discovery assessment would have been valid. 



Date: 2nd September, 2014
Author: Cathy Corns


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