HMRC loses big avoidance case

[TheFaQQer]

https://www.accountingweb.co.uk/tax/...edural-failure

Failure to follow the procedures means that the defendant keeps the £475k

[phil@pmtc]

HMRC have arguably been using s29 'discovery' as an extension of the enquiry window for quite a while now. Therefore, pleasing to see this case has reversed the tide somewhat. Not surprising to see Julian Ghosh was the successful QC for the respondent. If you need someone to present your case then he is very much 'the man'.

[DaveB]

So what this is saying is that provided you tell HMRC what you are doing on your return, regardless of whether or not is it actually compliant with tax law, if they don't do anything about it at the time you are basically off the hook.

[phil@pmtc]

So what this is saying is that provided you tell HMRC what you are doing on your return, regardless of whether or not is it actually compliant with tax law, if they don't do anything about it at the time you are basically off the hook.

A very shortened answer is that HMRC have 1 year to open an enquiry. If they miss this then the only way they can enquire is via s29TMA 1970 'Discovery'
However, S29 can only be utilised if information has come to light than the inspector could not have been reasonably aware of at the time of the normal window. If the information had been made available then s29 cant be used.
There are also strict deadlines for 'discovery' as well.
In this case it seems that a/there was no new information and b/even if there had been, they missed the discovery window anyway

[DaveB]

A very shortened answer is that HMRC have 1 year to open an enquiry. If they miss this then the only way they can enquire is via s29TMA 1970 'Discovery'
However, S29 can only be utilised if information has come to light than the inspector could not have been reasonably aware of at the time of the normal window. If the information had been made available then s29 cant be used.
There are also strict deadlines for 'discovery' as well.
In this case it seems that a/there was no new information and b/even if there had been, they missed the discovery window anyway

I was referring to this bit :

Sadly for HMRC, and happily for Tooth, he had been neither careless nor deliberately misleading. He made a clear disclosure in the white space of his tax return 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. This was exactly the approach which HMRC had asked for in SP1/2006!

[webberg]

Technical win.

The underlying scheme was lost.

HMRC incompetence however meant that this one got "away with it".

[ChimpMaster]

I'm guessing it wasn't a 'loan scheme' because otherwise Tooth would be bitten by the DR charge in 2019 anyway.

[Theythinkitsallover]

Avoidance case

So Phil

Let me ask this question someone has an open enquiry for say 09/10 tax year. HMRC have all the relevant info on their avoidance scheme bank statements etc....... and the taxpayer is told that their use of this scheme is under investigation by the SCI unit and they will make contact. Then nothing for 10years - not a peep.

So the tax payer carries on using the same scheme for the following tax year and subsequent years despite being under enquiry for the previous year same employer etc....

HMRC fail to open and enquiry into the 10/11 or 11/12 tax year forget about it and then decide to issue discovery assessments within the 4 year time frame because time pressure and complacency meant they had failed to open the correct enquiries.

Does this not render the discovery assessment invalid too as the officer of the board was "aware of the information and potential loss of tax/use of scheme" as this information was made available in the preceding tax year under investigation and therefore the officer of the board should have reasonably assumed that there could be a loss of tax in following year and should therefore have opened an enquiries rather than a discovery assessment.

Difficult to explain I know but hopefully you get where I am coming from. Once again complacency and doing nothing by HMRC

[ChimpMaster]

Theythinkitsallover I see your point but isn't it all irrelevant now that the DR charge will "catch-all" in 2019?

I have closed years (i.e. never Enquired/Discovered/Protected whatever you want to call it) from a decade ago and they will be caught by DR charge.

[Manic]

An interesting point ChimpMaster, if so then Mr Tooth in the article linked will also be subject no?