Discovery and penalty

[webberg]

http://www.taxchambers.com/wp-conten...w-11.11.14.pdf

This is a thread to collect together thoughts on two very complex and potentially controversial issues.

Strictly these two issues are separate and distinct. In many cases however where a discovery assessment has been made and is proven to be valid, a penalty becomes more likely.

It is however increasingly the case that HMRC seeks penalty even where declarations of income/relief have been made. Challenges to such penalties are usually heard at First Tier Tribunal (or at least I've not found anything significant at higher level yet). Worryingly HMRC is sending out penalty questionnaires in situations where a decision on a substantive issue has been made in Court but where no mention is made of penalty.

Starting however with discovery (because there is more published material) the above link is a good start. It discusses Fisher and Freeman which contain pretty good summaries of the state of play. I'm pretty sure Fisher continues its journey through the Courts but whether HMRC has dropped the discovery point remains to be seen.

It mentions Veltma which HMRC relied upon for a long while. It does not cover Robert Smith TC2768 (HMRC win) but perhaps that's because the author considers the cases selected as more current?

I am not the author. I have never met the author although I do know people from the Chambers she comes from. I am not therefore in a position to recommend or otherwise the individual or her Chambers.

I will say that aside from the typo error (repeated paragraph) I think it's a good start.

I know that there are many here who like to discuss the technical elements (you know who you are) whilst others throw up their hands in frustration and confusion. Hopefully this thread will be useful to both camps.

[webberg]

Additional

I think it would be wise to collect a list of case names and references and try to put these into a time line and with a brief note of the issue.

I'd be happy to do this (although it will not be today, this week or perhaps even this month) but it will come together.

Please add relevant cases to the following list:

Fisher
Freeman
Charlton
Veltma
Lansdowne
Blumenthal
Hankinson

I'll give it a week or so and start a summary

[StrengthInNumbers]

Thanks for this. Lots to chew into.

[centurian]

It's a bit like the "everyone knows not to invite a vampire into your home" saying

Likewise "everyone knows HMRC can't apply penalties as long as you declare 'it' on your return" without actually having any ground upon which to base that - other than the fact that everyone has told them that before - and I've probably been guilty of that in the past.

[webberg]

It's a bit like the "everyone knows not to invite a vampire into your home" saying

Likewise "everyone knows HMRC can't apply penalties as long as you declare 'it' on your return" without actually having any ground upon which to base that - other than the fact that everyone has told them that before - and I've probably been guilty of that in the past.

As mentioned, the problem is that penalty rarely makes a Court.

There are a lot of appeals about late returns and what I would call automatic penalties for late submission etc, but few about penalty arising from proven (or unproven) avoidance.

I suspect that by the time most people have lost the substantive issue an extra 20/50/100% in penalty is irrelevant anyway.

If anybody finds a case though add it to the list and we can try to put it in a matrix.

[StrengthInNumbers]

Gone through the link at the start of thread. Does not proves to me that HMRC can impose penalties.

Rather freeman's decision seems like to support the fact that with P11D submitted with tax return should stop HMRC from issuing discovery. Even if DOTAS SRN was not on the return.

[webberg]

Gone through the link at the start of thread. Does not proves to me that HMRC can impose penalties.

Rather freeman's decision seems like to support the fact that with P11D submitted with tax return should stop HMRC from issuing discovery. Even if DOTAS SRN was not on the return.

I agree. Freeman and Fisher are helpful.

I think we need to build this list and analysis and try to predict a trend rather than cherry pick cases?

Certainly my impression is that the Courts are trying to reel in some of the slack they've given HMRC on Discovery.

I'd like to see a penalty case derived from a decided action. Not spotted one so far.

It's also worrying that some cases that are not helpful to HMRC are failing to appear on BAILLI or similar or are appearing but are buried in lots of other cases reported at the same time.