Reply to: HMRC loses big avoidance case

[phil@pmtc]

Forgive what is possibly a dumb question, but did HMRC not need to know about the scheme for it to have a DOTAS number in the first place ?

Not dumb at all - yes they would. However doesn’t necessarily mean they had everything required. As general rule of thumb though, yes quoting the dotas number on a return is a good argument that they had the info. It isn’t however a certainty.

My point overall though is simply that s29 really is complex and an absolute pain at times, even though it shouldn’t be.

[TestMangler]

No I’m afraid it’s not that clear cut. DOTAS number just shows you were in the scheme, HMRC can (and have) stated that they didn’t know enough about the scheme at the time of the enquiry window so a later discovery was valid

Forgive what is possibly a dumb question, but did HMRC not need to know about the scheme for it to have a DOTAS number in the first place ?

[Loan Ranger]

In our case, it has been clear cut.

Several people have had s29 TMA 1970 discovery assessments withdrawn after writing to HMRC citing “HMRC v Charlton, Corfield & Another”.

I'll post a template people can use.

[phil@pmtc]

No I’m afraid it’s not that clear cut. DOTAS number just shows you were in the scheme, HMRC can (and have) stated that they didn’t know enough about the scheme at the time of the enquiry window so a later discovery was valid

Sorry, should’ve added, that doesn’t mean it’s not a valid argument though,. Just that can go either way.o

[phil@pmtc]

If DOTAS number theory hold true (that will be amazing), the irony is most of us got "discovered" way after one year of which the reason why we were discovered is because we included DOTAS in our returns!

No I’m afraid it’s not that clear cut. DOTAS number just shows you were in the scheme, HMRC can (and have) stated that they didn’t know enough about the scheme at the time of the enquiry window so a later discovery was valid

[philinlondon]

The person would have an arguable case. Certainly worth seeking advice as to the chances of success of an appeal.

There's quite a bit of case law on discovery.

Most cases revolve around what was on the tax returns ie. the level of detail.

For example, if there was a DOTAS number on the returns then this would be a slam dunk.

If DOTAS number theory hold true (that will be amazing), the irony is most of us got "discovered" way after one year of which the reason why we were discovered is because we included DOTAS in our returns!

[phil@pmtc]

I dont know - may not be that clear cut

If you choose CLSO2 is a DA viewed as an open or closed year ? If so an invalid DA could make a difference for some re interest payments
If you decide to pay LC then HMRC infer that open years will still be enquired into for interest etc...

Is a DA an open year and can they claim interest if successful in litigation and if that DA proves subsequently to be invalid ......and so on

If you decide to litigate whether the year of Discovery is open or closed or invalid could make all the difference

For all these reasons I think its important

But above all it highlights complacency and procedural errors within HMRC which I dont think will do them any favours in the courtroom when seeking to collect against the future loan charge for those who wish to take on the fight.

Yes, a DA will be classed as an open year.

[phil@pmtc]

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

Yes, they would have a strong argument.
I should state, there have been absolutely thousands of discovery cases argued in tribunals, all of which means that its not always as straightforward as perhaps should be.

[Loan Ranger]

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

The person would have an arguable case. Certainly worth seeking advice as to the chances of success of an appeal.

There's quite a bit of case law on discovery.

Most cases revolve around what was on the tax returns ie. the level of detail.

For example, if there was a DOTAS number on the returns then this would be a slam dunk.

[Theythinkitsallover]

I dont know - may not be that clear cut

If you choose CLSO2 is a DA viewed as an open or closed year ? If so an invalid DA could make a difference for some re interest payments
If you decide to pay LC then HMRC infer that open years will still be enquired into for interest etc...

Is a DA an open year and can they claim interest if successful in litigation and if that DA proves subsequently to be invalid ......and so on

If you decide to litigate whether the year of Discovery is open or closed or invalid could make all the difference

For all these reasons I think its important

But above all it highlights complacency and procedural errors within HMRC which I dont think will do them any favours in the courtroom when seeking to collect against the future loan charge for those who wish to take on the fight.

[difficulttimes]

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

The article says 'he invested in a tax avoidance scheme' so could have been a film scheme etc. No mention of loans so I think Mr. Tooth should be drinking a lovely bottle of bubble this evening as he has dodged a £400k bullet!

[Manic]

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

[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.

[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]

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