< Go Back HMRC Discovery became 'Stale' Posted: Dec 3, 2018 In Clive Beagles v HMRC [2018] UKUT 380 the Upper Tier
Tax Tribunal (UTT) confirmed that a discovery assessment can become 'stale' in
circumstances where HMRC is aware of a potential insufficiency of tax but delays in raising an appropriate 'Discovery assessment'.
Mr Beagles entered into an avoidance scheme in 2002-03 By June 2004 HMRC was aware of the scheme and considered it did not work as claimed. Already out of time to raise an assessment within the normal enquiry time limits, HMRC decided to await the outcome of another case before taking further action. HMRC eventually raised a 'Discovery Assessment' in 2008. The taxpayer appealed to the FTT who ageed with HMRC that
it was resonable for HMRC wait for the outcome of another case
before raising an assessment.
The taxpayer appealed to UTT on the basis that the FTT decision was wrong in law.
The UTT accepted the taxpayers argument that a discovery must retain its “newness” when an assessment is made.
It found that HMRC believed the scheme did not work from at least August 2005. At that time there was no case law suggesting that a
discovery could go stale. It was not until two and
a half years after August 2005 that the assessment was finally raised. This case shows that a 'Discovery' Assessement must be made within a reasonabe time to still qualify as a 'Discovery', which is, on any understanding of that word, is the act of finding something out that was not known before. HMRC cannot sit on it's hands in cases when that believe there may be an insufficiency of tax and do nothing until it deems it time to do so. Delays in making assessments will risk them being considerd as no longer new enough to carry on being considered as a 'Discovery' and, if normal assessing time limits have expired, render HMRC incapable of raising any assessment at all.
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