Inappropriate discovery

Lansdowne Partners Ltd Partnership was a fund manager. In August 2005 it submitted a partnership statement for the year 2004/05 which included rebated fees paid to the partners.

HMRC treated the rebates as deductible expenditure. However in 2008 the department amended the 2004/05 statement saying the rebated fees were not deductible.

The partnership appealed claiming that HMRC were too late to open an enquiry into the 2004/05 partnership statement; this should have been done no later than 31 January 2007. HMRC claimed that the discovery provisions applied (TMA 1970 s 29 and s 30B).

The General Commissioners allowed the appeal so HMRC appealed.

In the High Court Mr Justice Lewison said that for the discovery provisions not to apply it had to have been reasonable to expect the inspector to...