Discovery stands

The taxpayer bought an interest in November 1998 in the popular Castle Trust scheme the aim of which was to create allowable losses. He disclosed chargeable gains of £1.8m in his 1998/99 tax return but claimed they should be offset by capital losses of more than £2m.

He stated that the losses were attributable to a “beneficial interest in the Castle Trust”.

HMRC officials investigating the scheme became aware in 2004 that the taxpayer had taken part. A discovery assessment was raised.

Taxpayer appealed claiming the Revenue was aware of his participation before he submitted his return. The department had decided the Castle Trust scheme was not effective before he had filed the document meaning the tax authority should have been aware of tax insufficiency before the enquiry window closed.

The First-tier Tribunal upheld the discovery assessment. The taxpayer appealed.

The Upper Tribunal said the return might...