Appropriate discovery

Application of the discovery rules in TMA 1970 s 29

The taxpayer claimed capital losses of about £2.6m in his 2003-04 tax return. After examining the return in October 2006 HMRC concluded he had taken part in an avoidance scheme involving second-hand insurance policies.

In 2009 the Court of Appeal ruled in J Drummond v CRC [2009] STC 2206 that a similar avoidance scheme did not work. HMRC raised a discovery assessment in 2010 and the taxpayer appealed.

Referring to TMA 1970 s 29(5) he said a hypothetical HMRC officer could have been expected to be aware of the insufficiency in the return when the enquiry window closed on 31 January 2006. The First-tier Tribunal dismissed the appeal.

The first issue for the Upper Tribunal was whether a discovery could comprise a series of discoveries as stated by the First-tier Tribunal. The judge said the earlier...