Timing awry

Discovery assessment and bad debt relief

The taxpayer operated a consulting business. He also owned an oil water separator which he leased. He claimed to carry forward losses under ITA 2007 s 83 from the leasing trade against his consultancy. At a preliminary hearing (TC4898) the First-tier Tribunal decided the two businesses were separate and the losses could not be offset this way.

The appeal centred on whether HMRC was entitled to make a discovery assessment for 2011-12 whether the taxpayer was entitled to bad debt relief and how his tax liability should be computed given that he was carrying on separate trades.

On the discovery assessment the First-tier Tribunal agreed with HMRC that nothing in the taxpayer’s 2011-12 tax return or papers would have alerted a reasonable officer to form the view that he ran two businesses and that the losses of one could...