CA 2004, 76 TC 259; [2004] STC 544; [2004] EWCA CIV 193
A company director was liable to tax on the transfer of a property to him from his company. He submitted a self assessment tax return on the basis that the property was worth £100,000. HMRC issued the taxpayer with a notice that his tax return had been processed without the need for correction. The company subsequently submitted a corporation tax return and HMRC subsequently formed the opinion that the value of the property transferred was £145,000. HMRC issued a discovery assessment on the director under TMA 1970, s29. The taxpayer appealed, contending that a further assessment was not authorised by TMA, 1970, s29.
It was held by the Court of Appeal that TMA 1970, s29(5) did not preclude HMRC from raising a further assessment. The Judge commented that the basis of the self assessment system is that:
'the inspector is shut out from making a discovery assessment under (s 29) only when the taxpayer or his representatives, in making a honest and accurate return or in responding to a section 9A enquiry, have clearly alerted him to the insufficiency of the assessment, not where the inspector may have some other information, not normally part of his checks, that might put the sufficiency of the assessment in question'.
In the circumstances, the Inspector could not “reasonably be expected” to infer that the assessment was correct on the basis of the information given.