In 2006/07 the taxpayers entered into a tax avoidance scheme, similar to that which was found to be ineffective in Drummond v HMRC.
Comprehensive disclosure, drafted by counsel, was made in the taxpayers’ self assessment returns.
In July 2009, HMRC issued a discovery assessment under TMA 1970, s29. The taxpayer appealed, contending that the assessment had been issued outside the statutory time limit.
Held: The taxpayers’ appeal was allowed. The tribunal accepted that there had been a discovery assessment but on the evidence, the information provided with the taxpayers’ returns was sufficient to show that 'no officer could have missed the point that an artificial tax avoidance scheme had been implemented'.
Any officer reviewing the return should then have proceeded to seek guidance and an inquiry should have begun before the closure of the inquiry window on 31 January 2009.
Discovery should not be used to make up for administrative inadequacy on the part of HMRC.
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