EWHC 2582 (CH)
The partnership submitted its partnership tax return and partnership statement for 2004/05, which included rebated fees paid to the partners. HMRC treated the rebated fees as tax deductible expenditure but, in November 2008, amended the statement on the basis that the rebated fees were (correctly) not deductible. The partnership appealed on the grounds that HMRC were too late to open an inquiry, as the inquiry window had closed on 31 January 2007. HMRC contended that it was entitled to raise a discovery assessment.
HELD: The taxpayers’ appeal was allowed, ruling that the HMRC officer should have been aware of the insufficiency in the declared profit in the partnership statement.