In the recent hearing of Bashir Ahmed Jafari v HMRC  UKFTT 0692 (TC), the question of discovery and staleness was once again explored, in what will be seen as another bruising blow for HMRC.
The matter concerned a discovery assessment issued in respect of income for tax years 2008/09 to 2013/14 inclusive, amounting to £143,234.56 of tax in dispute.
The main point in contention was the 2009/10 discovery assessment. This had been issued in August 2018 to remedy a closure notice that had been erroneously issued, due to there being no pre-existing enquiry outstanding.
The judge in the case asked HMRC to explain when the discovery had taken place. HMRC responded saying ‘on or around February 2016’ when the closure notice had been issued. Judge Austen then asked whether a fresh discovery had been made, HMRC’s answer to this was, no – there had not.
HMRC’s skeleton argument supported this notion;
“The year 2009/10 was closed on 24 February 2016 by issuing of a closure notice under S28A (1) & (2) TMA 1970. When preparing the Statement of Case, it became apparent that this was incorrect. The reason being that although a return for 2009/10 was initially received on 16 July 2013 this was not captured and was returned as unsatisfactory on 28 October 2013. The S9A TMA 1970 enquiry notice was issued on 26 July 2013 however no return had been captured at that time. It follows that the enquiry notice and the resulting closure notice issued under S28A (1) & (2) TMA 1970 were invalid. To rectify that situation HMRC issued an assessment on 15 August 2018 under S29 Taxes Management Act 1970. As the taxpayer had already appealed the decision HMRC treated the assessment to have been issued and appealed on the same day. It is this assessment HMRC will be requesting the Tribunal to determine.”
No new discovery
As a result, the Judge applied the view from both Beagles v HMRC  UKUT 380 and Tooth v HMRC  UKUT 38 finding that the discovery had been made in February 2016 and that no new discovery had arisen in August 2018 to warrant a new assessment. This was because there was no ‘newness’ resulting in it being ‘stale’.
Clearly, this is another example of HMRC getting their enquiry process wrong and seeking to cover this up with discovery. We have identified this as an issue for our clients for some years now and continue to progress matters to tribunal in light of positive judgements. We hope these will stop HMRC using taxpayers’ money to defend its liberal application of the principles of discovery.
Should you have received a discovery assessment that you believe is out of time or needs appealing, please do not hesitate to contact the team at email@example.com or 020 3468 0000. Alternatively, for more information on this matter visit https://wttconsulting.co.uk/tax/wtt-for-individuals/