HMRC and Discovery Assessments
Updated: Sep 23, 2020
HMRC’s power to raise discovery assessments continues to be the subject of litigation on a number of fronts.
Most recently, both the courts and tribunals have held that discovery assessments were invalid on the basis of ‘staleness’, because they were not made on the basis of new information, for example in the cases of Hargreaves, Beagles and Tooth. The test of whether the information was new is applied at the time the assessment was made. It seems clear that the case law in this area is developing rapidly but the concept itself appears to have gained acceptance in a wide variety of circumstances.
In addition, appeals against assessments have been allowed where it can be demonstrated that the assessments are not made to the best of the officer’s judgment. In circumstance where assessments are so far removed from the actual or alleged tax liability, for example because they have been estimated, tribunals have found that the assessments are not made to the best of judgement and are therefore invalid, for example in Ritchie v HMRC.
It is frequently the case discovery assessments are made at the last possible moment or have been made in estimated figures, particularly in cases involving historic planning. With that in mind, advisers should be revisiting those assessments to confirm whether they were validly made in light of the changing case-law. This opens up a variety of potentially new challenges for those advising clients on discovery assessments. I am advising a large number of clients on these issues and am finding that there is a great deal of scope to challenge discovery assessments by applying the principles in these cases together.
If you would like to discuss these issues in more detail, please don’t hesitate to get in touch.