“24. Where, as in this case, the taxpayer has included information in his tax return but has left it to the Revenue to calculate the tax which he is due to pay, I think that the Revenue is entitled to treat as irrelevant to that calculation information and claims, which clearly do not as a matter of law affect the tax chargeable and payable in the relevant year of assessment. It is clear from sections 8(1) and 8(1AA) of TMA that the purpose of a tax return is to establish the amounts of income tax and capital gains tax chargeable for a year of assessment and the amount of income tax payable for that year. The Revenue's calculation of the tax due is made on behalf of the taxpayer and is treated as the taxpayer's self-assessment (section 9(3) and (3A) of TMA). 25. The tax return form contains other requests, such as information about student loan repayments (page TR2), the transfer of the unused part of a taxpayer's blind person's allowance (page TR3) or claims for losses in the following tax year (box 3 on page Ai3) which do not affect the income tax chargeable in the tax year which the return form addresses. The word "return" may have a wider meaning in other contexts within TMA. But, in my view, in the context of sections 8(1), 9, 9A and 42(11)(a) of the TMA, a "return" refers to the information in the tax return form which is submitted for "the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax" for the relevant year of assessment and "the amount payable by him by way of income tax for that year" (section 8(1) TMA). 26. In this case, the figures in box 14 on page CG1 and in box 3 on page Ai3 were supplemented by the explanations which Mr Cotter gave of his claim in the boxes requesting "any other information" and "additional information" in the tax return. Those explanations alerted the Revenue to the nature of the claim for relief. It concluded, correctly, that the claim under section 128 of ITA in respect of losses incurred in 2008/09 did not alter the tax chargeable or payable in relation to 2007/08. The Revenue was accordingly entitled and indeed obliged to use Schedule 1A of TMA as the vehicle for its enquiry into the claim (section 42(11)(a)). 27. Matters would have been different if the taxpayer had calculated his liability to income and capital gains tax by requesting and completing the tax calculation summary pages of the tax return. In such circumstances the Revenue would have his assessment that, as a result of the claim, specific sums or no sums were due as the tax chargeable and payable for 2007/08. Such information and self-assessment would in my view fall within a "return" under section 9A of TMA as it would be the taxpayer's assessment of his liability in respect of the relevant tax year. The Revenue could not go behind the taxpayer's self-assessment without either amending the tax return (section 9ZB of TMA) or instituting an enquiry under section 9A of TMA. 28. It follows that a taxpayer may be able to delay the payment of tax by claims which turn out to be unfounded if he completes the assessment by calculating the tax which he is due to pay. Accordingly, the Revenue's interpretation of the expression "return" may not save it from tax avoidance schemes. But what persuades me that the Revenue is right in its interpretation of "return" is that income tax is an annual tax and that disputes about matters which are not relevant to a taxpayer's liability in a particular year should not postpone the finality of that year's assessment.”
“An assessment on a person in a case involving a loss of income tax or capital gains tax– (a) brought about deliberately by the person, … may be made at any time not more than 20 years after the end of the year of assessment to which it relates (subject to any provision of the Taxes Acts allowing a longer period).”
“…During the tax year ending5 April 2009 , I sustained an employment related loss for which relief is being claimed now in accordance with section 128 ITA 2007. Please refer to the partnership pages of my return. Full details of this loss will be reported on my 2008/09 tax return in due course.”
“…in respect of your claim to employment losses incurred during 2008-2009 for which you request£914,999 relief be given effect in 2007-08. This letter is formal notice of HMRC’s intention to enquire into that claim under the provisions of Schedule 1A TMA 1970. As a result no effect will be given to the claim at the present time.”
“Following a decision of the Court of Appeal in the case of HMRC v. Cotter in February 2012, we have not (until now) been actively seeking to enforce payment by you of your overdue tax and interest arising on it. This is because we considered your circumstances were similar to those of Mr. Cotter and therefore governed by that decision. HMRC has now successfully appealed to the Supreme Court, which reversed the Court of Appeal’s decision, and as a result we are now able to enforce payment of the tax and interest that you owe. The Supreme Court’s decision is final.”
“Dear Mr Tooth Self Assessment tax return – year ended5 April 2008 I believe that your return for the above year is inaccurate. This is because you have claimed a partnership loss which was in fact an employment loss carried back from the year ended5 April 2009 . What happens now … HMRC removed a claim for a partnership loss of£1,210,229 from your 2007–08 return on14 April 2010 . This was done so as to not give effect to a claim as an enquiry into that claim had been opened under Schedule 1a [sic]Taxes Management Act 1970 . The Supreme Court decision in Cotter v HMRC makes clear that Schedule 1a did not give HMRC the power to remove this claim under the circumstances. It is however my intention to make an assessment for that year under the provisions of s 29 TMA 1970. Further s 36(1A) TMA enables HMRC to make: (1A) An assessment on a person in a case involving a loss of income tax or capital gains tax– (a) brought about deliberately by the person, may be made at any time not more than 20 years after the end of the year of assessment to which it relates (subject to any provision of the Taxes Acts allowing a longer period). You submitted your tax return for the year to5 April 2008 on30 January 2009 . You included on a separate partnership page, with the UTR 99999 99999, a claim for your share of the partnership loss of£1,210,229 . This was in fact employment losses carried back from 2008–09. It is my view that your actions in making this claim were deliberate. As this claim has already been removed from your return, I do not intend to make any further amendments.”
“In October 2014, Mr. Williams reviewed Mr. Tooth’s file and concluded, in line with mine and Mr Clarke’s thinking before him, that he had discovered a loss of tax as a result of the Appellant deliberately filling out his return in the manner that he did.”
“From looking through the file my understanding is that this [i.e. the discovery assessment] is to replace the amendment made in April 2010 under S[chedule]1A, as the Cotter case concluded that we could not use S[chedule]1A?”
“If this is correct should remove [sic] the informal standovers of the amounts on SA relating to the S[chedule] 1A amendment and reverse the amendments made to the Self Assessment in 2010? Finally, am I correct in thinking the discovery assessment will be the same as the S[chedule] 1A amendment ie assessment of£475,498.37 additional tax resulting from removal of the loss of£1,210,229 ?”
“… What you suggest seems right. Certainly we will be making a discovery assessment to replace the Sch 1A amendment following the Cotter decision, and in the same figures. Cancelling the Sch 1A amendments and associated stand-overs makes sense, and I assume this is what has been done in earlier cases.”
“… attempted to obtain immediate relief for the loss carry back to year 1 by knowingly and deliberately making entries in his 2007–08 tax return to the effect that the loss was a partnership loss of the current year. This was nothing to do with “technical software issues” as you suggest in your letter. The claim could, and should, have been made outside the return, where the existence or not of ‘appropriate boxes' would have had no relevance. The amounts claimed were clearly not appropriate to be entered into these boxes, and the notes submitted with the return confirm that your client was fully aware of this. The only possible conclusion is that there was a deliberate failure to report something correctly on his tax return in an attempt to make him liable for less tax than would otherwise be the case. In my opinion, this conduct falls squarely within Schedule [sic] 36(1A) as involving a loss of income tax or capital gains tax brought about deliberately by the person.”
“The losses purported to have been incurred as a result of the arrangements were Employment Losses for 2008/09. They were not, as acknowledged by entries above, either 2007/08 Partnership Losses or 2007/08 Income losses.”
“The conclusion the officer reached in this case is that the assessment to tax on your 2007/08 tax return was insufficient. She reached this conclusion when she became aware that following the decision in Cotter v Revenue & Customs[2013] UKSC 69 , an enquiry under Schedule 1aTaxes Management Act 1970 was not the appropriate mechanism to enquire into the claim which gave rise to the insufficiency.”
“Section 29(1) is a subjective test. The question is whether it was reasonable for the officer, based on the information before him, to come to the conclusion that there was an insufficiency in relation to the 2007-08 return. It is clear from the evidence before the officer at the time of making the assessment that the officer was justified in newly concluding that an assessment was required for 2007-08 to make good a loss of tax.”
“In October 2014, an officer of the Board properly raised a discovery assessment after concluding that there was an insufficiency in the 2007-2008 return (because of the incorrect inclusion of a partnership loss figure). That was the “discovery”
“(5) … The “discovery”, in this case, is that an assessment to tax is or has become insufficient. Deliberation, negligence or other questions are not relevant to whether there is a discovery. Here, HMRC discovered the insufficiency in 2009. It was incumbent upon HMRC, at that stage, to decide what to do consequent upon this discovery.”
“89. The burden of showing that the requirements of section 29 TMA are met is on HMRC. We consider that there is no sufficient basis – given the facts found by the FTT – to justify the conclusion that there was, properly speaking, a discovery. Had this been the only point in issue, we would have allowed the appeal, and remitted the matter for further evidence and argument to the FTT. As it is, given our conclusions on the question of deliberate inaccuracy, this course is unnecessary.”
“37. In our judgment, no new information, of fact or law, is required for there to be a discovery. All that is required is that it has newly appeared to an officer, acting honestly and reasonably, that there is an insufficiency in an assessment. That can be for any reason, including a change of view, change of opinion, or correction of an oversight.”
“The requirement for newness does not relate to the reason for the conclusion reached by the officer but to the conclusion itself. If an officer has concluded that a discovery assessment should be issued, but for some reason the assessment is not made within a reasonable period after that conclusion is reached, it might, depending on the circumstances, be the case that the conclusion would lose its essential newness by the time of the actual assessment.” “The requirement for newness does not relate to the reason for the conclusion reached by the officer but to the conclusion itself. If an officer has concluded that a discovery assessment should be issued, but for some reason the assessment is not made within a reasonable period after that conclusion is reached, it might, depending on the circumstances, be the case that the conclusion would lose its essential newness by the time of the actual assessment.”
“45. When considering whether there was an inaccuracy in this document, so defined and whether that inaccuracy was deliberate, it is necessary to consider the document as a whole. It would, in our judgment, be entirely wrong to “cherry-pick” one instance of inaccuracy in an entry in a document, ignoring a correction or explanation elsewhere in that document, and assert that (provided the correction was ignored) there was indeed an inaccuracy. The question of accuracy – just as the question of deliberateness – is a matter of context.”
“New subsection (7) provides that where a loss of tax or a situation is brought about by a deliberate inaccuracy in a document, it is to be treated as brought about deliberately. This is to ensure that in cases where a penalty is due for deliberate inaccuracy under paragraph 3 of Schedule 24 to FA 2007, the corresponding increase in time limit also occurs…”
“remove[s] from section 29(4) the requirement that “the situation mentioned [in section 29(1) TMA] was brought about” by a deliberate inaccuracy in a document given to HMRC…”
“The mere insertion of a figure into a document that is inaccurate may be a deliberate act, but it is not, necessarily, a deliberate inaccuracy. In this case, we do not consider that the inaccuracies alleged by HMRC can be said to be deliberate because Mr Tooth took steps to draw the (putative) inaccuracies to the attention of HMRC.”
“In this Act references to a loss of tax or a situation brought about deliberately by a person include a loss of tax or a situation that arises as a result of a deliberate inaccuracy in a document given to Her Majesty’s Revenue and Customs by or on behalf of that person.”