‘This is because you used arrangements where payments were received that were described as non-taxable. These payments were in reality connected to the provision of your services and as such should have been declared as taxable income.’
‘Notes for box 10 - Reason for claim – My business profits are down’
‘I noted the similarity of the two amounts but the proven link between Mr Contractor, Runnymede Services and IFL Management Ltd clarified in my mind that he has used a tax avoidance scheme and on that basis I decided that I had made a discovery of an insufficiency of tax.’
‘Would you consider it plausible that the money received by IFL was through a number of intermediaries?’
‘Your return for 2014-15 was submitted on the7 January 2016 and the period for enquiry has passed. Information has come to light that shows that you may have received additional payment that are not shown on your tax return. These additional payments arose via the provision of your services to Runnymede and investigations into these payments have led me to believe that tax should be paid on these payments.’
‘1. IFL Management Ltd have made not payments to the appellant 2. The appellant is not party to any contracts that IFL Management Ltd is or has been party to 3. No information has been provided to HRMC in the course of Corporation Tax enquiries into IFL Management Ltd that support or evidence additional payments to the appellant 4. The appellant has at no time been employed by IFL Management Ltd’
‘1. No information has been provided to HMRC in the course of Partnership Tax Return enquiries into Runnymede Services LLP that support or evidence additional payments to the appellant.’
‘as no enquiry under [s 9A TMA] is in place for this period, HMRC is protecting the potential tax at risk for this period by issuing this assessment’
‘(d) the information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above – (i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; …’
‘I can see no reason for saying that a discovery of undercharge can arise only where a new fact has been discovered. The words are apt to include any case in which it newly appears that the taxpayer has been undercharged and the context supports rather than detracts from this interpretation.’ (Viscount Simonds) ‘Mr Shelbourne [for the taxpayer] said that “discovery” means finding out something new about the facts. It does not mean a change of mind about the law. He said that everyone is presumed to know the law, even an inspector of taxes. I am afraid I cannot agree with Mr Shelbourne about this. It is a mistake to say that everyone is presumed to know the law. The true proposition is that no one is to be excused from doing his duty by pleading that he did not know the law. Every lawyer who, in his researches in the books, finds out that he was mistaken about the law, makes a discovery. So also does an inspector of taxes.’ (Lord Denning) (3) ‘In law, indeed, very little is required to constitute a case of “discovery”’: Jonas v Bamford [5] . The requisite threshold for there to be a discovery is therefore low: ‘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’; ‘no new information, of fact or law, is required for there to be a discovery’: Charlton at [37]. (4) In Hankinson [6] Lewison LJ stated the test under s 29(1) is a ‘subjective’ one, as pertaining to the actual officer who has formed the view that there was an insufficiency. ‘[18] That section 29(1) is dealing with the subjective views of the officer concerned is borne out by the consequence of the making of a discovery viz. that he may make an assessment of the amount “which ought in his … opinion” to be charged to make good the loss of tax.’ (italics added) (5) The Court of Appeal in Hankinson also confirmed that the meaning of ‘discovery’ has not changed in relation to the self-assessment regime. ‘[15] … Although the conditions under which a discovery assessment can be made have been tightened in recent years following the introduction of the self-assessment regime, the meaning of the word “discovers” in this context has not changed ... it meant “comes to the conclusion from the examination he makes and from any information he may choose to receive”; … it was equivalent to “finds” or “satisfies himself”. …’
‘[56] … I do not suggest that the hypothetical inspector is required to resolve points of law. … It is enough that the information made available to him justifies the amendment to the tax return he then seeks to make. Any disputes of fact or law can then be resolved by the usual process.’ (4) The Upper Tribunal in Charlton gave guidance on the attributes of a hypothetical officer in relation to the pre-condition at [65] - [66]: (a) Section 29(5) does not require the hypothetical officer to be given the characteristics of an officer of general competence, knowledge or skill only. (b) The officer must be assumed to have such level of knowledge and understanding that would reasonably be expected in an officer considering the particular information provided by the taxpayer. (c) The test should not be constrained by reference to any perceived lack of specialist knowledge in any section of HMRC officers. (d) Reasonableness falls to be tested, not by reference to a living embodiment of the hypothetical officer, with assumed characteristics at a typical or average level, but by reference to the circumstances of the particular case. (e) Consequently, the hypothetical officer must not be regarded as the embodiment of HMRC as a whole, who has possession of information relevant to his awareness that is held elsewhere within HMRC or known to any particular officer including the officer dealing with the case. (5) Judge Reid in Pattullo [12] aptly set out the context of the evaluative test under s 29(5) and the relevant evidence to be taken into account. ‘[65] Courts and tribunals are used to considering objectively and deciding questions of reasonableness such as what a reasonable person, the man on the Clapham omnibus, the officious bystander, a reasonably competent professional, … or how a fair minded and informed observer would view a particular situation. There are no doubt many other inhabitants in this legal village in which everyone always acts in a fair, reasonable and balanced manner, only considers the relevant and always disregards the irrelevant. … The courts are sometimes assisted in this exercise of objective assessment by evidence of standards set by institutions, professional bodies, codes of practice, or experts. However, the courts and tribunals are not bound by such evidence but generally take it into account. … Normally, the Court would make its own objective evaluation on a properly informed basis against the background circumstances. The Tribunal would not hear evidence from an individual offered as a candidate for the role of the hypothetical officer….’
‘[24] … There are statutory limitations as to the time at which the sufficiency or otherwise of the information must be judged. These provisions underline the finality of the self-assessment, a finality which is underlined by strict statutory control of the circumstances in which the Revenue may impose additional tax liabilities by way of amendment to the taxpayer's return and assessment.’
‘(1) In certain circumstances, a court may be able to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.’