MR PETER REEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Reed representing himself, assisted by Mrs Reed. for AppellantMr Quinlan Windle of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION
Introduction
[1]This is an appeal against a discovery assessment issued by HM Revenue and Customs (“HMRC”) on 20 March 2019, as subsequently varied following HMRC’s further consideration of the matter and an independent review. As varied, the assessment charges the Appellant, Mr Reed, to an unauthorised payments charge of £23,712 and an unauthorised payments surcharge of £8,892.[2]The assessment arises from Mr Reed’s participation in a marketed pension liberation scheme. The scheme was designed to enable participants to access funds from their pension arrangements before reaching the permitted retirement age without incurring the tax charges ordinarily associated with unauthorised payments. As a result of his participation in the scheme, Mr Reed received a payment of £59,280 on 20 November 2014.
legislation
[3]At the relevant time, the following provisions applied.
Discovery assessments
[4]Section 29 Taxes Management Act 1970 (“TMA 1970”) permits HMRC to make a discovery assessment in certain circumstances and, so far as material, provides:(1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment — (a) that any income, unauthorised payments under section 208 of the Finance Act 2004 or surchargeable unauthorised payments under section 209 of that Act or relevant lump sum death benefit under section 217(2) of that Act which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax have not been assessed, or (b) that an assessment to tax is or has become insufficient, or (c) that any relief which has been given is or has become excessive, the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.(2) Where— (a) the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, and (b) the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed, the taxpayer shall not be assessed under that subsection in respect of the year of assessment there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.(3) Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above— (a) in respect of the year of assessment mentioned in that subsection; and (b) in the same capacity as that in which he made and delivered the return, unless one of the two conditions mentioned below is fulfilled.(4) The first condition is that the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf.(5) The second condition is that at the time when an officer of the Board— (a) ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment; or (b) in a case where a notice of enquiry into the return was given— (i) issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) above relates, or (ii) if no such partial closure notice was issued, issued a final closure notice, the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.(6) For the purposes of subsection (5) above, information is made available to an officer of the Board if— (a) it is contained in the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment (the return), or in any accounts, statements or documents accompanying the return; (b) it is contained in any claim made as regards the relevant year of assessment by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim; (c) it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer; or (d) it is 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; or (ii) are notified in writing by the taxpayer to an officer of the Board.(7) In subsection (6) above— (a) any reference to the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment includes— (i) a reference to any return of his under that section for either of the two immediately preceding year of assessments; (ii) where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any partnership return with respect to the partnership for the relevant year of assessment or either of those periods; and (b) any reference in paragraphs (b) to (d) to the taxpayer includes a reference to a person acting on his behalf.[5]Section 34 TMA 1970 provides that the ordinary time limit for making a discovery assessment is four years after the end of the year of assessment to which the discovery assessment relates.[6]Sections 49A – 49I TMA 1970 deal with offers of a review and appeals to the tribunal. Section 49C TMA sets out the consequences of HMRC offering a review and relevantly provides: (2) When HMRC notify the appellant of the offer, HMRC must also notify the appellant of HMRC's view of the matter in question. (3) If, within the acceptance period, the appellant notifies HMRC of acceptance of the offer, HMRC must review the matter in question in accordance with section 49E. (4) If the appellant does not give HMRC such a notification within the acceptance period, HMRC's view of the matter in question is to be treated as if it were contained in an agreement in writing under section 54(1) for the settlement of the matter.[7]Section 49E(5) TMA 1970 provides that following a review, HMRC’s view of the matter can be upheld, varied or cancelled and relevantly provides: (1)This section applies if HMRC are required by section 49B or 49C to review the matter in question. (2)The nature and extent of the review are to be such as appear appropriate to HMRC in the circumstances. (3)For the purpose of subsection (2), HMRC must, in particular, have regard to steps taken before the beginning of the review— (a)by HMRC in deciding the matter in question, and (b)by any person in seeking to resolve disagreement about the matter in question. (4)The review must take account of any representations made by the appellant at a stage which gives HMRC a reasonable opportunity to consider them. (5)The review may conclude that HMRC’s view of the matter in question is to be— (a)upheld, (b)varied, or (c)cancelled.
Pensions and authorised payments
[8]The law relating to unauthorised payments is set out in Finance Act 2004 (“FA 2004”).[9]Section 160 FA 2004 introduces unauthorised payments and relevantly provides:(1) The only payments which a registered pension scheme is authorised to make to or in respect of a person who is or has been a member of the pension scheme are those specified in section 164.(2) In this Part “unauthorised member payment” means— (a) a payment by a registered pension scheme to or in respect of a person who is or has been a member of the pension scheme which is not authorised by section 164, and (b) anything which is to be treated as an unauthorised payment to or in respect of a person who is or has been a member of the pension scheme under this Part. … (5) In this Part “unauthorised payment” means— (a) an unauthorised member payment, or (b) an unauthorised employer payment.[10]Payment is defined for the purposes of the legislation in s. 161 FA 2004, which relevantly provides: “(1) This section applies for the interpretation of this Chapter. (2) “Payment” includes a transfer of assets and any other transfer of money's worth. (3) Subsection (4) applies to a payment made or benefit provided under or in connection with an investment (including an insurance contract or annuity) acquired using sums or assets held for the purposes of a registered pension scheme. (4) The payment or benefit is to be treated as made or provided from sums or assets held for the purposes of the pension scheme, even if the pension scheme has been wound up since the investment was acquired.[11]The only payments that a registered pension scheme is authorised to make are those specified in s. 164 FA 2004, which relevantly provides: (1). The only payments a registered pension scheme is authorised to make to or in respect of a person who is or has been a member of the pension scheme are—(a) pensions permitted by the pension rules or the pension death benefit rules to be paid to or in respect of a member (see sections 165 and 167),(b) lump sums permitted by the lump sum rule or the lump sum death benefit rule to be paid to or in respect of a member (see sections 166 and 168),(c) recognised transfers (see section 169),(d) scheme administration member payments (see section 171),(e) payments pursuant to a pension sharing order or provision, and(f) payments of a description prescribed by regulations made by the Board of Inland Revenue.[12]Section 208 FA 2004 imposes the unauthorised payments charge. It relevantly provides:(1) A charge to income tax, to be known as the unauthorised payments charge, arises where an unauthorised payment is made by a registered pension scheme.(2) The person liable to the charge— (a) in the case of an unauthorised member payment made to or in respect of a person before the person's death, is the person, (b) in the case of an unauthorised member payment made in respect of a person after the person's death, is the recipient, and (c) in the case of an unauthorised employer payment, is the person to or in respect of whom the payment is made. … (5) The rate of the charge is 40% in respect of the unauthorised payment.[13]Section 209 FA 2004 imposes the unauthorised payments surcharge. It relevantly provides:(1) A charge to income tax, to be known as the unauthorised payments surcharge, arises where a surchargeable unauthorised payment is made by a registered pension scheme.(2) “Surchargeable unauthorised payments” means— (a) surchargeable unauthorised member payments (see section 210), and (b) surchargeable unauthorised employer payments (see section 213).(3) The person liable to the charge— (a) in the case of a surchargeable unauthorised member payment made to or in respect of a person before the person's death, is the person, (b) in the case of a surchargeable unauthorised member payment made in respect of a person after the person's death, is the recipient, and (c) in the case of a surchargeable unauthorised employer payment, is the person to or in respect of whom the payment was made. … (6) The rate of the charge is 15% in respect of the surchargeable unauthorised payment.”[14]Section 210 FA 2004 provides that unauthorised member payments are surchargeable if the total value of all unauthorised member payments within a 12-month period is at least 25% of the value of the member's rights under the pension scheme.[15]Paragraph 1, Sch. 34, FA 2004 provides that the unauthorised payments charge and the unauthorised payments surcharge apply to payments made to, or in respect of, a transfer member of a relevant non-UK scheme in the same way as they apply to payments made to or in respect of a member of a registered pension scheme. The same paragraph defines a relevant non-UK scheme as including the situation where there has been a relevant transfer at any time after 5 April 2006 when the scheme was a qualifying recognised overseas pension scheme (“QROPS”).[16]Section 268 allows a person to apply to HMRC for the discharge of that person’s liability to the unauthorised payments surcharge. Regulation 3 of the Registered Pension Schemes (Discharge of Liabilities under Sections 267 and 268 of the Finance Act 2004) Regulations 2005 sets out the time limits for such an application to be made and does not give any discretion to extend those time limits.
Background
[17]Prior to 2014, the Appellant held pension benefits in a pension scheme registered in the United Kingdom.[18]In or around June 2014, the Appellant transferred his pension fund from that scheme to the Castle Trust Metro Pension Scheme (“Castle Trust”), a QROPS. The precise date of the transfer has not been provided to HMRC. The amount transferred to Castle Trust was £237,025.20.[19]On 13 November 2014, Castle Trust transferred a total of £565,000 to Digital Media Services Ltd (“DMSL”). The transfer was described as being for investment in Snowdrop Research Ltd (“Snowdrop”).[20]Of the £565,000 transferred to DMSL, £78,000 was attributable to the Appellant’s pension fund held within Castle Trust.[21]On 20 November 2014, seven days after the transfer to DMSL, the Appellant received a payment of £59,280 from DMSL.[22]The Appellant filed his self-assessment tax return for the 2014–15 tax year on 17 September 2015. The return contained no reference to any payment made from DMSL, nor did it disclose any shareholding in Snowdrop or any connection with Castle Trust.[23]During 2018, HMRC was conducting enquiries into a number of pension schemes that had invested in companies connected with Aspiro Research and Development LLP (“Aspiro”). In the course of those enquiries, HMRC became aware that some of the schemes had invested in a number of companies named after flowers.[24]On 26 October 2018, HMRC wrote to Castle Trust requesting information concerning members of the pension scheme and their investments in Aspiro companies, together with certain other information.[25]On 23 November 2018, Castle Trust responded by email. The response included Aspiro accounts, a spreadsheet containing details of scheme members, and a number of other documents not directly related to the Appellant’s pension arrangements.[26]On 6 December 2018, HMRC issued a further information request to Castle Trust. HMRC sought details of all shareholdings, both current and historic, together with information relating to individual members, pension schemes and transactions.[27]On 4 February 2019, HMRC received a further email from Castle Trust enclosing a spreadsheet identifying members who had invested in six companies. The spreadsheet recorded that the Appellant had invested £78,000 in Snowdrop on 13 November 2014.[28]On 11 March 2019, HMRC wrote to the Appellant stating that they believed his Self Assessment return for 2014–15 was inaccurate. The letter referred to investments made through Castle Trust and stated that HMRC considered that the arrangements may have resulted in the Appellant receiving an unauthorised payment from his pension scheme attracting both an unauthorised payments charge under s.208 FA 2004 and an unauthorised payments surcharge under s.209 FA 2004. HMRC further stated that, as the ordinary assessment time limit was approaching, they intended to issue a discovery assessment under s.29 TMA 1970.[29]By a notice of assessment dated 20 March 2019, HMRC issued a discovery assessment against the Appellant pursuant to s. 29 TMA 1970. The assessment charged the Appellant to additional tax in the sum of £12,433.30. The assessment did not include any further details relating to the basis of the charge.[30]Ms Johnson gave evidence that HMRC's current understanding is that the officer who issued the discovery assessment intended to assess tax by reference to aggregate investment figures of approximately £226,000 using a combined rate of 55%, but that a computational error resulted in an assessment of £12,433.30 rather than approximately £124,000.[31]Ms Johnson also explained that HMRC later revised its analysis following receipt of the Appellant's bank statements. HMRC then proceeded on the basis that the relevant payment was the sum of £59,280 received by the Appellant from DMSL. HMRC therefore no longer relied on the same figures that had apparently informed the original assessment.[32]By email dated 27 March 2019, the Appellant appealed against the assessment within the statutory time limit. In that email he stated that he had spoken to an HMRC officer who had been unable to explain what the charge was for and requested postponement of the tax pending resolution of HMRC's enquiries. Whilst the Appellant's subjective understanding cannot determine the legal effect of the assessment, the email forms part of the contemporaneous factual context.[33]On 25 March 2021, HMRC wrote to the Appellant pursuant to s. 49C TMA 1970 offering a review of the assessment and setting out their view of the matter in question. In that letter HMRC expressed the view that the correct liability exceeded the amount originally assessed, being both an increased charge under s. 208 FA 2004 and an additional charge under s. 209 FA 2004 by way of the unauthorised payments surcharge. This represented a proposed liability of approximately double the amount originally assessed, together with a surcharge which HMRC contended had already been included within the original assessment, but which was not expressly identified as such in the assessment documentation.[34]On 9 April 2021, the Appellant telephoned HMRC and expressed disagreement with HMRC’s view of the matter, specifically objecting to the inclusion of the surcharge and to the interest charged. During that call HMRC’s officer indicated to the Appellant that if he continued to disagree with the decision set out in the letter of 25 March 2021 he could obtain an independent review, the details of which were contained in that letter.[35]On 13 April 2021, HMRC sent an email which referred to the telephone call of 9 April 2021. That email made reference to the Appellant having indicated that solicitors would have been in contact with HMRC. HMRC have confirmed that no communication was received from any solicitors at that time.[36]On 21 April 2021, the Appellant’s adviser contacted HMRC. On the same date the adviser submitted an online request to HMRC’s Solicitors Office asking them to make contact. The 30-day period for acceptance of the review offer under s. 49C(3) TMA 1970 expired on or around 24 April 2021.[37]On 16 August 2021, HMRC, apparently unaware that the Appellant had sought to accept the offer of review, sent a notice to the Appellant stating that the discovery assessment had been amended in accordance with the view of the matter set out in the letter of 25 March 2021. HMRC treated the appeal as settled by deemed agreement pursuant to s. 49C(4) TMA 1970 on the basis that the Appellant had not accepted the review offer within the prescribed period.[38]On 21 March 2025, the Appellant formally accepted the offer of review. That acceptance was made outside the statutory 30-day period by a significant margin.[39]On 31 March 2025, HMRC agreed to conduct a review notwithstanding the lateness of the acceptance. In doing so HMRC accepted that the Appellant had a reasonable excuse for the delayed acceptance, that reasonable excuse being that the Appellant had sought to accept the offer of review within the relevant period but had not done so in a manner which HMRC recorded as a valid acceptance. HMRC exercised their discretion to accept the late review request pursuant to the principles set out in s. 49C TMA 1970 and their published guidance at ARTG4300.[40]On 2 May 2025, the review officer issued conclusions pursuant to s. 49E(5) TMA 1970 upholding the assessment as set out in the view of the matter letter of 25 March 2021, namely the increased s. 208 charge and the s. 209 surcharge.[41]On 8 May 2025, the Appellant appealed to this Tribunal against the review conclusions pursuant to s. 49G TMA 1970, that appeal having been made within the 30-day period prescribed by that section.
Grounds of appeal
[42]The Appellant’s Notice of Appeal includes the following in the Grounds of Appeal section:(1) “Incorrect calculations(2) HMRC assessment based on incorrect information(3) Victim of a scam(4) Lost all of my pension(5) I have not receive any payment from my pension fund, full value of pension was invested.(6) Facts that I listed for my review have not been taken into consideration” Issues in dispute Procedural issues
Issues in dispute
[43]Two procedural issues arise in this appeal. The first is whether the discovery assessment issued on 20 March 2019 was validly issued.[44]The second concerns the scope and effect of that assessment. We therefore invited submissions on whether the assessment included liability to the unauthorised payments surcharge under s.209 FA 2004 and, if it did not, whether liability to that charge could nevertheless be sustained through the statutory review process.
Substantive issues
[45]We have summarised the substantive issues in the appeals as follows:(1) Was the £59,280 payment received by the Appellant properly to be treated as a payment from his QROPS for the purposes of Part 4 FA 2004?(2) If so, was it an unauthorised payment?(3) If so, did the amount of that payment exceed the statutory threshold so as to trigger the unauthorised payments surcharge? Submissions and Discussion Procedural issues
Submissions and Discussion
[46]The burden of proof is on HMRC to establish that the discovery assessment was valid. In order to do so, HMRC must demonstrate that a discovery was made and, because the Appellant filed a return for the relevant year, that one of the conditions in ss. 29(4) or 29(5) TMA 1970 was satisfied.[47]HMRC submits that the discovery assessment was valid for the following reasons:(1) A discovery was made in February 2019 when HMRC became aware that the Appellant’s pension fund had purported to invest £78,000 in Snowdrop and that the Appellant had received a payment as a result of that arrangement.(2) The condition in section 29(5) TMA was met. An officer of HMRC could not reasonably have been expected, on the basis of the information made available before HMRC ceased to be entitled to open an enquiry into the return, to be aware of the alleged insufficiency of tax arising from the unauthorised payment.(3) Alternatively, the condition in section 29(4) TMA was met. The Appellant acted carelessly in believing, without obtaining independent professional advice, that a purported investment of £78,000 by his pension fund would entitle him to receive almost £60,000 free of tax. The insufficiency of tax was therefore brought about carelessly by the Appellant.(4) The quantum of the Appellant’s liability accords with HMRC’s analysis as set out in the view of the matter letter, which was subsequently upheld on review.(5) The assessment was made within the statutory time limit. The discovery assessment was issued on 20 March 2019, less than four years after the end of the 2014–15 tax year in which the unauthorised payment was made. It was therefore issued within the ordinary time limit prescribed by the TMA.(6) Accordingly, HMRC submits that the discovery assessment was validly made and that the appeal should be dismissed.[48]We find that the assessment issued on 20 March 2019 was made within the ordinary statutory time limits and was validly issued. HMRC made a discovery when the officer became aware that the Appellant's pension fund had invested in Snowdrop and that the Appellant had received a payment arising from that investment.[49]The Appellant had filed a return for the relevant year. Accordingly, HMRC were required to show either that the condition in s.29(4) TMA 1970 or the condition in s.29(5) TMA 1970 was satisfied.[50]We are satisfied that the condition in s.29(5) was met. Prior to the discovery, the information available to HMRC did not reveal that the Appellant had received the payment in question from arrangements involving the Snowdrop investment. We are therefore satisfied that an officer of HMRC could not reasonably have been expected, on the basis of the information made available before the end of the enquiry window, to be aware of the insufficiency of tax which HMRC contend arose from that payment.[51]It follows that HMRC were entitled to make a discovery assessment under s.29 TMA 1970. The assessment was issued on 20 March 2019, within four years of the end of the 2014–15 tax year, and was therefore made within the ordinary statutory time limit.[52]HMRC also contended that the condition in s.29(4) TMA 1970 was met because the insufficiency of tax had been brought about carelessly by the Appellant.[53]It is unnecessary for us to determine that issue. We are satisfied that the condition in s.29(5) TMA 1970 was met and that HMRC were therefore entitled to make the assessment within the ordinary statutory time limits. Nothing turns on the question whether the condition in s.29(4) was also satisfied.[54]An “amended assessment for the year ended 5 April 2015” was purportedly issued on 16 August 2021. That document stated:
“We have made this assessment under section 29 Taxes Management Act 1970. Your appeal against the assessment dated 27 March 2019 [sic] is now treated as settled under section 54(1) Taxes Management Act 1970.”
[55]In circumstances where HMRC accepted an allegedly late request for a review (because it is unclear whether the Appellant had in fact failed to make a request for review within the prescribed time limit), the procedural consequence is that the purported amended assessment issued on 16 August 2021 cannot stand. The appeal therefore proceeds by reference to the original discovery assessment issued on 20 March 2019 and the review conclusions subsequently issued on 2 May 2025.[56]In The King on the application of Fluid System Technologies (Scotland) Ltd and others v HMRC [2025] UKUT 278 (TCC) ("Fluid System Technologies"), the Upper Tribunal considered the relationship between an assessment and HMRC's "view of the matter" for the purposes of the statutory review provisions. The Tribunal held that HMRC's view of the matter may differ from the amount stated in the original assessment and may therefore result in the amount of tax ultimately due being increased or reduced.[57]However, the Upper Tribunal also emphasised that the scope of the review remains constrained by the assessment under appeal. At [103] it held that the "matter in question" is defined by the assessment itself and that HMRC's view of the matter is correspondingly circumscribed by that assessment.[58]Accordingly, whilst Fluid System Technologies confirms that the amount ultimately due in respect of an assessed liability may differ from the amount stated in the original assessment, it also makes clear that the review process cannot be used to expand the scope of the liability assessed.[59]The question in the present appeal is therefore whether liability to the unauthorised payments surcharge formed part of the discovery assessment issued on 20 March 2019. If it did not, a separate question arises as to whether liability to that charge could nevertheless be introduced through the statutory review process.[60]At the hearing, Mr Windle submitted that the original discovery assessment issued on 20 March 2019 did in fact include both the unauthorised payments charge under s.208 FA 2004 and the unauthorised payments surcharge under s.209 FA 2004. He relied upon a letter dated 11 March 2019 in which HMRC informed the Appellant that HMRC considered that the arrangements “may have resulted” in an unauthorised payment attracting both the unauthorised payments charge and the unauthorised payments surcharge. Mr Windle submitted that the subsequent discovery assessment was intended to implement that analysis and that the later review process merely corrected the amount assessed.[61]We accept that the letter of 11 March 2019 demonstrates that, prior to issuing the assessment, HMRC was considering whether liability arose under both s.208 and s. 209 FA 2004. However, the letter was not itself an assessment. It stated only that HMRC considered that the arrangements may have given rise to an unauthorised payment and that HMRC intended to issue a discovery assessment. The issue for the Tribunal is therefore not what liabilities HMRC was considering on 11 March 2019, but what liabilities HMRC actually assessed on 20 March 2019.[62]There is no prescribed form for a discovery assessment under s.29 TMA 1970. The question is to be determined objectively by reference to the effect of the assessment on a reasonable recipient. A document is not invalid merely because it contains errors or is capable of improvement in its drafting. The issue is whether the liability which HMRC seeks to assess can objectively be identified from the assessment and its surrounding context.[63]We have had regard to the authorities concerning the interpretation of notices and assessments, including Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 and HMRC v Mabbutt [2017] UKUT 289 (TCC). Those authorities establish that notices are to be construed objectively through the eyes of a reasonable recipient in their factual context and that errors or imperfections in drafting do not necessarily invalidate a notice.[64]Applying that approach, we do not consider that the assessment is invalid. A reasonable recipient would understand that HMRC was seeking to assess additional tax arising from arrangements connected with the Appellant's pension arrangements. However, for the reasons set out below, a reasonable recipient would not understand from the assessment and surrounding documentation that HMRC had assessed a separate liability to the unauthorised payments surcharge under s.209 FA 2004.[65]The assessment itself assessed a single amount of £12,433.30. It did not refer to s.208 FA 2004, s.209 FA 2004, an unauthorised payments surcharge, a surchargeable unauthorised payment, or a composite 55% charge. No breakdown was provided identifying any part of the assessment as attributable to the surcharge. Nor was there anything in the assessment identifying the existence of more than one distinct statutory charge. Read objectively, the assessment communicated only that HMRC had assessed additional tax under s.29 TMA 1970 in relation to the Appellant's 2014–15 tax return.[66]Mr Windle accepted that a recipient of the assessment would have difficulty understanding how the figure of £12,433.30 had been calculated. He submitted that HMRC's current understanding is that the officer intended to assess tax by reference to aggregate investment figures at a rate of 55% and that a computational error occurred. He further accepted that HMRC's current explanation of the assessment depends upon a retrospective reconstruction of the officer's reasoning and that the assessment itself did not explain how the figure of £12,433.30 had been derived. We take those matters into account when considering what liabilities the assessment objectively communicated to a reasonable recipient.[67]We also take into account the contents of HMRC's letter of 11 March 2019. A reasonable recipient would have understood from that letter that any assessment subsequently issued was likely to relate to the Appellant's participation in the pension arrangements and the payment which HMRC considered to have been received from them. However, the amount assessed was materially lower than 40% of the payment of £59,280 and bore no obvious relationship to a liability comprising both an unauthorised payments charge and an unauthorised payments surcharge. In those circumstances, whilst a reasonable recipient might have understood that the assessment concerned the pension arrangements, we do not consider that the amount assessed would have led such a recipient to conclude that HMRC had assessed both an unauthorised payments charge and an unauthorised payments surcharge.[68]We also regard the Appellant's immediate response as relevant context. On 27 March 2019 the Appellant wrote to HMRC explaining that he had been unable to ascertain what the assessment was for and wished to appeal it. Whilst the Appellant's subjective understanding is not determinative, the correspondence is consistent with our conclusion that the assessment did not clearly communicate that HMRC had assessed liability to both an unauthorised payments charge and a separate unauthorised payments surcharge.[69]The question is not whether HMRC can now reconstruct the thinking of the officer who issued the assessment. The question is what a reasonable recipient of the contemporaneous documents would have understood HMRC to have assessed. We do not consider that a reasonable recipient could infer from the assessment and surrounding correspondence that HMRC had assessed liability to a distinct surcharge under s.209 FA 2004. The assessment figure can only be understood by reference to a retrospective reconstruction advanced years later.[70]Accordingly, we reject HMRC's submission that the discovery assessment dated 20 March 2019 included an assessment to the unauthorised payments surcharge under s.209 FA 2004. The contemporaneous documents demonstrate that HMRC was considering the possibility of such a charge, but they do not objectively demonstrate that such a charge was assessed.[71]It follows that the discovery assessment issued on 20 March 2019 did not assess liability to the unauthorised payments surcharge under s.209 FA 2004.[72]Once that conclusion is reached, Fluid System Technologies does not assist HMRC. Even if the review machinery permits HMRC to contend that a greater amount is due in respect of an existing assessed liability, it does not follow that the statutory review process can sustain liability to a separate charge which was not included within the original assessment. The matter under appeal remained liability to the unauthorised payments charge assessed under s.208 FA 2004.[73]That does not mean that HMRC was confined to the amount of £12,433.30 stated in the original discovery assessment. As explained in Fluid System Technologies, the review process permits HMRC to contend that a different amount is due in respect of the liability which was assessed. We are satisfied that both the original assessment and the subsequent review conclusions concerned the Appellant's liability to the unauthorised payments charge under s.208 FA 2004 arising from the same alleged unauthorised payment. The review conclusions therefore permissibly varied the amount of that assessed liability. What HMRC could not do was use the review process to introduce liability to the separate unauthorised payments surcharge under s.209 FA 2004, because that liability was not included within the original assessment.
Substantive issues
[74]HMRC's case is that the payment of £59,280 received by the Appellant on 20 November 2014 constituted an unauthorised payment for the purposes of Part 4 FA 2004. HMRC relies on the fact that £78,000 was transferred from the Appellant's QROPS to DMSL on 13 November 2014, ostensibly for investment in Snowdrop, and that the Appellant subsequently received £59,280 from DMSL. HMRC notes that the Appellant has accepted in correspondence that the payment was made as a consequence of that purported investment.[75]HMRC submits that the payment was either made directly from the QROPS via DMSL or, alternatively, was made in connection with an investment acquired using sums held for the purposes of the pension scheme. On either basis, HMRC contends that s.161(3) and (4) FA 2004, together with paragraph 1 of Schedule 34 FA 2004, operate so as to treat the payment as having been made from sums held for the purposes of the pension scheme.[76]HMRC further submits that the payment was not an authorised member payment within any of the categories set out in s.164 FA 2004. HMRC observes that the Appellant has not contended that the payment was authorised and identifies no statutory basis upon which it could be treated as such. Accordingly, HMRC contends that the payment of £59,280 was an unauthorised payment and that the Appellant is liable to the unauthorised payments charge at the rate of 40%.[77]We note that the view of the matter letter states that a payment of £565,000 was made from Castle Trust to DMSL on 11 March 2015. If correct, that date would place the transfer after the payment of £59,280 made to the Appellant on 20 November 2014. We are satisfied that the reference to 11 March 2015 is a clerical error. A spreadsheet supplied by the Gibraltar scheme administrator records the transfer of £565,000 from Castle Trust to DMSL on 13 November 2014, of which £78,000 related to the Appellant's Snowdrop investment. That date is consistent with the chronology relied upon throughout HMRC's case and with the documentary evidence as a whole. We therefore find that the transfer occurred on 13 November 2014 and attach no significance to the erroneous date appearing in the view of the matter letter.[78]We agree with HMRC's analysis of the facts and there are no submissions that the Appellant has made to the contrary which persuade us otherwise. The documentary evidence demonstrates that £78,000 was transferred from the Appellant's QROPS to DMSL on 13 November 2014 and that, shortly thereafter, the Appellant received a payment of £59,280 from DMSL. The Appellant has accepted that the payment was made as a consequence of the purported Snowdrop investment. In those circumstances, we are satisfied that the payment was made in connection with an investment acquired using sums held for the purposes of the pension scheme and accordingly falls to be treated by s.161(3) and (4) FA 2004 as a payment made from sums held for the purposes of the pension scheme.[79]We accept Mr Reed's evidence that he genuinely believed the arrangements were legitimate, that he relied on assurances given to him by those promoting the arrangements and that he now regards himself as the victim of a pension scam. However, those matters do not alter the operation of Part 4 FA 2004. The issue is not whether Mr Reed understood that he was receiving a payment from his pension scheme, but whether the payment constitutes an unauthorised payment as a matter of law.[80]We are also satisfied that the payment was not an authorised member payment within the meaning of Part 4 FA 2004. The Appellant has not identified any statutory provision under which the payment could be treated as authorised, nor does any such basis emerge from the evidence before us. The mere fact that the payment was routed through DMSL does not alter its character or remove it from the scope of the statutory regime governing unauthorised payments.[81]We therefore conclude that the payment of £59,280 constituted an unauthorised payment for the purposes of FA 2004. It follows that the Appellant was liable to the unauthorised payments charge under s.208 FA 2004 at the rate of 40%. The assessment issued on 20 March 2019 validly assessed liability to the unauthorised payments charge under s.208 FA 2004. For the reasons given above, the amount of that liability was capable of being varied through the statutory review process. We are satisfied that the correct amount of the unauthorised payments charge is £23,712.
Unauthorised payments surchargeunders. 209 FA 2004
[82]HMRC additionally contends that the unauthorised payments surcharge under s.209 FA 2004 is payable. Relying on documentation supplied by the Appellant, HMRC calculates that the value of the Appellant's pension rights immediately before the payment was £237,025.20. 25% of that amount is £59,256.30. As the payment received by the Appellant was £59,280, HMRC submits that the payment exceeded the statutory 25% threshold and that the conditions for the surcharge were therefore satisfied.[83]HMRC further notes that the Appellant did not apply for discharge of the surcharge within the statutory time limit, or at all. On that basis, HMRC contends that the Appellant is liable both to the unauthorised payments charge at 40% and to the unauthorised payments surcharge at 15%, producing a total liability of £32,604 before interest.[84]We have concluded above that, notwithstanding HMRC's submission that the surcharge was already included within the discovery assessment of 20 March 2019, the assessment did not objectively assess a liability under s.209 FA 2004. It follows that the view of the matter letter and review conclusions could not sustain liability to that charge.[85]On the evidence before us, the value of the Appellant's pension rights immediately before the payment was £237,025.20, 25% of which is £59,256.30. As the Appellant received £59,280, the statutory 25% threshold was exceeded. Had a valid assessment to surcharge been made, we would therefore have concluded that the conditions for liability under s.209 FA 2004 were satisfied.[86]We add one further observation. A taxpayer's right to seek discharge of liability to the unauthorised payments surcharge under s.268 FA 2004 is subject to strict statutory time limits prescribed by Regulation 3 of the Registered Pension Schemes (Discharge of Liabilities under Sections 267 and 268 of the Finance Act 2004) Regulations 2005. Those time limits cannot be extended. Had we accepted HMRC's submission that the surcharge was included within the discovery assessment issued on 20 March 2019, the Appellant's opportunity to seek discharge would have long since expired. Conversely, if liability to surcharge could be introduced through the review process notwithstanding the absence of any assessment to that charge, a taxpayer might lose the opportunity to seek discharge before it became apparent that HMRC was asserting a liability to a surcharge. The Tribunal would have no jurisdiction to restore that lost opportunity. We do not base our decision on that consideration. However, it illustrates the importance of a liability to the unauthorised payments surcharge being clearly identified if it is to be assessed.
Disposal
[87]For the reasons given above:(1) The discovery assessment issued on 20 March 2019 was validly issued pursuant to s.29 TMA 1970.(2) The payment of £59,280 received by the Appellant on 20 November 2014 constituted an unauthorised payment for the purposes of Part 4 FA 2004.(3) The Appellant is liable to the unauthorised payments charge under s.208 FA 2004 in the sum of £23,712.(4) The discovery assessment issued on 20 March 2019 did not assess liability to the unauthorised payments surcharge under s.209 FA 2004.(5) Accordingly, neither the view of the matter letter issued under s.49C TMA 1970 nor the review conclusions issued under s.49E TMA 1970 could sustain a liability to the unauthorised payments surcharge.[88]The appeal is therefore allowed in part.[89]The review conclusion dated 2 May 2025 is set aside insofar as it upholds liability to the unauthorised payments surcharge under s.209 FA 2004.[90]Subject to that amendment, the review conclusion is upheld.[91]The Appellant remains liable to the unauthorised payments charge under s.208 FA 2004 in the sum of £23,712.
Right to apply for permission to appeal
[92]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 10 July 2026