HMRC has lost their appeal in respect of their discovery assessment raised against Mr Tooth for his tax return in respect of the year 2007/08.
Background
Mr Tooth entered into a Tax Avoidance scheme, which had been taken to him by a promoter, in the year 2008/09 which artificially created an employment tax loss. Under rules in existence at the time, the 2008/09 loss could be carried back to 2007/08 and in order to generate the necessary repayment as a result of the carry-back, Mr Tooth ‘forced’ the claim into his return using the partnership pages of the tax return. On this page, and elsewhere in the return, Mr Tooth made significant white-space disclosure advising that the loss entered on the partnership pages, was in fact, an employment tax loss.
Following submission of the return, HMRC opened an enquiry into the claim, under schedule 1A TMA1970. However, following the Supreme Court decision in Cotter, it was established that this route of enquiry was inappropriate and that HMRC should, in these circumstances, have opened an enquiry under s8 TMA 1970 into the return itself, rather than into the claim. By this time, HMRC were out of time to open an enquiry into the return.
As a result, HMRC raised a discovery assessment in 2014 which Mr Tooth appealed against and is the subject of this decision.
