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The Supreme Court (“SC”) has handed down its decision in the long-running dispute between HMRC and Raymond Tooth. It deals with several important points relevant to HMRC’s ability to issue assessments or penalties on the basis that a taxpayer has “deliberately” submitted an incorrect return to HMRC.  It also definitively addresses the concept of a discovery assessment becoming ‘stale’, which had become orthodox thinking in recent years. 

The SC reversed the Court of Appeal decision, deciding that:


Mr Tooth claimed a deduction for an employment loss against his total earnings on his 2007/8 tax return. The loss related to a tax avoidance scheme. The tax return software didn’t allow the use to be claimed in the relevant box, so it was entered in the partnership losses section, together with a narrative disclosure in the white space box. 

Subsequently, HMRC raised a discovery assessment. HMRC were out of time to do so under the normal enquiry rules. HMRC were only in time if they could establish the loss relief claim was a ‘deliberate’ error, and so have the extended time limit.