The Court of Appeal has rejected an HMRC appeal in relation to a discovery assessment (HMRC v Wilkes [2022] EWCA Civ 1612). HMRC had already lost before the FTT and the Upper Tribunal.
The question was whether HMRC can issue a discovery assessment where they learn that a taxpayer who has neither delivered a tax return in respect of the material year nor been notified of a requirement to do so was liable for high income child benefit charge (HICBC).
The problem for HMRC lay in the wording of TMA 1970, s. 29, which refers to “profits [defined to refer to income] which ought to have been assessed to tax”.
The HICBC was not “income which ought to have been assessed to income tax”. It followed that “an assessment in respect of outstanding HICBC will not ‘make good … the loss of tax’ arising from ‘income which ought to have been assessed to income tax’ not having been so assessed.”
The Court of Appeal also ruled that this was not a case where it could “rectify” the legislation. This was the case even though “It may well be that, had Parliament considered the matter, it would have chosen to amend section 29 so as enable HMRC to make an assessment in respect of HICBC where no return had been delivered”.
https://www.bailii.org/ew/cases/EWCA/Civ/2022/1612.html
Related content from Claritax Books
Discovery Assessments, by tax barrister Keith Gordon, is a detailed, clearly written guide to the law and practice in this area. Based on the author’s personal involvement in many leading cases, the book contains much practical advice explaining when and how such assessments may be challenged.
