In the anonymised case of A Nurse v HMRC [2026] UKFTT 722 (TC), the FTT dismissed the appeal against discovery assessments reclaiming tax refunds that had arisen as result of incorrect claims for normal commuting, but allowed a special reduction to the associated penalties to nil due to special circumstances.
Keywords: Employment income; Excessive travel expenses; Discovery assessments and closure notice; appeals DISMISSED; penalties for incorrect returns; careless conduct; special reduction; Barry Edwards considered; decision flawed; penalties reduced to NIL; penalty appeals ALLOWED
The claims had been made for a number of tax years on the nurse’s behalf either by a work colleague (“M”) who had convinced her that she was entitled to tax relief, or, as claimed by M, by a third party. The Appellant had passed all of her log on details to M. M had retained 20% of the refunds, apparently on behalf of the third party. The case had been anonymised because it concerned “a vulnerable individual” and, while the Appellant had “provided no meaningful information to HMRC that would allow them to identify the work colleague”, it was hoped that HMRC would be able to take action and the FTT wanted to “take every reasonable precaution to protect the Appellant from the risk of any retribution by the work colleague who might (not necessarily correctly) conclude that the Appellant has been the source of any information in HMRC’s possession.”
Considering the discovery assessments, the FTT judged that they were valid, the extended deadline applying because the Appellant had failed to take reasonable care as:
“(“1) By passing over personal login details to M (contrary to normal protocols), the Appellant was exposing herself to the situation where returns would be made on her behalf without any opportunity to check the contents.
(2) As the Appellant herself said to us, she was surprised by the size of the repayments that M had indicated she would be entitled to. We consider that the Appellant should have taken stock at that stage and questioned whether it was realistic.”
However, in relation to the penalties for careless errors, the FTT judged that there were special circumstances being:
“(1) the fact that the Appellant is a victim of someone preying on her naivety; and
(2) the fact that the Appellant has effectively suffered a 20% penalty by having to pay M his fee for these suspect claims … – indeed, we do not consider that HMRC consider that penalties should be a revenue raiser (or even a way to compensate HMRC) but they should operate as a financial deterrent: if so, the deterrent has already been suffered.”
The FTT therefore concluded that:
“As a result, we consider that we are entitled to remake the decision in relation to special reduction.
In addition to the two factors identified at ¶84 above, we also note:
(1) the fact that the Appellant is effectively being further penalised by her exposure to HMRC’s interest rates;
(2) the fact that HMRC are somewhat to blame for having a repayment system that authorises repayments which, on even a cursory glance … , ought to have rung alarm bells; and
(3) the fact that we consider the Appellant to fall on the carelessness side of the (did/did not take reasonable care) only by a narrow margin.
For these reasons, we consider that the appropriate result is for each of the four penalties to be reduced to NIL.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/722
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.
