John Hargreaves v The Commissioners for HM Revenue and Customs [2022] UKUT 00034 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Edwin Johnson,Judge Jonathan Richards |
| Neutral Citation | [2022] UKUT 00034 (TCC) |
| Subject Matter | 11 February 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 15 February 2022 |
[2022] UKUT 00034 (TCC)
Appeal number: UT/2021/000067
INCOME TAX, CAPITAL GAINS TAX – whether preconditions to the making of a
discovery assessment were satisfied – yes
UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
JOHN HARGREAVES
Appellant
-and-
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
Sitting in public (by way of hybrid hearing) at Rolls Building, 7 Rolls Buildings, Fetter
Lane, London EC4A 1NL on 13, 14 and 17 January 2022
David Goldberg QC, Amanda Brown QC, and Conrad McDonnell instructed by KPMG
Law for the Appellant
Akash Nawbatt QC, Christopher Stone and Marianne Tutin, instructed by The General
Counsel and Solicitor for Her Majesty’s Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2022
TRIBUNAL:
MR JUSTICE EDWIN JOHNSON
JUDGE JONATHAN RICHARDS
2
DECISION
Introduction
HMRC are entitled to make what practitioners refer to as “discovery assessments”
under s29 of the Taxes Management Act 1970 (“TMA”) where an officer of HMRC
discovers that a taxpayer has paid insufficient tax. This appeal concerns HMRC’s
entitlement or otherwise to make such a discovery assessment on Mr Hargreaves in
respect of income and gains arising in the 2000-01 year of assessment.
Mr Hargreaves submitted his self-assessment return (his “Return”) for 2000-01 on
31 January 2002 (the “Return Date”) on the footing that he was not resident or
ordinarily resident in the UK in that year. HMRC formed the view that he was so
resident and made an assessment (the “Assessment”) on 9 January 2007 on the basis
that he was liable to both income tax and capital gains tax (“CGT”) in amounts greater
than those stated in the Return.
The text of s29 so far as relevant and applicable at the relevant time is set out in the
Appendix to this decision. HMRC considered that they were entitled to make the
Assessment by applying the following line of reasoning:
(1) An HMRC officer had “discovered” a situation mentioned in s29(1)(a)
and s29(1)(b) of TMA, namely that income and chargeable gains that should
have been assessed on Mr Hargreaves were not so assessed and that Mr
Hargreaves’ self-assessment of tax due for 2000-01 was insufficient (the
“Situation”).
(2) Because Mr Hargreaves had submitted the Return, HMRC could, by
s29(2), make a discovery assessment only if the condition set out in s29(4)
or s29(5) was satisfied.
(3) The condition set out in s29(4) (the “Negligence Condition”) was
satisfied because the Situation was attributable to the negligent conduct of
Mr Hargreaves and/or of PricewaterhouseCoopers (“PwC”) who were
acting on his behalf.
(4) Alternatively, the condition set out in s29(5) (the “Information
Condition”) was satisfied because an officer of HMRC could not have been
reasonably expected to be aware of the Situation by the deadline for opening
an enquiry into Mr Hargreaves’ return under s9A of TMA (the “Information
Date” being 31 December 2003), on the basis of information that Mr
Hargreaves had provided before that date.
Mr Hargreaves appealed against the Assessment to the First-tier Tribunal (Tax
Chamber) (the “FTT”). In those proceedings Mr Hargreaves originally sought to
challenge the Assessment on two grounds. The first ground was that he had in fact been
neither resident nor ordinarily resident in the UK in the 2000-01 tax year. The second
ground was that HMRC had not, for various reasons, been entitled to make the
Assessment, with the consequence that the Assessment was invalid. Shortly before the
hearing in the FTT Mr Hargreaves abandoned the first of these grounds, accepting that
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