In HMRC v Raymond Tooth [2018] UKUT 0038 (TCC), the Upper Tribunal (UT) decided that the extended discovery time limit for deliberate error did not apply and also, there was no discovery. Spoiler alert: this case was appealed on by HMRC to the Supreme Court who agreed on the time limit but disagreed on the staleness point.

The normal time limit for a Discovery Assessment is 4 years, but this is extended to 6 if the taxpayer was careless or 20 if the error was deliberate.

  • Tooth used a tax scheme to create an employment loss in 2008/09.
  • This loss was utilised against his 2007/08 income
  • Due to software issues, the loss was included on the partnership pages of his Return: disclosure of this fact, and the reasons, was included on his return.
  • Disclosures about the scheme were also included, with a note that a DOTAS number had been applied for but not received.
  • HMRC enquired into the 2007/08 return on 14 August 2009, but this was under the wrong section (Sch 1A rather than s9A of TMA 1970).
  • The tax scheme was defeated in 2012.
  • In 2014 HMRC raised a discovery assessment (over six years after the tax year in question)

The FTT decided that the error did not cause the loss of tax. HMRC appealed and the taxpayer then cross appealed on the basis that HMRC had not found any new information to justify a discovery.

  • The UT held that there are three conditions for the extended deadline for discovery assessments to be available
    • A document must be inaccurate
      • The tax treatment of the loss was controversial but not (at the time of making the return) wrong
      • The return became inaccurate when the scheme was defeated, but was not inaccurate when prepared and submitted
      • The use of the wrong pages was forced on Tooth by “HMRC Approved” software, and he included a full explanation
      • The UT concluded that the return was not inaccurate.
    • That inaccuracy must be deliberate
      • Tooth drew HMRC’s attention to his interpretation and that they might disagree
      • HMRC opened an enquiry into the return, there was no question of HMRC having been misled by the entries
      • The UT concluded that the “inaccuracy” was not deliberate
    • The inaccuracy must have brought about an insufficiency in an assessment
      • The UT concluded that tax assessment was insufficient as a result of utilising the losses..
  • There was no deliberate inaccuracy leading to a loss of tax so the discovery assessment was out of time.


  • The UT found that
    • HMRC made the discovery of an insufficiency when they opened the original enquiry
    • A second officer could not now make that same discovery
    • There was insufficient evidence to justify the FTT’s decision that there was a discovery
  • This would have been remitted back to the FTT for reconsideration had the assessment not been overturned due to being out of time..


The UT provides quite a detailed consideration of both deliberate inaccuracy and what discovery means where two different officers are involved in the case.

The UT also noted that it appeared that the HMRC officer had viewed discovery as simply a " replacement" for the existing enquiry. "If that was HMRC's thinking, then that thinking was seriously flawed."

UPDATE: HMRC appealed this decision; the Court of Appeal upheld the decisions of the lower courts. Leave has been granted for appeal to the Supreme Court in 2020.

Our guides

Useful guides on this topic

How to appeal a decision of HMRC
Key steps in appealing a decision of HMRC.

How to appeal a tax penalty
Essential reading in cases were there are penalties too

Discovery assessment and time limits
How far HMRC can go back, what conditions must be met for a valid discovery

Penalties: Error in a return or document
How work out penalties for different forms of inaccuracies

DOTAS: Disclosure of Tax Avoidance Schemes
Rules for declaring use of tax schemes

External and other links

UT: HMRC v Raymond Tooth [2018] UKUT 0038 (TCC)

The FTT Decision