In Andrew Monaghan v HMRC [2018] TC06408, a commission received by a pension scheme's member was not a pensions unauthorised payment and in any case, the legislation did not permit HMRC to make a discovery assessment.

The First-tier Tribunal (FTT) found that:

  • The taxpayer had received a commission payment however it was not an unauthorised payment as it was impossible to discern its source and there was no evidence of any link between the payer and companies in which the appellant’s funds were invested.
  • The taxpayer was subject to PAYE however not within Self Assessment as HMRC had not issued him with a s8 TMA 1970 notice to file a tax return and no tax return had been filed for the year in question.
  • The taxpayer was not in any case required to notify chargeability as the unauthorised payment legislation at 208(8) FA 2004 says that it is not income for any purpose of the Tax Act.
  • Even if an unauthorised payment charge was payable, the discovery legislation (s29(1)(a) could not apply as there was no income which ought to have been assessed to income tax. 
  • Even if the amount could be assessed to income tax, the discovery used to justify the making of the assessment in 2017 was made at the latest in 2014, albeit by a different officer.

Finance Act 2022 Update

Note that Finance Act 2022 has changed the discovery provisions retrospectively such that they can be used to collect underpaid taxes on omitted pension charges.

Our guides (for subscribers)

Discovery Assessments 
When can HMRC make an assessment out of time? Topical cases and the rules explained.

Pensions: Unauthorised Payment Charges 
An unauthorised payment simply arises when you pension invests in something that it should not, i.e. residential property, or when it makes a payment that is in contravention of the rules, i.e. it advances cash or a benefit to someone who is not of retirement age.

Penalties: Failure to notify 
Taxpayers have a duty to notify HMRC of they have any income or gains that are untaxed. Time limits apply.

How to appeal: HMRC error or flaw in assessment
HMRC must follow the strict wording of the tax legislation, there is a lot of legislation, its complicated and HMRC are human and (not yet machines).


Andrew Monaghan v HMRC [2018] TC06408