In William Ritchie & Hazel Ritchie v HMRC  UKUT 0071 the Upper Tribunal found that HMRC was not entitled to make a discovery assessment outside of normal time limits as it had not actually established carelessness.
The taxpayers had relied on the advice of their accountant, Mr Weir, who in turn had relied on the advice of Mr Wilson, an ex-inspector of taxes.
Although the conditions for discovery were met HMRC also needed to establish that there was careless by the taxpayer or their adviser so that it could extend the discovery time limit from four to six years.
Before the FTT HMRC had argued that Mr Weir was careless.
The taxpayers appealed to the UT that the issue of carelessness had not been fully considered during the cross examination of witnesses.
The UT agreed.
It concluded that it would be unfair to remit the case back to the FTT and recall the witnesses and it allowed the appeal.
'The devil', as they say, 'is in the detail'. It might seem strange that the basic conditions for an extended discovery were not tested by the FTT however, this case was very long on detail and the PRR claim was the matter that occupied both parties.
HMRC had also lodged an appeal against the FTT decision, this was as to whether PRR had been properly decided by the FTT. This was not heard as the decision on carelessness meant that the assessment was out of time.
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FTT decision: Mr William & Mrs Hazel Ritchie  TC05911