In Hargreaves v HMRC [2019] TC07090 HMRC's long delay in raising an assessment on an £84m capital gain meant that there was no 'discovery' and it was invalid.

  • Mr Hargreaves the former chairman of Matalan plc claimed to have moved abroad in March 2000.
  • He disposed of his Matalan shares in May 2000, however he did not fully leave in terms of UK tax residence.
  • His 2000-01 self assessment return was completed and filed by January 2002 on the basis that he was non-resident and he did not disclose his substantial capital gain.
  • HMRC opened an enquiry into his 2001-02 return and concluded that he was non resident for that year and assessed £6million in tax.
  • HMRC did not raise an assessment for an estimated £84million in capital gains tax in the 2000-01 year until 2007.

Mr Hargreaves initially claimed he was non-resident, he dropped that and claimed that the conditions for a discovery assessment had not been met.

The FTT considered:

  • Whether there was a discovery and if so whether it was stale (s 29(1) TMA);
  • Whether there was a loss of tax was the result of negligent conduct by Mr Hargreaves or by someone acting for him, in this case his then agent PricewaterhouseCoopers (“PwC”) (s 29(4) TMA);
  • Whether the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the insufficiency of tax (s 29(5)TMA); and
  • Whether the return was made on the basis or in accordance with the practice generally prevailing at the time when it was made (s 29(2) TMA)

It found:

There were more than three years between HMRC making a discovery that the taxpayer was non resident and raising an assessment. A discovery cannot be remade: the discovery had lost its quality of newness and become stale by the time the assessment was made.

Accordingly the assessment could not stand.

Having found that, the outcome of the further discovery conditions was immaterial, all of which were found in HMRC's favour:

  • By failing to take reasonable steps to review and consider Mr Hargreaves’s position before filing the return on 31 January 2002 the conduct of Mr Hargreaves and/or his advisers, PwC amounted to carelessness. 
  • There was no reference to any capital gain on Mr Hargreaves’s 2000-01 return. Accordingly the hypothetical officer could not have been reasonably expected to be aware of an actual insufficiency arising as a result of the disposal by Mr Hargreaves of his Matalan shares on the basis of the information either on that return or indeed the P85 submitted.
  • Mr Hargreaves’s return was not made on the basis or in accordance with the practice generally prevailing at the time it was made.


Two other cases on discovery and staleness went on appeal to Court of Appeal: Tooth and Beagles. The judgment in Tooth is expected any day and Beagles is to be heard later in 2019. It is expected, given the amount of tax involved that HMRC may appeal Hargreaves. Time limits for discovery assessment in cases involving offshore matters are now extended to 12 years in normal cases.

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

Time Limits for Tax Assessments
What are the time limits for claiming a tax refund? How far back can HMRC go to raise an assessment?

External links

Hargreaves v HMRC TC07090