In HMRC v John Hicks [2019] UKUT0040, the Upper Tribunal (UT) allowed HMRC’s appeal. It found there had been carelessness on the part of the taxpayer's adviser so the discovery assessments raised were in time after all. 

Mr Hicks claimed a trading loss on his 2008/9 tax return, which was carried forward to use against the profits arising on the same trade in 2009/10 and 2010/11.

The FTT had found that:

The Upper Tribunal disagreed and allowed HMRC’s appeal:

Since carelessness had been established, the UT did not need to decide whether sufficient information had been supplied to HMRC so as to alert the 'hypothetical' HMRC officer of the potential insufficiency in the original assessment. However, they did discuss it, rejecting HMRC's arguments that it had not. 

The Tribunal also considered in outline whether Mr Hicks himself had been careless or whether the scheme provider, Montpelier, had acted carelessly, even though any decision on these points would not affect the outcome of the appeal. The UT thought that Mr Hicks would have been careless if he had not used an adviser and, more importantly, that Montpelier was careless. Its suggestion that "the scheme was perfect for derivatives traders" was wrong and carelessly so.

The UT rejected Mr Hicks’ ground of challenge that discovery had actually been made in early 2012 when HMRC wrote to him expressing 'concerns' on a number of issues as part of a check of his 2008/09 return and that this discovery was stale. The Tribunal did not have enough evidence to show a discovery in 2012.

Links to our useful subscriber guides:

Statutory Review
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review?

How to appeal a decision of HMRC
What type of decision is appealable? What are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

Link to guides

Discovery assessment and time limits
HMRC have the power to re-open a past year of assessment if they discover a past under assessment that results in a loss of tax, and raise a Discovery Assessment. 

External link:

HMRC v John Hicks [2019] UKTU0040