In Peter Marano v HMRC [2020] TC7685, a US citizen who delayed reporting £20 million in capital gains was unsuccessful in persuading the First Tier Tribunal (FTT) that HMRC's knowledge of his inaction rendered its subsequent discovery assessment as 'stale'. Late filing penalties were also upheld as he had a history of poor compliance.

  • The taxpayer’s accountants notified HMRC that he had a Capital Gains Tax liability of £5.7m to report for the 2012-13 tax year in December 2012.
  • When the return filing deadline passed in January 2014, HMRC issued a tax determination based on the previous year’s return of £118,199 plus tax-geared late filing penalties.
  • In 2015, a different HMRC officer picked up the case and she contacted the accountants, requesting that an actual return was filed for 2012-13 to report the CGT due. They said that a return had been prepared but it was unsigned.
  • Subsequent calls received the same response, and by 25 October 2016, the officer was told that the return was unlikely to be approved.
  • HMRC raised a Discovery Assessment in March 2017. The return was then filed and Late Filing Penalties given.
  • The taxpayer Appealed to the FTT on the basis that the assessment was invalid: the discovery had become stale. A range of other technical points were also covered in the appeal and a further appeal was considered in respect of the penalties.

In respect of the key issue of staleness, the FTT expressed its opinion that the current case law on TMA s.29 has taken 'a wrong turning'. It mooted that staleness has been introduced as a new restriction which is not present in the statute. The FTT said that it prefered the interpretation that TMA s.29 merely requires that the officer 'discover' a failure to assess, an underassessment or an excessive claim to relief. To meet that test, all that is required is that “it has newly appeared to an officer, acting honestly and reasonably, that there is an insufficiency in an assessment”. Once this has occurred, the requirement for a 'discovery' has been satisfied. No more is required and the discovery does not become subsequently become 'stale'.

However, the FTT, could not act according to its particular interpretation of the statute as, it is totally bound by current case law set by higher courts, including the Upper Tribunal in Pattullo and the Court of Appeal in Tooth. Thus, the FTT was compelled to proceed on the basis of the appeal and ask if the assessment was invalid if it was made when the discovery was 'stale'.

The FTT found that throughout the period in which HMRC could raise a further assessment, HMRC was regularly liaising with Mr Marano’s agent and was being told that the return would soon be filed, therefore there was no discovery until HMRC realised that no return was going to be filed. This is not a case where HMRC made the discovery and then just sat on it and did nothing for a number of years. The discovery was not stale.

Further grounds of appeal were that the notice to file a return and subsequent late filing penalty notices were not issued by an HMRC officer. The FTT dismissed these on the basis that if the notices were issued by the computer it was in accordance with the program authorised by the HMRC staff who had designed and implemented the computer programs.

The FTT did agree that HMRC’s late filing penalties were flawed due to a failure by HMRC's officer to consider any special circumstances. It reconsidered the facts and concluded that there were no special circumstances. Mr Marano was exactly the type of taxpayer for whom these penalties were designed. The initial fixed penalties were ineffective; he delayed his return until after the tax-geared penalties were issued on 14 March 2017 and he had a wider problem with compliance with his UK tax obligations and had been consistently late in tax reporting in the past. Thus, not only were there no special circumstances, but the penalties are here operating precisely as intended.


There were some ten grounds of appeal and the case makes interesting reading if you have the time to spare as it covers a lot of ground. This case may yet be subject to a further appeal, given the amount of tax at stake. The judge's comments on the concept of staleness are worth noting as staleness is a fairly modern development and it has been challenging for HMRC. Update: in 2021 the Supreme Court ruled against staleness in another case - HMRC v Raymond Tooth [2021] UKSC 17.

Useful guides on this topic.

Discovery assessment and time limits

What are the steps in making an appeal? What should your appeal cover? What does recent case law say 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 where there are penalties too

Late filing penalties
Late returns can be subject to a mix of fixed and tax geared penalties. What penalties apply for late filing? Which penalty will apply and when? 

External links

Peter Marano v HMRC [2020] TC7685