In Heather Jones v The Commissioners for HM Revenue and Customs: [2020] UKUT 0229, the Upper Tribunal allowed an appeal against a discovery assessment for higher rate tax on a severance payment. HMRC had not proved that the assessment was valid.

Income Tax is due on termination payments over £30,000.

Where a discovery assessment is issued the burden on proof is on HMRC to show that the taxpayer failed to take reasonable care and caused an insufficiency of tax.

Miss Jones left her employer on 31 October 2010 after entering into a compromise agreement under which she was to receive a redundancy payment of £36,700, payable in four monthly instalments.

The Upper Tribunal allowed Miss Jones’ appeal. HMRC had not discharged the burden of proof to show the discovery assessments were valid as they had not shown careless or deliberate behaviour by Miss Jones. The UT refused to remit the case back to the FTT to allow them to do so. It would not be in the interests of justice to allow HMRC to make a case which it ought to have made the first time around.

The UT pointed out that the FTT had failed to consider the main issue:


These questions did not need to be answered by the Tribunal due to them finding that the discovery assessments were not valid, a shame since the case has legal precedent and a definitive answer on these points might have helped others finding themselves in a similar predicament to Miss Jone.


Termination, redundancy and leaving payments (from 6 April 2018)
How are redundancy and termination payments taxed? What amounts can be paid tax-free? What amounts are taxable as earnings?

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?

External links

Heather Jones v The Commissioners for HM Revenue and Customs: [2020] UKUT 0229 (TCC)

FTT decision Heather Jones v HMRC [2017] TC6267