In James Scott v HMRC [2023] TC08784, the First Tier Tribunal (FTT) confirmed the extended time limits for Discovery Assessment applying to the Requirement to Correct (RTC) rules. 

  • The taxpayer was the beneficiary of an interest-free loan from an offshore trust. This created a taxable benefit. 
  • Prompted by the Requirement to Correct rules to report a UK tax liability that resulted wholly or in part to an offshore issue, the taxpayer had made his disclosure under the Worldwide Disclosure Facility (WDF) in December 2018 relating to 2014-15 to 2016-17.
  • HMRC issued Discovery assessments for 2013-14 to 2016-17.
  • The taxpayer Appealed both 2013-14 and 2014-15, claiming that HMRC was out of time to assess these years.

The FTT found that: 

  • The parties agreed that the taxpayer had taken reasonable care.
  • HMRC could not rely on s.36A TMA 1970 (i.e. the extended 12 years) to make a discovery assessment for 2013-14 and 2014-15 because the legislation is quite clear and discovery assessments can only be issued for these years for carelessness, which HMRC agreed that the taxpayer had not been.  
  • As assessment was in time under Para.26 of Schedule 18 of Finance (No 2) Act. This extended the time limit in general for raising a discovery assessment where the matter involved an offshore issue.  

The taxpayer's appeal was dismissed and the discovery assessments for 2013-14 and 2014-15 were valid. 

Useful guides on this topic 

Offshore Trusts
When is a trust non-resident? What are the UK tax implications of a non-resident trust? What are the UK tax implications for any beneficiaries? What are the UK administrative requirements for a non-resident trust?

Appeal: How to appeal a HMRC decision?  
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Discovery Assessments 
Why can HMRC issue a discovery assessment? What are the discovery assessment time limits?  

Worldwide Disclosure Facility (WDF)
What is the WDF? When can it be used?

Requirement to Correct
What is the Requirement to Correct (RTC)? What are the terms of the RTC. what penalties apply? What are the discovery rules? 

External links  

James Scott v HMRC [2023] TC08784 

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