I have a client who had partnership income and sole trade income in 2006/2007. HMRC issued a notice under Section 12AC (1) and (6) TMA 1970 ref the partnership, all on time, but also issed a Section 9A TMA 1970 notice ref sole trade but have accepted that it was invalid as it was issued too late to have been received within the statutory date. Both related to losses and a tax refund was witheld.
All well and good but they had in the interim issued an assessment, which they called a discovery assesment using Section 29 TMA 1970 as authority as time was running out, thus reducing the overpayment from £51K to £22k (and come up with tax due of £29K by taking a negative from a negative and getting a positive) by disallowing the sole trade loss. The partnership loss stayed intact.
The partnership matter is now settled and a figure of tax is due by way of a settlement payment to be lade separately.
So, where do we stand regading the sole trade?
I am of opinion that the invalid Section 9A invalidates the asessment so the full £51K overpayment should now be released. There are also losses allocted to earlier years which should now be actioned resulting in a additional tax refund.
Am I right or will HMRC get an out via the Section 12AC (6)?
Was it really a "discovery" assessment seing all info was on the return itself?
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