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Interesting case on what constitutes HMRC enquiry

http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11538/TC07580.pdf

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See in particular para 196: http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11538/TC...

Yet another c*ck up by HMRC that appears to have (at least potentially) cost the taxpayer £83,144,379.

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By richard thomas
02nd Mar 2020 17:16

This decision does not reflect at all well on the senior management of the Large Business Service. I do not include in that expression my former colleagues Craig Norris, who was clearly ill at the time, and Richard Taylor-Gooby who amazingly was not able to access Craig's emails. Too much emphasis on "real time working" and non-confrontation leads to overlooking fundamentals of tax law.

It also seems a strange decision to fight this case which cannot have taken Guy Brannan long to decide (however long it took him to write it) but not to have fought numerous other LBS cases, particularly on international matters like transfer pricing, where HMRC's prospects were so much better.

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By fawltybasil2575
03rd Mar 2020 10:51

@ richard thomas.

From my reading of the Judgment, and with due respect of course, I am not entirely sure that I agree your view that Messrs. Norris and Taylor-Gooby should be exonerated from blame.

One has to also ask whether HMRC were acting in collective desperation in pursuing what was self-evidently a lost cause. No doubt HMRC’s legal team were also handsomely rewarded for failing to persuade HMRC to abandon that lost cause.

As Justin rightly observes, over 83 MILLION pounds lost by the taxpayer, not to mention the time costs of senior HMRC representatives.

To use a current euphemism, “unacceptable” conduct by HMRC and their team: more realistically, a complete shambles.

Basil.

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Replying to fawltybasil2575:
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By richard thomas
03rd Mar 2020 15:20

I didn't mean to imply, nor do I think, that no blame at all attaches to Messrs Norris and Taylor-Gooby, but I do think the main people at fault here for the failure to start an enquiry were the senior management of LBS and above for the reasons I gave. Former colleagues of mine with whom I have discussed the case agree.

As to the foolish decision to fight the case, the decision in something as large as this would have been taken ultimately by the Tax Assurance Commissioner, the second Permanent Secretary, and in governance committees where lawyers were in a minority. Indeed to my knowledge several very promising large cases were dropped, particularly in the Hartnett era, against the advice of lawyers both internal and external. And even QCs like Akash Nawbatt do not get as much from HMRC as appellants would be willing to pay.

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By Justin Bryant
04th Mar 2020 09:58

Indeed, but what was there to prevent HMRC raising a protective discovery assessment within the usual 4 year DA time limit (or was that just incompetence on top of incompetence)?

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By richard thomas
04th Mar 2020 11:32

Para 25(5) Sch 1 FA 2010? (the BPT equivalent of s 29(5) TMA).

It seems from §87 of the decision that HMRC had "discovered" even before the enquiry deadline that CS had an unreturned liability. In RT-G's opinion para 12 did not operate as CS claimed and set out his view why, leaving only the expected rate of attrition through early leavers to be agreed.

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By Justin Bryant
04th Mar 2020 15:19

Yes; but I doubt that would stop HMRC playing dirty (as they normally do) and arguing (both ways) in the alternative that it was only after the 12 month period that they (properly) realised there was a potential loss of tax i.e. HMRC could have issued a protective DA while the CN was being disputed with no downside, but didn't and (unless I'm missing something) seem to have adopted the position they did re discovery only coz they missed the boat there also (with a protective DA) so to speak.

Or per the case below, perhaps HMRC could have said a discovery assessment was made within 12 months and physically issued it later: https://www.taxation.co.uk/Articles/letters-constitute-an-assessment

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