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Much as I dislike 'avoidance schemes' there is something infinitely satisfying about HMRC tripping up when they do not follow the rules, and their own guidance!
Yes; this must be particularly annoying for HMRC (sick to the Tooth even one might say) as we all know this was an utterly hopeless tax avoidance scheme in the 1st place with zero chance of success (barring HMRC [***]-ups), and one wonders why they did not just simply block it retrospectively as that would have easily solved the problem.
They DID block it retrospectively - s.128(5A) ITA 2007. This case was not about whether the scheme worked but whether the Revenue's discovery was a) valid and b) on time. Due to their incompetence it was neither
I obviously meant properly retrospectively i.e. back to when Tooth did the scheme with a specific requirement for him to amend his tax return accordingly, so there then would not have been the need to take him to a Tribunal in the 1st place as he would then have no possible defence.
"How did Tooth escape tax?
Tooth made the investment in the tax avoidance scheme in 2008/09, but HMRC failed to raise the discovery assessment until October 2014. HMRC needed the UT to accept that Tooth had been either careless or deliberately misleading in his self assessment which reduced his tax liability on the basis of his investment in the avoidance scheme."
The tax year in question was 2007/08. The significance of which is that October 2014 is more than six years after it ended and thus HMRC had to prove, among other things, that the loss of tax was brought about deliberately by the taxpayer or someone acting on his behalf. Carelessness was an irrelevant matter. The correct answer to the question posed "how did Tooth escape tax" is HMRC incompetence - they opened the wrong sort of enquiry.
Actually, since the claim related to the carry-back of loss relief from one year to the preceding year, it falls within TMA 1970 Schedule 1B. As a result, although it is calculated by reference to the earlier year's income and gains, it is executed as a claim of the later year. Which would enable carelessness to be used to extend the assessment window to April 2015.
That very thing (ie Tooth amending his 07/08 return for a later year loss when there was no statutory authority to do so) should have triggered an immediate enquiry, even without the fact that Tooth actually told them to raise one!
It boils down to the fact that Tax is about the legal construct and every one bearing the responsibility. I wonder if this makes HMRC appear weak, given the recent powers it was further granted?
A toothless Inspector or another sign of the crumbling, creaking HMRC administrative staff cutting ? I fear the latter.
At least the unacceptably p0or standard of this particular government department appears to be dysfunctional in both compliance and customer service.
It does however beggar belief why the simple procedural
task of recording the potential loss - with the time limit for making a protective assessment - was not adhered to.
Fred Davies, my old D.I. in Newport 1 Tax Office is no doubt turning in his grave at such incompetence.
'Jaws' is successfully dishonest by virtue of the unscrupulously untruthful allegations he makes for his clients.
Get real people; lawyers are protected gangsters so STOP using them entirely.