The tax inspector had sought to re-open a tax assessment outside the time limit provided. He had discovered that a house had been given to the tax payer by his employers. The taxpayer said this had been discoverable from his self-assessment tax return. The inspector had been aware of the possible deficiency for more than 12 months, but had taken no action, and was now out of time. The inspector appealed against refusal of permission by the High Court after a similar refusal by the General Commissioners.
Held: The purpose of the self-assessment scheme was to simplify and speed matters up, and worked on the assumption of honesty in the tax-payer. The tax payer had miscalculated, but without fraud or negligence. Nevertheless the inspector should be shut out from a re-opening only when he had received a clear indication of error and did nothing.
‘[T]he key to the scheme is that the Inspector is to be shut out from making a discovery assessment under the section only when the taxpayer or his representatives, in making an honest and accurate return or in responding to a section 9A enquiry, have clearly alerted him to the insufficiency of the assessment, not where the Inspector may have some other information, not normally part of his checks, that may put the sufficiency of the assessment in question. If that other information when seen by the Inspector does cause him to question the assessment, he has the option of making a section 9A enquiry before the discovery provisions of section 29(5) come into play. ‘[A]pplying the proper statutory test, there was no basis upon which they could have found that the Inspector ought reasonably to have been aware, in the terms provided by section 29(5), of the insufficiency of the assessment on the basis of the information contained in Mr. Veltema’s tax return ‘ and the tax inspector’s appeal was allowed. Leave was given to appeal to the House of Lords.
Judges:
Lord Justice Auld, Lord Justice Chadwick and Lady Justice Arden
Citations:
[2004] EWCA Civ 193, Times 11-Mar-2004, [2004] STC 544
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Appeal from – HM Inspector of Taxes v Veltema ChD 10-Dec-2002
The inspector appealed a finding that he was unable to challenge a self-assessment after the normal time limit.
Held: The Act allowed an exemption on the basis that the inspector ‘could not have been reasonably expected on the basis of the . .
Cited – Scorer v Olin Energy Systems Ltd HL 1985
Where an appeal against an assessment to tax had been settled by agreement, any dispute as to the scope of that agreement was to be viewed objectively, having regard to the surrounding circumstances, including all the material known to be in the . .
Cited – Cenlon Finance Co Ltd v Ellwood 1961
The inspector may use discovery procedures after a tax assessment has been settled where it newly appears that the taxpayer has been undercharged. The discovery allowed is to be given a wide meaning. . .
Cited by:
Cited – HM Revenue and Customs v Cotter CA 8-Feb-2012
Mr Cotter’s accountants had submitted a second tax return adding claims to loss relief in the following year. The claims were contentious, but he invited a review by the Revenue asserting that the losses wiped out any liability to tax. The Revenue . .
Lists of cited by and citing cases may be incomplete.
Income Tax, Taxes Management
Updated: 10 June 2022; Ref: scu.194131