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Discovery assessments: agents

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Is it right to hold taxpayers responsible for misleading conduct by their advisers?

The recent case of Lucas v HMRC [2025] UKFTT 702 (TC) is a cautionary tale which is likely to have some serious repercussions.

Mr Lucas was a driver for a courier company. An accounting firm offered to obtain tax repayments for him by claiming cleaning and subsistence expenses; their fees would be 20% of the tax refunds. They had acted for a number of his colleagues who had obtained significant tax repayments.

The accountants did everything and sent various calculations for him to approve, which were then submitted to HMRC without his further knowledge or consent. A repayment was duly received by Mr Lucas. As it turned out, there was no substance to the claims. When HMRC found out, they issued discovery assessments (which would have been out of time) to reclaim the tax on the basis on the basis of careless or deliberate behaviour.

The tribunal said that Mr Lucas has been misled by the accountants (Apostle Accounting Ltd) into authorising claims that they knew were not legitimate.

Mr Lucas thought that HMRC’s allegation of careless or deliberate behaviour was a bit harsh because he relied on the accountants to do things correctly and had been in regular communication with them. He had no reason to believe that anything was wrong. You can see his point.

Unfortunately, the test for discovery assessments in TMA 1970 s 36(1B) refers not only to the taxpayer but includes a loss of tax brought about by another person acting on his behalf.

The tribunal said that Mr Lucas did not see the tax returns, he did not confirm their accuracy, he did not give any authority for their submission, and he had been misled into authorising the accountant to claim the refunds. Nevertheless, they concluded that Apostle were acting on his behalf and therefore the assessments were valid.

This places all taxpayers in an impossible position. Tax is so complicated that the lay taxpayer has no real hope of knowing whether there is anything wrong with his tax return which has been prepared by his accountant. I wonder whether any MP would accept that he is responsible under the tax code for the actions of his accountant and unable to rely on anything they say because if they are misleading him, he will be to blame. He can sue his accountant or lawyer, of course – but good luck with that.

I would have thought that any MP faced with this would say that the law must be changed. I suggest they get on with it.

One can only hope this case will go further and the legislation will be found not to be as harsh as suggested by the FTT. Or better still, HMRC could issue a statement saying they will accept that where an adviser deliberately misleads the taxpayer, the taxpayer will not be regarded as responsible for the advisers’ deliberate and wrongful conduct. 

Issue: 1716
Categories: In brief
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