In Hargreaves v HMRC [2016] EWCA Civ 174 (22 March 2016), the Court of Appeal found that a taxpayer was not entitled to a separate preliminary hearing on the validity of a discovery assessment.
The issue was whether Mr Hargreaves had the right to require HMRC to establish, at a separate preliminary hearing prior to the hearing of his appeal, whether the discovery assessment which was the object of the appeal had validly been issued under TMA 1970 s 29(3).
Mr Hargreaves contended that the conditions set out in s 29(3) provided a threshold and therefore a high level of protection for the taxpayer which could not be fulfilled unless he had a right to a separate hearing. The Court of Appeal rejected the notion that a two-stage process was required. It noted, inter alia, that Hankinson [2011] EWCA Civ 1566 was authority for the proposition that the s 29(3) conditions were not a precondition for the validity of a discovery assessment; and that s 29(8) required any objection to the validity of a discovery assessment to be dealt with on appeal.
The Court of Appeal also rejected the argument that the taxpayer might be forced to present his case on the substantive issue, even if he was claiming that the discovery assessment was not valid. The court pointed out that if HMRC did open, the taxpayer could submit that there was no case to answer by virtue of s 29(3) and only call his evidence on the substantive issue if he lost on that point.
Why it matters: Prior to FA 1989, the issue of a discovery assessment was a two-stage process, as it required the leave of the General or Special Commissioners. This case confirms that this is not the case under current legislation. Furthermore, it reiterates the point made in Hankinson that HMRC does not have to satisfy the conditions before issuing a discovery assessment, as the conditions are objective and can be assessed by the tax tribunals in the course of an appeal against the assessment.
In Hargreaves v HMRC [2016] EWCA Civ 174 (22 March 2016), the Court of Appeal found that a taxpayer was not entitled to a separate preliminary hearing on the validity of a discovery assessment.
The issue was whether Mr Hargreaves had the right to require HMRC to establish, at a separate preliminary hearing prior to the hearing of his appeal, whether the discovery assessment which was the object of the appeal had validly been issued under TMA 1970 s 29(3).
Mr Hargreaves contended that the conditions set out in s 29(3) provided a threshold and therefore a high level of protection for the taxpayer which could not be fulfilled unless he had a right to a separate hearing. The Court of Appeal rejected the notion that a two-stage process was required. It noted, inter alia, that Hankinson [2011] EWCA Civ 1566 was authority for the proposition that the s 29(3) conditions were not a precondition for the validity of a discovery assessment; and that s 29(8) required any objection to the validity of a discovery assessment to be dealt with on appeal.
The Court of Appeal also rejected the argument that the taxpayer might be forced to present his case on the substantive issue, even if he was claiming that the discovery assessment was not valid. The court pointed out that if HMRC did open, the taxpayer could submit that there was no case to answer by virtue of s 29(3) and only call his evidence on the substantive issue if he lost on that point.
Why it matters: Prior to FA 1989, the issue of a discovery assessment was a two-stage process, as it required the leave of the General or Special Commissioners. This case confirms that this is not the case under current legislation. Furthermore, it reiterates the point made in Hankinson that HMRC does not have to satisfy the conditions before issuing a discovery assessment, as the conditions are objective and can be assessed by the tax tribunals in the course of an appeal against the assessment.
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