Hargreaves v HMRC: Upper Tribunal upholds validity of £84 million discovery assessment
In Hargreaves v HMRC, the Upper Tribunal has found that a discovery assessment issued to John Hargreaves, founder of Matalan plc, was valid. He was assessed to £84 million of tax, including £80 million of capital gains tax on his disposal of shares in Matalan during the 2000/01 tax year. Akash Nawbatt QC, Christopher Stone and Marianne Tutin represented HMRC.
Mr Hargreaves had claimed to be non-resident in the UK in 2000/01 with the consequence that he was not liable to capital gains tax or income tax on foreign income. He conceded shortly before the hearing in the First-tier Tribunal (Tax Chamber) (“FTT”) that he was resident in the UK in that year, but challenged the validity of the discovery assessment that charged him to tax. Mr Hargreaves successfully argued in the FTT that the assessment was ‘stale’. However, following the Supreme Court’s judgment in Tooth v HMRC  UKSC 17, he accepted that that conclusion could not stand.
The Upper Tribunal was therefore concerned with the FTT’s alternative conclusions that if the assessment was not stale, the other conditions for issuing a discovery assessment (contained in ss.29(2) and (3) of the Taxes Management Act 1970 (“TMA”)) were satisfied. The UT upheld the FTT’s conclusion that: 1) an officer of HMRC could not have been reasonably expected to be aware of the loss of tax, thereby satisfying the condition in s.29(3) TMA; and 2) the tax return was not made in accordance with the practice generally prevailing at the time, which would have been a bar to an assessment being made under s.29(2) TMA. The Upper Tribunal’s Decision considers the correct construction and application of both s.29(2) and (5).
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