Discovery assessments: the Court of Appeal in Tooth

The Court of Appeal decision in Tooth concerning discovery assessments has been eagerly awaited. The taxpayer disclosed in his online return the use of a scheme to generate employment losses, but a software glitch meant the disclosure could not be put in the employment tax section and was instead made in the partnership pages. HMRC issued a discovery assessment claiming it had made a discovery and that the return contained a deliberate inaccuracy. Although the Court of Appeal decided that HMRC had not made a discovery, the judgment contains unhelpful comments for taxpayers in relation to what constitutes an inaccuracy in a return and what amounts to deliberate behaviour.