Adviser acted carelessly for the purposes of discovery

On 30 March 2015 HMRC raised discovery assessments for 2009-10 and 2010-11 for trading losses the taxpayer claimed had resulted from his participation in the Montpelier dividend strip scheme. The department had opened an enquiry into his 2008-09 tax return but not those for 2009-10 and 2010-11.

The First-tier Tribunal allowed the taxpayer’s appeal on the ground HMRC had not proved carelessness on the part of the taxpayer or his adviser in bringing about the insufficiency in the returns (TMA 1970 s 29(4)). It also found that adequate information had been available to alert the hypothetical officer to the potential insufficiency (s 29(5) and (6)).

HMRC appealed.

The Upper Tribunal considered that the taxpayer’s accountant (B) who provided advice on entering the scheme and prepared his tax returns was not qualified to form an independent opinion on the workings of the scheme. However having taken...