Discovery confusion

The taxpayer company claimed a deduction of £2m in its accounts and tax return for the year ended 31 December 2005.

HMRC issued an FA 2008 schedule 36 paragraph 1 notice in December 2009 requesting information in relation to the deduction which related to an out-of-court settlement.

The taxpayer was told the Revenue would issue protective assessments on the basis the deduction was not allowable.

The tax department sent a letter headed “notice of determination” in June 2012 and it was agreed by both parties that the correspondence was outside the time limit for making a determination.

But the taxpayer also claimed the letter was not a valid notice of discovery determination and issued an appeal.

The First-tier Tribunal said making a discovery determination under FA 1998 sch 18 para 41(2) was separate from notifying a discovery; the time limits in sch 18 para 46 applied...