Discovery is reasonable

Nature of soccer academy

The taxpayer invested in a South African soccer academy having borrowed the money from a Jersey-based entity M. He claimed sideways loss relief of £3m (ITA 2007 s 64 and s 74). HMRC held that the losses were not allowable on the basis the trade was not commercial (s 66 and s 74) and issued a discovery assessment.

The First-tier Tribunal dismissed the taxpayer’s appeal. There were two issues for the Upper Tribunal. First whether HMRC’s discovery assessment was valid and second whether the taxpayer had been carrying on a trade on a commercial basis with a view to profit.

On discovery the judges accepted the First-tier Tribunal’s finding that it was reasonable for the officer to believe there had been an insufficiency of tax. Her belief went beyond a ‘mere suspicion’. It was one which a reasonable person...