Discovery assessment invalid

The taxpayer participated in a tax avoidance scheme designed to produce an income tax loss in 2008-09 which he was advised could be set against his 2007-08 liability. His accountant was unable to enter the loss on his return because the software he used did not cater for employment losses incurred in a later year and carried back. So the taxpayer entered the loss on the partnership pages of his return and explained why in a white space disclosure pointing out that it was an employment loss and not a partnership loss that was being claimed.

HMRC enquired into the claim but did not raise an enquiry into the 2007-08 return. After the Supreme Court’s decision in CRC v Cotter [2013] STC 2480 HMRC wrote to the taxpayer stating that as a result of that case the tax was due for collection. The taxpayer argued that Cotter...