Businesses Filing Late Tax Returns Late Will Always Face Consequences, Right

Businesses Filing Late Tax Returns Late Will Always Face Consequences, Right?

An Australian music creator and his wife of French origin invested in a winery in 2004 via a holding company located in France. The activities involving the farming of the land were to be conducted by the holding company. The overwhelming majority was owned by the husband, who owned a ninety-five percent stake and his wife owned a smaller proportion at around five percent.

The husband approached accountants for advice on tax relief to offset any losses whilst carrying out the farming activities. He was encouraged to establish a partnership with a business very similar to his name.

Better Late Than Never?

The husband carved out an unwanted reputation for himself as a poor timekeeper and regularly submitted his tax return documents to HMRC late numerous times. Due to this, the authorities opened a ‘valid action case’ against him for two reasons:

  • HMRC was concerned about the origin of the funds used for payment and
  • his seeming lack of action when requests were made to file.

In more granular detail in 2011 the HMRC grew increasingly concerned after the husband had paid any outstanding tax liability in the amount of just shy of £100,000. Her Majestys Revenue and Customs raised eyebrows and questioned where the monies had originated from and the extent of his outstanding tax liability. HMRC sent a discovery assessment as it sought further information over his tax affairs for the years between 2004-07. The authorities also wanted to review his entire tax returns and the husband disclosed them in full. However, he sought to offset the losses of the partnership against his income.

HMRC inquired into the form of various notices pursuing the missing payments and the husband failed to file them. Seemingly frustrated over the lack of progress HMRC claimed £6,000 from him about the 2007-08 tax year by way of a discovery assessment.

First Tier Tax Tribunal

Around 2019 the husband seemingly disagreed with the action being pursued by HMRC and appealed to the First Tier Tax Tribunal. In more detail, the appeal was against the decision to send penalty notices to him seemingly in error and the discovery assessments which had been sent about tax years 2004 to 2008. HMRC argued that the husband had intentionally attempted to prevent it from assessing his income by failing to submit tax returns. However, the Tribunal found that this could not have been the case since the husband filed tax returns seemingly seeking to claim relief from losses and had overlooked the time when this was required. Another argument put forward by HMRC surrounded limitations. The usual limitation period is six years. However, HMRC also argued that section 36 of the TMA 1970 also provided it with a two-decade limitation period because of the intentional decision of the taxpayer. However, the Tribunal rained on HMRC’s parade further when it held that this view was incorrect. Instead, it held that HMRC was outside the limitation period, the discovery assessments were invalid, and should have been submitted within the six years.

Lessons Learned?

There are key takeaways for both HMRC and taxpayers in similar situations. There is no guarantee that the courts will accept the HMRC arguments of entitlement to extended limitation periods or the submission that the taxpayer deliberately submitted tax returns late to prevent HMRC from reviewing its income. The taxpayer would be best advised to timely pay their taxes to reduce the likelihood of HMRC:

  • carrying out investigations,
  • sending discovery assessments and
  • pursuing court proceedings.

The Legists Content Team


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[1] Dougan [2022] TC 08471/V - TC 08471 AMENDED.pdf (

[2] Flanagan, R – Wine merchant wins £350k tax case – 4 May 2022 – Accountancy Daily - Wine merchant wins £350k tax case | Accountancy Daily

[3] Ross Martin – Failure to file not deliberate for discovery purposes - Robert Don Hunter v HMRC [2022] TC8471 - Failing to file not deliberate for discovery purposes -

[4] Ross Martin – Discovery Assessments – 23 May 2022 - Discovery Assessments -

[5] Section 29 Taxes Management Act 1970

[6] Section 36 Taxes Management Act 1970

[7] The Birmingham & District Cattle By-products Co, Ltd v The Commissioners of Inland Revenue [1919] 12 TC 92 (“Birmingham Cattle”)

[8] Kirk and Randall, Limited v Dunn [1924] 8 TC 663 (“Kirk and Randall”)

[9] Mallalieu v Drummond [1983] 2 All ER 1095 (“Mallalieu”)

[10] Mansell v HMRC; SpC 551 [2006] STC (SCD) 605 (“Mansell”)

[11] Romasave (Property Services) Ltd v Revenue and Customs Commissioners [2015] UKUT 254 (TCC) (“Romasave”)

[12] Anthony Clynes [2016] UKFTT 369 (TC) (“Clynes”)

[13] Tooth v HMRC [2019]EWCA Civ 826 (“Tooth”)

[14] Ransom v Higgs [1974] 3 All ER 949 (“Ransom v Higgs”)

[15] Earlspring Properties Ltd v Guest [1993] STC 473 (“Earlspring”)

[16] Wannell v Rothwell [1996] S.T.C. 450 (“Wannell”)

[17] Barry Edwards v HMRC [2019]UKUT 131 (“Barry Edwards”)

[18] William Martland [2018] UKUT 178 (TCC) (“Martland”)



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