Derek Hankinson lost a First Tier tax tribunal hearing relating to his residency status in October 2009 after the tribunal found that Hankinson was a UK resident in the UK for the year 1998/99 in a case worth £30m.
Hankinson had originally appealed this decision based on the fact that HMRC had made a discovery assessment about his residency status 6 years after the tax year in question.
A discovery assessment can only be made on previous years provided that one of two criteria is fulfilled – that there was negligence of fraud involved in the original submission or that the officer could not have reasonably expected to have been aware of the discovery when the tax return was originally submitted to HMRC.
However, Hankinson has argued that as the changes in the self assessment system in recent years has placed a greater burden on taxpayers, a greater burden should also be placed on HMRC.
He said that officers should now be required to prove the discover assessments fulfil both criteria before investigations may be carried out.
Furthermore, he is claiming that any evidence produced after the discovery assessment was announced should be inadmissible in court.
Hankinson, after his failure, took his case to the Upper Tribunal, which he also lost, who ruled that he could not take this to the Court of Appeal.
However, the Court of Appeal has announced their intention to hear it as there is a point of principle or practice to the case.
This is a vital case for HMRC as they appear to increasingly rely on their discovery powers in order to raise assessments and indeed start enquiries.
If the Court of Appeal rules in favour of Hankinson, HMRC may be faced with difficult changes to make in the way assessments are raised.
If you have already undergone an enquiry by HMRC and know that you have left out information or have offshore bank accounts stashed away then you NEED to contact an expert who can guide you through before a discovery assessment is raised.
If you don’t… you could go to prison.
To speak to KinsellaTax to put your mind at rest, telephone us now on 0800 471 4546 or click here to fill a tax enquiry form.