The law and practice on discovery assessments has lost its balance, and along with it, any realistic protection for the taxpayer.
The subject of discovery assessments has got a bit out of hand.In fact, it has become so confused and, frankly, surreal thatthere.is no longer the protection for the taxpayer which was envisaged when the provisions were originally introduced. As so eloquently explained by Park J in Langham v Veltema  EWCA Civ 193:
‘[Self-assessment] imposed new burdens on taxpayers by requiring them to submit fuller tax returns than had previously been required…. The new burdens were balanced by new protections for taxpayers who conscientiously complied with the system, in particular by new and tighter time limits on the power of the Revenue to make further tax assessments.’
Unfortunately, the system has lost its balance and, along with it, any realistic protection for the taxpayer. The circumstances which represent a discovery by HMRC are now tolerably clear; however, HMRC’s powers to raise a discovery assessment have begun to resemble the powers from a fantasy world. I would submit that there is now an urgent need for a review, by the legislature or the judiciary or perhaps by HMRC, so we can regain that essential element of balance, and so that taxpayers (and advisers) can understand what the rules really are.
This article was first published in Tax Journal, September 2015.