The beneficiary of an offshore trust has won a time limit extension from HMRC for raising a discovery assessment, in a court case ruling by First Tier Tribunal (FTT).

In James Scott v HMRC [2023] TC08784, the FTT confirmed the extended time limits for Discovery Assessment applying to the Requirement to Correct (RTC) rules, according to a briefing note on 21 September by Rossmartin.  

The taxpayer was the beneficiary of an interest-free loan from an offshore trust, which created a taxable benefit. 

Prompted by the Requirement to Correct rules to report a UK tax liability that resulted wholly or in part to an offshore issue, the taxpayer had made his disclosure under the Worldwide Disclosure Facility (WDF) in December 2018 relating to 2014-15 to 2016-17.

HMRC issued Discovery assessments for 2013-14 to 2016-17.

The taxpayer Appealed both 2013-14 and 2014-15, claiming that HMRC was out of time to assess these years.

The FTT said the parties agreed that the taxpayer had taken reasonable care, and that HMRC could not rely on s.36A TMA 1970 (i.e. the extended 12 years) to make a discovery assessment for 2013-14 and 2014-15 because the legislation is quite clear and discovery assessments can only be issued for these years for carelessness, which HMRC agreed that the taxpayer had not been.  

As assessment was in time under Para.26 of Schedule 18 of Finance (No 2) Act, this extended the time limit in general for raising a discovery assessment where the matter involved an offshore issue.  

The taxpayer's appeal was dismissed and the discovery assessments for 2013-14 and 2014-15 were valid.