Guy exiting building.

Tribunal confirms discovery assessment was invalid as enquiry window was still open

03 August 2022. Published by Alexis Armitage, Senior Associate

In Curtis v HMRC [2022] UKFTT 00172 (TC), the First-tier Tribunal (FTT) allowed the taxpayer's appeal as HMRC had not raised a valid discovery assessment under section 29, Taxes Management Act 1970 (TMA), because the enquiry window was still open.


Elaine Curtis (the Appellant) experienced financial difficulties in 2012 and resorted to payday loans. Confiding in a work colleague, she was referred to a financial adviser, Mr Peacock, who it was thought might be able to assist her.

After reviewing the Appellant's financial situation, Mr Peacock arranged a loan for the Appellant of £20,000 from a company known as Blu Funding. Mr Peacock also recommended that the Appellant transfer her occupational pension from a previous employment with BT to a new private pension with a company called Fast Pensions. At the time, the Appellant did not realise or have any reason to think that the transfer of her pension was connected to the loan she received from Blu Funding. Her pension with BT had a transfer value of £49,208 and she transferred it to Fast Pensions. 

Unfortunately, the arrangements ultimately resulted in the Appellant losing her pension in exchange for relieving some of the personal loan that she had borrowed from Blu Funding. The Appellant had received the loan but had repaid about £13,500 of the loan by way of monthly repayments before realising that she had been badly advised. In March 2018, Fast Pensions and Blu Funding were placed into provisional liquidation by the Official Receiver. They were subsequently wound up in the public interest in May 2018. An independent trustee was appointed to the pension fund. The Appellant did not recover any of the pension fund she had transferred to Fast Pensions. 

HMRC wrote to the Appellant for the first time on 30 December 2015, requiring her to file a tax return for the tax year 2012/13. The Appellant sent a completed tax return to HMRC on 19 May 2016. The return included her employment income but made no reference to the £20,000 loan. 

HMRC had begun enquiring into a number of pension schemes, including those administered by Fast Pensions. HMRC formed the view that the loan of £20,000 was derived from the Appellant's pension and as such, it was an unauthorised member payment from her pension, pursuant to the regime for pension tax charges in Part 4, Finance Act 2004 (FA 2004). As a result, HMRC issued a discovery assessment to the Appellant in respect of the alleged unauthorised member payment, under section 29, TMA (the discovery assessment). 

The Appellant appealed the discovery assessment to the FTT.

FTT's decision

The appeal was allowed.

The FTT concluded that the loan of £20,000 made to the Appellant by Blu Funding was an unauthorised member payment as the loan was a "payment … in connection with an investment", for the purposes of section 161(3), FA 2004, although at the time the Appellant had no reason to know that was the case. There was a link between the movement of the pension and the loan the Appellant received, as funds were paid from the new pension provider to the company making the loan.

However, HMRC was not entitled to make the discovery assessment because the conditions in section 29, TMA, were not met. It was implicit that the discovery required by section 29 was a discovery made after the closure of the enquiry window. The discovery assessment was therefore invalid.

Although the FTT did not need to consider the issue, it  commented that, applying O'Mara v HMRC [2017] UKFTT 91 (TC), it would have found that it would not be "just and reasonable" for the Appellant to be liable to the unauthorised payments surcharge. There was nothing more that the Appellant might have reasonably been expected to do that would have avoided the unauthorised member payment. Accordingly, had the discovery assessment been valid, the FTT would have reduced it under section 268(3), FA 2004.


HMRC issue a great many discovery assessments under section 29, TMA, and this decision demonstrates the importance of carefully considering whether all of the conditions in section 29 are satisfied. If they are not, the assessment will be invalid and there will be no need to consider the underlying substantive issue. 

The FTT determined that the discovery assessment was invalid because it had been made before the enquiry window had closed and it was implicit that the discovery required by section 29 had to be made after the closure of the enquiry window. The balance of authority on this point now favours the taxpayer, the FTT preferring the decision of the Special Commissioners in Lee v HMRC [2008] SPC 715 to the FTT's decision in Tim Norton Motor Services Ltd and another v HMRC [2020] UKFTT 503 (TC). 

The decision can be viewed here