Kelly – Tax tribunal confirms re-discovery not permissible for the purposes of section 29 TMA

10 August 2021. Published by Adam Craggs, Partner

In Sean Kelly v HMRC [2021] UKFTT 162, the First-tier Tribunal (FTT) confirmed that a discovery can only be made once and HMRC cannot raise a new discovery assessment under section 29, Taxes Management Act 1970 (TMA), in respect of the same discovery.


Mr Kelly (the taxpayer) appealed against discovery assessments issued by HMRC in 2016 under section 29, TMA, on the basis that the taxpayer was provided with taxable benefits in kind in the form of a car and fuel benefits in the tax years 2010/11, 2011/12, 2012/13 and 2013/14 (the 2016 assessments).  The discovery was made when a spreadsheet showing which cars had been allocated to which employees was provided to HMRC.

The taxpayer disputed the 2016 assessments on various grounds including that the car was a “pooled car” within section 167, Income Tax (Earnings and Pensions) Act 2003. 

After the hearing (which had focussed on the issues raised in the pleadings as to whether the car provided for the taxpayer's use was a pool car), the FTT identified a procedural issue with the 2016 assessments. 

Shortly before the expected hearing of that appeal, HMRC had written to the taxpayer informing him that the assessments were "technically flawed". The 2016 assessments were therefore vacated and HMRC withdrew from the appeal. 

In 2017, HMRC issued new discovery assessments to the taxpayer (the 2017 assessments).  The taxpayer appealed those assessments and it was that appeal which had come before the FTT for determination. 

FTT decision

The appeal was allowed.

The FTT held that HMRC could not issue the 2017 assessments as there had not been a fresh 'discovery' by HMRC after the 2016 assessments had been withdrawn. Following established principles, which have been considered recently in HMRC v Tooth [2021] UKSC 17 (you can read our blog on that decision here), the FTT confirmed that the discovery that underpinned both the 2016 and 2017 assessments, could only be made once. As the discovery had already been the basis of the 2016 assessments, it could not be relied upon again for the purpose of the 2017 assessments.

HMRC had also sought to argue that the taxpayer's appeal of the 2016 assessments was still active, on the basis that the letter from the FTT closing the appeals was not a 'decision' of the FTT. This, HMRC submitted, meant that the 2016 assessments had not been disposed of and could still be the subject of an appeal. The FTT gave this argument short shrift and confirmed that the letter it had issued did amount to a final decision in relation to that appeal. The taxpayer's appeal of the 2016 assessments had therefore already been successful.


Although the recent decision of the Supreme Court in Tooth removed the possibility of a taxpayer arguing that a discovery assessment could become stale through the passage of time, in this case the FTT has confirmed that a discovery can only be made once and HMRC cannot raise a new discovery assessment in respect of the a discovery previously made.

Together with the FTT's recent decision in Ball Europe Ltd v HMRC [2021] UKFTT 23 (TC) (you can read our blog on that decision here) this decision is another reminder that taxpayers who receive a discovery assessment should pay close attention to the statutory protections provided in the relevant legislation and case law and where appropriate, the validity of such assessments should be challenged.

The decision can be viewed here.

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