Tooth – Supreme Court rejects the concept of 'staleness' and confirms the meaning of 'deliberate'

16 June 2021

In HMRC v Tooth [2021] UKSC 17, the Supreme Court, in dismissing HMRC's appeal, confirmed that a discovery assessment issued under section 29, Taxes Management Act 1970 (TMA) will not be invalid because a large period of time has elapsed between the discovery being made and the assessment being issued by HMRC and that for a taxpayer to bring about a loss of tax as a result of a deliberate inaccuracy in a document there must be an intention to mislead.


The taxpayer, Mr Tooth, filed a self-assessment return in 2009 in respect of income tax for the tax year 2007/08, which included a loss generated by way of a tax avoidance arrangement. At the end of 2013, with the assistance of retrospective legislation, it was established that the arrangement was ineffective. HMRC thought it had protected its position in relation to Mr Tooth by opening an enquiry, but it had in fact opened the enquiry under the incorrect legislative provision (Schedule 1A rather than section 9A TMA) and there was no valid enquiry. HMRC therefore issued a discovery assessment in October 2014 under section 29, TMA (the Discovery Assessment), claiming that the insufficiency in Mr Tooth’s self-assessment had been brought about deliberately, and thereby enabling it to rely on the 20-year period within which to issue the Discovery Assessment.

HMRC argued that Mr Tooth's online tax return contained a deliberate inaccuracy, because a loss which (under the arrangement) was designed to be an employment-related loss incurred in the following year of assessment and then carried back, was wrongly inserted into a box on the electronic form reserved for partnership losses and thereby found its way by deduction into the electronic calculation of the self-assessment tax liability and caused the insufficiency. The return was completed in this way because of the technical limitations of the HMRC-approved software which was used to complete the return. Full explanations for the way the form had been completed and why, including an explanation that the loss arose pursuant to a tax avoidance arrangement, were included in the 'white space' on the form.

Mr Tooth appealed the Discovery Assessment to the First-tier Tribunal (FTT).

FTT decision

In the FTT, Mr Tooth put HMRC to proof that there had been the requisite discovery and  denied that his return contained an inaccuracy. HMRC argued that the discovery had been made by its officer in October 2014. The FTT accepted HMRC's case on discovery, but agreed with Mr Tooth that there had been no deliberate inaccuracy in his return. Mr Tooth's appeal was therefore allowed.

HMRC appealed to the Upper Tribunal (UT).

UT decision

The UT found that there had been no discovery in 2014, mainly because HMRC had formed its own view about the insufficiency in Mr Tooth’s return in 2009, and a discovery made in 2009, even if it had been pleaded, would have become 'stale' by October 2014, when the Discovery Assessment was issued. The UT also held that there had been no inaccuracy in Mr Tooth’s return, read as a whole, and that even if there was an inaccuracy, any such inaccuracy had not been deliberate.

HMRC appealed to the Court of Appeal.

Court of Appeal judgment

The Court of Appeal agreed with the UT on the absence of a qualifying discovery but concluded, by a majority, that there had been a deliberate inaccuracy in Mr Tooth’s return. Due to the Court's conclusion on the first point, HMRC's appeal was dismissed.

HMRC appealed to the Supreme Court.

Supreme Court judgment

HMRC argued that there was a valid discovery and sought to uphold the judgment of the majority in the Court of Appeal that there was a deliberate inaccuracy in Mr Tooth’s return. Mr Tooth contended that the conclusion arrived at by the FTT and the UT that there was no deliberate inaccuracy in his return was correct.

The Supreme Court held that Mr Tooth's return did not contain an inaccuracy. The Court said that, even if the return had contained an inaccuracy as contended by HMRC, the Court would not have been satisfied that it was deliberate "in the sense … that Mr Tooth or his advisors knew that the relevant statements were inaccurate and intended thereby to mislead the Revenue". On this basis, HMRC's appeal was dismissed.

The Court also rejected the concept of 'staleness' in connection with discovery assessments, deciding that there is no place for the idea that a discovery which qualifies as such should cease to do so simply because of the passage of time. The Court was of the view that to import such a notion of staleness would conflict with the statutory scheme which sets out a series of limitation periods (in section 34, TMA, onwards ie the four year time limit extended to six and 20 years in the case of carelessness and deliberate conduct, respectively) for the making of assessments to tax. Each of the relevant provisions provide that an assessment “may be made at any time” up to the stated time limit.


The Supreme Court has confirmed that in order for a taxpayer to bring about a loss of tax as a result of a deliberate inaccuracy in a document there must be an intention to mislead HMRC (or possibly recklessness). The only relevant question is whether a statement was made that was deliberately inaccurate, and not whether a deliberate statement was made.

The Court's rejection of the concept of 'staleness' will come as a disappointment to many taxpayers. What this means in practice is that so long as an HMRC officer has made a 'discovery', the fact that HMRC then 'sit' on the discovery will not prevent it from issuing a valid assessment at a later point in time provided the assessment is issued within the relevant statutory time limits and the statutory safeguards in section 29, TMA, are not applicable. 

The Court did acknowledge that a taxpayer may seek relief by way of judicial review proceedings if HMRC fail to act in accordance with ordinary principles of public law in deciding when to issue an assessment under section 29. 

The Court also confirmed that an HMRC officer may make a discovery even if a different HMRC officer made the same discovery earlier, and there are no new facts. 

The judgment can be viewed here.

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