In Victoria Carter & Peter Kennedy v HMRC [2021] UKUT 0300, the Upper Tribunal (UT) concluded that white space disclosure was insufficient to prevent a discovery assessment being raised by HMRC.  The disclosure suggested that a tax scheme had been operated but did not provide details.

  • Ms Carter and Mr Kennedy (the taxpayers) implemented a Stamp Duty Land Tax (SDLT) avoidance scheme in the purchase of a property for £816,000.
  • Under the scheme, the consideration declarable on the SDLT return was £130,763 which resulted in no SDLT being due on the purchase.
  • The taxpayers filed the required SDLT return, which included a white space disclosure, within the statutory time limit.
  • The disclosure made it clear some form of sub-sale had occurred and that advice had been received that the SDLT anti-avoidance provisions had been considered but did not apply.
  • HMRC did not open an enquiry within the required time but subsequently issued a Discovery Assessment.
  • The taxpayers Appealed to the First Tier Tribunal (FTT) contending discovery was unavailable due to the disclosure made.

The FTT dismissed the taxpayers' appeal against the discovery assessment as:

  • The SDLT return and disclosure note was not detailed enough to allow the hypothetical officer to conclude that insufficient tax had been paid by the end of the enquiry window
  • The disclosure note did not any indication that a pre-planned tax avoidance scheme had been used nor did it provide any technical analysis of why the anti-avoidance provisions did not apply.

The taxpayers' appeal to the UT was dismissed as:

  • The FTT was reasonably entitled to conclude that the disclosure note was of insufficient quality to enable the loss of tax to be identified.
  • While the disclosure note implied that a tax scheme had been undertaken, it did not provide enough information about the way the specific scheme operated.

Useful guides on this topic

SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies? What garden and grounds are subject to higher rates of SDLT?

SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?

Discovery Assessment
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

Discovery Assessments: At a glance
This is a freeview 'At a glance' guide to Discovery Assessments.

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

Victoria Carter & Peter Kennedy v HMRC [2021] UKUT 0300


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