Inadequate ‘white space’ disclosure
A taxpayer who had ‘invested’ in a tax avoidance scheme has failed in his attempt to deny HMRC the right to issue a section 20 discovery notice seeking disclosure of all relevant paperwork.
The taxpayer had made what he and his advisers considered to be a full disclosure of the scheme and the tax consequences using the ‘white space’ on his 2003/04 tax return.
The Court held that the discovery notice was valid despite the disclosures made on the tax return as to the Capital Redemption Contract, the relevant legislation and all of the steps involved in the transaction. Such disclosures had been made in a deliberate attempt to deny HMRC the facility to make a discovery assessment after the normal deadline for enquiries into 2003/04 tax returns.
The Court determined that the disclosure in the taxpayer’s tax return was insufficient and that HMRC had ‘discovered’ the taxpayer was involved in a specific type of packaged tax avoidance scheme. The Court also determined that the tax return disclosure did not contain sufficient detailed information about the scheme to provide the hoped for protection from a discovery notice.