TC09550 - [2025] UKFTT 00702 (TC)

HMRC’s suspicions were set out in their 8 February 2023 letter. The subsequent telephone conversations, discussed at [24] provided Miss Bachleda-Baca with sufficient information for her reasonably to conclude that excessive relief had been given for the first four years under consideration and that there was an insufficiency of tax for 2020/21. Accordingly, she had made a “discovery” of a loss of tax.

By virtue of section 29(3) a discovery assessment may only be made, assuming a valid tax return had been submitted, if one of the conditions in section 29(4) or (5) is satisfied.

At the time when the enquiry window closed for each of the returns, the only “information made available” to HMRC for the purposes of section 29(5) were the tax returns themselves. HMRC may have had other information from other sources which gave rise to the 8 February 2023 letter, but under section 29(6) only information provided by the taxpayer or a person acting on his behalf counts in relation to HMRC’s ability to raise a discovery assessment.

Mr Lucas himself did not submit the returns and, as we have found, he was unaware that returns had been submitted. HMRC raised the assessments based on the returns submitted by Apostle. We therefore consider whether Apostle was “acting on behalf of” Mr Lucas.

The Tribunal drew the attention of the parties to the case of Robson v Revenue and Customs Commissioners [2023] UKFTT 266 (TC) (Robson). In that case, Mr Robson engaged a firm called CACL to discuss with HMRC whether he was entitled to a tax rebate. He did not authorise them to submit a tax return. CACL did submit a tax return and in it claimed EIS relief, the tax repayment being paid to its nominee company. Mr Robson knew nothing about the EIS claim. The EIS relief claim did not satisfy the statutory requirements and HMRC made a discovery assessment to recover the tax. The Tribunal said, at [79]-[81]:

“79.

The box on the declaration was clearly completed by CACL or the return would not have been received by HMRC. However, I am satisfied that Mr Robson had not seen the return, he had not confirmed the accuracy of its contents and he had not given authority for its submission. ….

80.

The facts of Mr Robson's appeal are unusual and specific and as I have concluded that CACL were not authorised to act on behalf of Mr Robson, …

81.

I concluded that CACL was the not authorised agent of Mr Robson. That being so, the return cannot be deemed to have been submitted on behalf of Mr Robson. As s29 TMA requires the filing of a return the statutory requirements are not satisfied.”

The Tribunal in Robson found that CACL was not Mr Robson’s authorised agent, despite him having obtained an authorisation code from HMRC and forwarding it to CACL (an alternative procedure to completing a form 64-8). We understand the reasoning to be that CACL had not only submitted a tax return without Mr Robson’s knowledge or authority but they had claimed relief in respect of investments he had not made and knew nothing about. The Tribunal concluded that the return submitted by CACL could not therefore be regarded as Mr Robson’s return and so the discovery assessments fell away.

We considered whether the principles of Robson could apply in Mr Lucas’ case. As in Robson, Mr Lucas did not see the returns and so could not have confirmed the accuracy of their contents, and he did not give authority for their submission. In our view, the question is not simply whether the returns were submitted with Mr Lucas’ authority. The real question is whether Apostle was “acting on his behalf” in making the returns. In contrast to Robson, Mr Lucas had instructed Apostle to claim the “rebate” which Apostle had advised him was due. Although he had not approved the tax return itself, he had approved the amount of the claim, even though he did not understand how the figure was arrived at and had accepted Apostle’s assurances that it was all correct. In other words, although Mr Lucas had not specifically authorized Apostle to submit tax returns, he had specifically authorized it to claim a tax rebate on his behalf and had approved the amount of that claim. The submission of the tax returns was the mechanism or process by which the claim was made; Apostle had done exactly what Mr Lucas had authorized it to do, that is, claim the tax rebate in relation to work expenses.

We therefore conclude that Apostle was acting on behalf of Mr Lucas in submitting the tax returns.

As noted, at the time when the enquiry windows closed, the only information made available to HMRC in accordance with sub-sections 29(5) and (6) were the tax returns and there was nothing in them to alert an officer to an insufficiency of tax. Accordingly, section 29(5) is satisfied, and the discovery assessment is valid.

It is not necessary to consider the behavioural issues for these purposes, although we now turn to that question in relation to the applicable time limits.

HMRC can raise assessments for the years ending 5 April 2019 to 2021 inclusive in any event (section 34). To raise assessments for the years ending 5 April 2017 and 2018, they must prove, on the balance of probabilities, that the loss of tax was “brought about” carelessly or deliberately by Mr Lucas, or Apostle as a person acting on his behalf (section 36(1), (1A) and (1B)).

HMRC do not contend that Mr Lucas acted deliberately but that he acted carelessly in that he had not queried the amounts of the expenses and had authorized the amounts claimed in the tax returns.

We recognise that Mr Lucas approved the amounts of the claim, but we do not consider that Mr Lucas “brought about” the loss of tax. The loss of tax arose as a result of the submission of tax returns claiming relief for expenses. As Mr Lucas did not know that tax returns were being submitted and accordingly could not have authorized them, he himself did not make the claim and did not bring about the loss of tax.

However, we have found that Apostle was “another person acting on behalf of [Mr Lucas]” within section 36(1B) TMA and so we must consider its behaviour.

We have little doubt that Apostle acted deliberately in submitting tax returns containing the excessive and unallowable expense claims. Any competent tax agent would know that one cannot claim expenses in relation to meals. Apostle did not provide any rationale for the amounts claimed, nor did they appear to have any. The amounts varied randomly from year to year. We do not consider that this could have been a careless error in making the claim for Mr Lucas. Apostle’s response to Mr Lucas’ email following HMRC’s enquiry letter was factually inaccurate and threatening. This was not the response of a legitimate business which had made a mistake. Mr Lucas was not an isolated case. As mentioned, he only approached Apostle because many of his colleagues had been contacted by the company and offered help to claim “rebates”, for a very substantial fee amounting to 24% of the money received. Apostle was, in fact, conducting an industrial scale exercise. We understand that more than 800 people are affected and are having to repay the full amounts of the tax reclaimed by Apostle even though they only received 75% of it.

To the extent that it may be relevant, our finding that Apostle acted deliberately would also mean that the condition for making a discovery assessment in section 29(4) is satisfied.

As a person acting on behalf of Mr Lucas brought about the loss of tax deliberately, HMRC are entitled to issue discovery assessments for the tax years ended 5 April 2017 and 2018 in accordance with section 36.