UT/2023/000126 - [2025] UKUT 00145 (TCC)

Pursuant to section 317(1)(a) POCA the NCA may, upon service of certain notices on HMRC, take on general Revenue functions (which pursuant to s323 POCA are such of the functions vested in HMRC as relate to income tax, CGT, corporation tax and National Insurance Contributions) if the NCA:

“ …has reasonable grounds to suspect that —

(a)

income arising or a gain accruing to a person in respect of a chargeable period is chargeable to income tax or is a chargeable gain (as the case may be) and arises or accrues as a result of the person’s or another’s criminal conduct (whether wholly or partly and whether directly or indirectly)…”

The income tax statutory provisions relevant to this appeal are the familiar discovery assessment (s29) and extended time limit (s36) provisions found in the TMA.

Section 29 TMA provided as relevant:

“29.— Assessment where loss of tax discovered

(1)

If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment—

(a)

that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or

(b)

that an assessment to tax is or has become insufficient, or

(c)

that any relief which has been given is or has become excessive, the officer, or as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.

(2)

…

(3)

Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above—

(a)

in respect of the year of assessment mentioned in that subsection…

(b)

… unless one of the two conditions mentioned below is fulfilled.

(4)

The first condition is that the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf.

(5)

The second condition is that at the time when an officer of the Board —

(a)

ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment; or

(b)

informed the taxpayer that he had completed his enquiries into that return,

the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.

…”

Section 36(1) provided as relevant:

“36.— Loss of tax brought about carelessly or deliberately etc

(1)

An assessment on a person in a case involving a loss of income tax or capital gains tax brought about carelessly by the person may be made at anytime not more than 6 years after the end of the year of assessment to which it relates (subject to subsection (1A) and any other provision of the Taxes Acts allowing a longer period).

(1A) An assessment on a person in a case involving a loss of income tax or capital gains tax—

(a)

brought about deliberately by the person, [or]

(b)

attributable to a failure by the person to comply with an obligation under section 7,

…

may be made at any time not more than 20 years after the end of the year of assessment to which it relates (subject to any provision of the Taxes Acts allowing a longer period).”

Prior to 6 April 2010, s36 provided for extended time limits in the case of fraudulent or negligent conduct. Further, Article 7 of SI 2009/403 provided that section 36(1A)(b) shall not apply where the year of assessment is 2008-09 or earlier, except where the assessment is for the purposes of making good to the Crown a loss of tax attributable to the taxpayer’s negligent conduct or the negligent conduct of a person acting on the taxpayer’s behalf.

The reference in section 36(1A)(b) to an obligation under section 7 is to the obligation on a taxpayer to notify HMRC that they are chargeable to income tax.

Returning to the provisions of POCA the other provision which is raised in this appeal is s319 POCA which is relevant where the NCA makes a discovery assessment under s29 TMA. That provides as follows:

“(1)

For the purpose of the exercise by the National Crime Agency of any function vested in it by virtue of this Part it is immaterial that the National Crime Agency cannot identify a source for any income.

(2)

An assessment made by the National Crime Agency under section 29 of the Taxes Management Act 1970 (c 9) (assessment where loss of tax discovered) in respect of income charged to tax under Chapter 8 of Part 5 of the Income Tax (Trading and Other Income) Act 2005 must not be reduced or quashed only because it does not specify (to any extent) the source of the income.

(3)

If the National Crime Agency serves on the Board a notice of withdrawal under section 317(4), any assessment made by the National Crime Agency under section 29 of the Taxes Management Act 1970 is invalid to the extent that it does not specify a source for the income.”

The reference in s319(2) to Chapter 8 of Part 5 of Income Tax (Trading and Other Income) Act 2005 is to the charge to tax on income not otherwise charged to tax. Income would otherwise be chargeable to tax if it was taxable, for example as trading income.