The Commissioners for HMRC v Nicola Martino

Where HMRC has made a qualifying discovery for the purposes of a discovery assessment, the discovery does not cease to qualify merely because time has passed. A tribunal therefore errs in law by treating a discovery as becoming stale before the assessment is made. On an appeal against that error, the Upper Tribunal may set aside the decision and either remit the case or remake the decision under the Tribunals, Courts and Enforcement Act 2007. Where the remaining grounds have already been rejected and are not challenged, the Upper Tribunal may remake the decision by dismissing the taxpayer’s appeal.

HMRC assessed Nicola Martino to an unauthorised payments charge and surcharge under the Finance Act 2004, following a transfer from funds held in a registered pension scheme. The First-tier Tribunal allowed his appeal, holding that HMRC’s discovery had become stale by the time the discovery assessment was issued. It rejected his other challenges.

HMRC appealed on the issue whether staleness could invalidate an otherwise valid discovery assessment under section 29 of the Taxes Management Act 1970. The appeal was stayed pending the Supreme Court’s decision in HMRC v Tooth [2021] UKSC 17. After that decision, Mr Martino was debarred from further participation and the appeal was determined on the papers.

1. Appeal allowed. The FTT’s conclusion that HMRC’s discovery had become stale was inconsistent with the Supreme Court’s decision in HMRC v Tooth [2021] UKSC 17. If HMRC has made a discovery which qualifies as such, it cannot cease to qualify by mere passage of time.
2. The FTT’s error was material because its conclusion on staleness was the basis on which Mr Martino’s appeal succeeded. The Upper Tribunal’s powers under section 12 of the Tribunals, Courts and Enforcement Act 2007 were therefore engaged.
3. The Upper Tribunal set aside the FTT’s decision insofar as it related to Mr Martino. The FTT had rejected all his other challenges, including his argument that the assessment was out of time, and those conclusions were not challenged.
4. There was no reason to depart from the FTT’s unchallenged conclusions on the remaining issues. The Upper Tribunal remade the decision and dismissed Mr Martino’s appeal against the assessment.

• Upper Tribunal (Tax and Chancery Chamber): HMRC’s appeal allowed. The First-tier Tribunal’s decision was set aside insofar as it related to Mr Martino, and the decision was remade by dismissing his appeal against the assessment.
• First-tier Tribunal (Tax Chamber): In Gordon, Connell, Martino and Hills v HMRC [2018] UKFTT 307 (TC), Mr Martino’s appeal was allowed on the basis that HMRC’s discovery had become stale, although his other challenges were rejected.