A discovery assessment issued nearly two and a half years after HM Revenue and Customs (HMRC) was found to have made the discovery had lost its quality of newness by the time it was issued and so was not valid. 

Background 

In the tax year 2001/02, the appellant entered into a tax avoidance scheme promoted by KPMG. The scheme was designed to produce a tax deduction with no corresponding taxable amount. On 29 January 2003, the appellant filed his self-assessment return for the tax year 2001/02. He disclosed a loss (£1,093,474) in his return. In the ‘additional information’ box, he referred to an appendix attached to the return, which gave details of the transactions that gave rise to the loss. 

HMRC did not open an enquiry into the appellant’s tax return. However, on 1 August 2005, HMRC