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Discovery assessment invalid as a hypothetical HMRC officer should have been aware of an insufficiency of tax

By Mark McLaughlin, June 2021

A discovery assessment was invalid as a hypothetical officer could have been reasonably expected to be aware that an amount which ought to have been assessed to tax had not been so assessed. 

The appellant company (‘BEL’), a UK incorporated and tax resident company, was part of an international group with a US incorporated head company. BEL was incorporated on 28 November 2002, and prepared statutory accounts for the 13-month period ended 31 December 2003. 

An inter-company loan facility was entered into on 21 January 2003 between BEL’s parent company (‘BUKH’) as lender and another company (‘BCL’) as borrower. The consideration given by BCL in respect of the loan was the repayment of the principal by BCL to BUKH, and the issue by BCL to BEL of a ‘promissory note’ (i.e. loan note) on 18 December 2003 of £10,812,449.;<

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