Where an amount of tax is disputed, and HMRC put forward calculations, the tax bill becomes finalised if both sides can agree to those figures. This offer (the tax calculation) and the taxpayer’s agreement, forms a contract between HMRC and the taxpayer, and the tax is said to be determined by agreement.
However, to reach this determination the taxpayer has to actually accept HMRC’s offer stating the tax due. A failure to reply or silence from the taxpayer can not be taken as an agreement, although HMRC investigators may try to skip this vital stage and record an agreement when none has been achieved.
A recent case concerning CGT has made it clear that where the taxpayer has failed to respond HMRC can not read that as acceptance of the tax due.
In 2014 HMRC discovered that Ms Kaura had not declared a number of property transactions in the years 2005 to 2013, and issued discovery assessments after she failed to reply to an information notice. In 2015 Kaura was diagnosed with cancer and did not give her full attention to her tax affairs. In January 2016 HMRC sent her calculations of the gains and tax due. In July 2016 HMRC wrote to Kaura explaining that her lack of response was taken as agreement to the tax figures.
The FTT determined that Kaura’s failure to respond could not be taken as agreement, and she was permitted to appeal against the discovery assessments.
Written by the Tax Advice Network