The Supreme Court has delivered its eagerly anticipated decision in Tooth v HMRC [2021]. There were two issues in the case: whether an insufficiency of tax had been caused deliberately by Mr Tooth, therefore justifying a discovery assessment by HMRC made within the extended 20-year time limit; and whether the discovery assessment made by HMRC was ‘stale’ and therefore invalid. The Court dismissed HMRC’s appeal and agreed with Mr Tooth that the alleged inaccuracy had to be looked at in the context of his return as a whole; and as a result, the Court also agreed that there was no deliberate inaccuracy in the return. However, the Court found that the concept of ‘staleness’ does not exist in the context of discovery assessments. The decision is likely to have significant implications across all taxes.

Deliberate Behaviour

Whilst the Supreme Court accepted HMRC's argument that the requirement to demonstrate deliberate behaviour in the case of a 20-year assessment can be satisfied by showing a deliberate inaccuracy in a document, even if the loss of tax itself was not deliberately sought, it rejected some of HMRC's more challenging submissions. In particular, the Court held against HMRC and confirmed that:

A 'deliberate inaccuracy' is a statement which, when made, was deliberately inaccurate. It is therefore not a statement which was made deliberately, and which was in fact inaccurate. There must, in other words, be an element of 'intentionality'; and

An alleged inaccuracy must be viewed in the context of a document as a whole. In the case of a tax return, the entire return must therefore be considered and a decision by the taxpayer to use the wrong box (e.g. when the other box is unavailable or the form is deficient) is not necessarily enough if adequate explanation is given elsewhere in the return.

The Supreme Court's decision is a welcome one. It reverses the previous decision of the Court of Appeal on this point and restores vital protections for taxpayers.


The Court has confirmed that 'staleness' is not a legal concept relevant to discovery assessments. As a result, an assessment will be valid provided that a discovery is made by an officer of HMRC and the assessment is then made within the relevant statutory time limits, subject to the other conditions also being met.

Practically, this makes it significantly more difficult to challenge assessments made within four years. The best protection against assessments remains full and thorough disclosure in the 'white space' of a return.


Following the decision in Tooth, HMRC will only be able to show that there was a deliberate inaccuracy if they can show that the maker of the statement knew it to be inaccurate when the statement was made. By analogy, and if HMRC assert that the loss of tax itself was brought about deliberately, then they will need to show that the taxpayer or a person acting on their behalf knew of the loss of tax when the self-assessment or claim is made.

However, the Supreme Court left open the possibility that reckless behaviour might also be enough to satisfy the test of deliberateness. This will no doubt be the subject of future litigation in due course.

In addition, the Court has now aligned the concept of deliberate behaviour as it applies to both discovery assessments and penalties. The test of deliberate behaviour is therefore likely to apply in all cases in which HMRC must show deliberate behaviour to justify the making of an assessment and it may well apply in any penalty case in which HMRC allege deliberate behaviour, regardless of whether the penalty concerns income tax, corporation tax or VAT.