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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Reopening Earlier Years: Tax Cases: Jonas v Bamford 51TC1

In this case, several years’ capital statements pointed to under declarations of income, which the taxpayer sought to explain with a betting story. Jonas, on legal advice, had refused to give any information to the Inspector concerning his income or expenditure for the three years following those for which the capital statements had been completed. As a result the Inspector had no direct evidence of actual under-declarations for those years and Counsel suggested that as a result the Inspector had not made a discovery. Both the Special Commissioners (now replaced by the tribunal) and the Courts rejected that submission. The Judge commented, ‘There can be no doubt at all that the Inspector of Taxes discovered that Mr Jonas was the possessor of resources which would not be explained by reference to known sources of capital and income. This is virtually the classic case of ‘discovery’.’

He later summarised matters as follows,

“but, so far as the discovery point is concerned, once the Inspector comes to the conclusion that, on the facts which he has discovered Mr Jonas has additional income beyond that which he has so far declared to the Inspector, then the usual presumption of continuity will apply. The situation will be presumed to go on until there is some change in the situation, the onus of proof of which is clearly on the taxpayer”.

It is clear therefore that the fact that the Inspector was able to point to under-declarations in one series of years was sufficient to enable the Inspector to infer that while Mr Jonas’ business and lifestyle remained the same under-declarations could be presumed to have continued.

The question which the Judge was answering was not whether the appellant had made additional profits and what they were, but whether the Inspector had been entitled to raise assessments at all. His conclusion was that the ‘presumption of continuity’ gave sufficient grounds for the Inspector to raise the assessments and the onus was then on the appellant on appeal to show the amount by which they should be reduced, TMA70/S50 (6). The appellant elected not to bring any evidence, so it was inevitable that the assessments should be confirmed by the Commissioners unless he could show that they were invalid in their entirety.