text: A taxpayer who made an in-year payment on account but never filed a return has lost an appeal against a discovery assessment assessing him to that amount of tax. Having failed to file a return in time the FTT held that HMRC was entitled to reject his later claims that the amount of tax should have been lower than his initial estimate, and upheld tax geared penalties based on that amount, though it had been paid prior to penalties becoming due.
  A UK resident non-dom remitted a capital gain. His tax adviser informed HMRC during that tax year. The tax was paid then, so that the taxpayer could claim the tax as a credit against his US tax liability. He did not file the tax return for several more years, and in the interim HMRC issued assessments and penalties based on the original tax estimate supplied by his adviser.
  When the return was filed, HMRC rejected it as it was over four years late. It contained a lower figure of CGT, and an EIS claim that further reduced the tax due. He challenged HMRC’s refusal to accept the reduced figures. The FTT first found that the discovery assessment was not stale, as although issued over a year after HMRC was aware of the tax that ought to be assessed, it was issued less than five months after his adviser had confirmed that the return was unlikely ever to be filed, which was the true point of the discovery. Although the FTT disagreed with the concept of staleness, it followed the precedent set by higher courts in considering it. A number of technical challenges to the assessment and penalties were also dismissed.
  The taxpayer also argued that the tax geared penalties for late filing should be reduced, as he had paid tax in advance. This was rejected, as he had not filed a valid return on time.
  HMRC has provided an update on how R&D tax credits will be applied in light of the COVID-19 crisis along with an update on notified State Aid status for COVID-19 support schemes.
  HMRC has clarified that where tax is deferred for a specific regime to support businesses during COVID-19, such as the VAT deferral, the R&D Expenditure Credits (RDEC) or the repayable tax credit may not be set against any liabilities for those taxes before the revised due date.
  If, however, tax is deferred under a time to pay (TTP) arrangement, HMRC will offset any R&D tax credit against any TTP liability, not just the liability outstanding at the time the credit was paid. Any R&D credit that is expected by the taxpayer should be disclosed to HMRC during TTP discussions and HMRC will factor this in to the TTP arrangement.
  It is not HMRC’s intention to change temporarily the legislation that requires any RDEC remaining at the relevant step in the calculation to be offset against liabilities owed to HMRC. It will therefore usually seek to offset credits against liabilities owed to HMRC before paying out a credit. HMRC will, however, consider this on a case-by-case basis.
  HMRC has also provided confirmation as to which Government support schemes are notified State Aid, which potentially prevents a claim for the purposes of SME R&D relief. The Bounce Back loans, Coronavirus Business Interruption Loan Scheme and Coronavirus Large Business Interruption Loan Scheme are all notified State Aid. The Future Fund, however, is not a form of State Aid.
  The Government is seeking views on the technical effectiveness of draft legislation to introduce rules on the taxation of COVID-19 business support grants, which will be included in Finance Bill 2020.
  The measure is intended to ensure that government grants provided during COVID-19 are treated as taxable income, within the scope of either income tax or corporation tax. It will apply to individuals, businesses, individual members of a partnership and employers who receive payments from: