Words and Phrases - "deliberate"

Mr Tooth, who wished to claim losses generated by a tax avoidance scheme, filed his tax return using IRIS software approved by HMRC. Due to a technical software issue, he was unable to enter such losses as an employment-related loss (as intended under the scheme), but was advised by IRIS technical personnel to enter the loss in some other box and then explain what he had done in a space provided for written explanations (a “white space”). Mr Tooth did so, such that in an adjacent white space, he explained that rather than a partnership loss (as reported), it was an employment-related loss.

HMRC’s statutory ability to open up such return with a “discovery assessment” depended inter alia on establishing that, under s. 29(4) of the Taxes Management Act 1970, the insufficiency of the initial assessment of the year “was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf,” with s. 118(7) further providing that “in this Act references to … a situation brought about deliberately by a person include … a situation that arises as a result of a deliberate inaccuracy in a document given to Her Majesty’s Revenue and Customs by or on behalf of that person.”

Lord Briggs and Lord Sales gave a joint judgment finding that "deliberate inaccuracy in a document" in s. 118(7) meant a statement which, when made, was deliberately inaccurate (i.e. the taxpayer intended to mislead HMRC), rather than a deliberate statement which was inaccurate.

First, this was the natural meaning of the phrase "deliberate inaccuracy" (para. 43):

Deliberate is an adjective which attaches a requirement of intentionality to the whole of that which it describes, namely “inaccuracy”. An inaccuracy in a document is a statement which is inaccurate. Thus the required intentionality is attached both to the making of the statement and to its being inaccurate.

Second, it accorded with the differing statutory time periods within which HMRC could make a discovery assessment (i.e., 20 and 6 years for deliberate and careless inaccuracies, respectively, with the six-year period for carelessness resulting from a Parliamentary reduction for less blameworthy conduct) (para. 44, see also para. 46):

If the [alternative] interpretation were to be preferred the taxpayer could incur that [discovery assessment] exposure by making an honest but in fact inaccurate statement, even after taking reasonable care as to its truth or falsehood. The taxpayer would not even need to be careless, and yet would incur a much longer exposure than if he had been.

Third, it was consistent with the concept of deliberate inaccuracy in the penalty scheme, which “used the same concept of deliberate inaccuracy for the purpose of triggering penalties more serious than those arising from carelessness” (para. 45).

Furthermore, as to whether there was an inaccuracy, this turned on what "in a document" meant. There was no reason to depart from the usual approach to interpreting a document as a whole. Furthermore, regarding the online tax return form having clearly stated that it would be read upon receipt by an HMRC computer (para. 50):

A document written in the English language …does not have a different meaning depending upon whether it is read by a human being or by a computer. A choice by the recipient of such a document to have it machine-read cannot alter its meaning. Furthermore, the Revenue-approved online tax return form used by Mr Tooth and his advisors contained numerous “white spaces” … within which the taxpayer is invited to add information using his own words and phrases, so as to ensure that the declaration [was accurate].

Therefore, there was no inaccuracy in the document and, even if there were, it was not deliberate as Mr Tooth did his best with an intractable online form. HMRC’s appeal failed.