HMRC v Tooth: What 'Deliberate Inaccuracy' Really Means

HMRC says you were "deliberate." That single word changes everything. It's the difference between a 6-year time limit and a 20-year one. It's the difference between a penalty of up to 30% and one of up to 70%—or 100% if HMRC also alleges concealment. And it's the difference between a routine compliance dispute and an allegation that sits just below fraud.

But the Supreme Court, in its 2021 decision in HMRC v Tooth [2021] UKSC 17, set the bar for "deliberate inaccuracy" extremely high. If HMRC has classified your behaviour as deliberate, this case is the most important piece of law you need to understand.

What This Case Was About

Mr Raymond Tooth participated in a tax avoidance scheme in 2008-09 that claimed to create employment-related losses he could carry back to the previous year. When his accountant completed the online self-assessment return for 2007-08, there was a problem: the online form didn't have a suitable box for the type of loss being claimed.

So the accountant used the partnership pages instead, entering the figure with a fake Unique Taxpayer Reference (99999 99999). Crucially, they didn't try to hide what they were doing. The return included detailed white-space explanations—free-text notes on pages TR6 and SP2—setting out exactly what the claim was, why the partnership boxes had been used, and explicitly inviting HMRC to open an enquiry.

HMRC understood perfectly well what was happening from the moment they read the return. But they opened the wrong type of enquiry (a Schedule 1A enquiry instead of a section 9A enquiry under the Taxes Management Act 1970). After the Supreme Court's separate decision in the Cotter litigation confirmed HMRC hadn't protected its position, a new officer reviewed the file in 2014 and issued a discovery assessment under section 29 TMA 1970.

HMRC's argument was stark: using the wrong box on the return was a "deliberate inaccuracy," unlocking the 20-year time limit. The case went all the way to the Supreme Court, which unanimously dismissed HMRC's appeal.

What The Supreme Court Decided

"Deliberate Inaccuracy" Means Intent To Mislead

The heart of the judgment is paragraph 47. The Supreme Court held that for there to be a "deliberate inaccuracy" within the meaning of section 118(7) TMA 1970, HMRC must demonstrate "an intention to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement."

This matters because HMRC had argued for a much lower threshold. Their position was that any deliberate statement that turned out to be inaccurate counted—even if the taxpayer genuinely believed the statement was correct, or (as with Mr Tooth) fully explained what they were doing.

The Court rejected that interpretation decisively. Lord Briggs and Lord Sales explained at paragraph 43 that "deliberate" is "an adjective which attaches a requirement of intentionality to the whole of that which it describes, namely 'inaccuracy'." In other words, the inaccuracy itself must be intentional—not just the act of making the statement.

At paragraph 44, they pointed out the absurdity of HMRC's position. If a deliberate statement that happened to be wrong could trigger a 20-year time limit, "the taxpayer could incur that exposure by making an honest but in fact inaccurate statement, even after taking reasonable care as to its truth or falsehood." An honest taxpayer who took every precaution would face harsher consequences than a careless one. Parliament could not have intended that.

At paragraph 83, the Court went further: the 20-year time limit is "typically only in relation to what amounts to fraud or is akin to fraud." That's the threshold. Deliberate inaccuracy sits at the top of the culpability spectrum—it's not just getting something wrong, and it's not even carelessness. It's a conscious intention to mislead.

The Court left one question open. At paragraph 47, they noted that recklessness—"perhaps"—might also qualify, but declined to decide the point because it wasn't needed on the facts. This means recklessness (consciously disregarding a known risk that a statement is wrong) remains a live argument, but HMRC cannot rely on it as settled law.

Your Return Is Read As A Whole

HMRC had argued that Mr Tooth's return contained a "deliberate inaccuracy" because the figure was entered in the partnership boxes when it didn't relate to a partnership. They wanted the tribunal to look at each box in isolation—ignoring the white-space explanations that made the claim perfectly clear.

The Supreme Court called this "a very unattractive argument" (paragraph 50). A tax return, like any other document, must be interpreted as a whole. Each entry must be read "by reference to its place in the context of the document as a whole" (paragraph 52).

When the return was read holistically—boxes and explanatory notes together—there was no inaccuracy at all. Mr Tooth had told HMRC exactly what the claim was and why it appeared where it did. No one was misled.

This is a powerful principle. If you've used the wrong box on a return but explained what you were doing in white-space notes or an accompanying letter, HMRC cannot isolate the box entry and call it a deliberate inaccuracy while ignoring your explanation.

A Discovery Does Not Go Stale

The Court also addressed an important question about "discovery assessments"—the power HMRC uses to assess additional tax when they've missed the normal enquiry window. (For a full explanation of how discovery assessments work, see our guide to HMRC enquiries and closure notices.)

The Upper Tribunal in Charlton v HMRC [2013] STC 866 had developed a concept of "staleness"—the idea that if HMRC discovered an insufficiency but then sat on it for too long, the discovery could lose its "essential newness" and no longer support an assessment.

The Supreme Court rejected this entirely at paragraphs 75-76. A discovery "is a particular event in time, and does not cease to be such with the passage of time." There is no requirement for HMRC to act promptly after making a discovery. The only time constraints are the statutory time limits themselves—4 years for innocent errors, 6 for carelessness, 20 for deliberate behaviour (sections 34 and 36 TMA 1970).

An important distinction. This rejection of "staleness" is about whether HMRC's discovery expires with delay. It is completely separate from the defence under section 29(5) TMA 1970—sometimes also called the "staleness defence"—which asks whether the HMRC officer could reasonably have been expected to be aware of the insufficiency from information you already provided in your return.

That s.29(5) defence, established in Langham v Veltema [2004] EWCA Civ 193, was not affected by Tooth and remains fully available. If your return clearly disclosed the relevant information, HMRC may not be able to raise a discovery assessment at all. See the discovery assessment section of our enquiries guide for more detail.

Discovery Is Individual, Not Collective

The final significant point concerns whose knowledge counts. When HMRC claims to have "discovered" an insufficiency, the question is whether a specific officer—an individual person—newly concluded that your tax was insufficient.

The Supreme Court confirmed at paragraphs 68-69 and 78 that discovery is assessed by reference to an individual officer's state of mind. It doesn't matter that another HMRC officer already knew about the issue. "It is perfectly possible, as a matter of ordinary language, to speak of someone making a discovery for himself or herself even if it is something already known to others."

This cuts both ways. It means HMRC doesn't lose the power to assess just because one officer dropped the ball—a different officer can independently reach the same conclusion. But it also means the officer who actually issues the assessment must have personally formed the view that there was an insufficiency.

Why This Matters For You

Discovery Assessments And Time Limits

If HMRC has issued you a discovery assessment, the behaviour classification determines how far back they can go:

The jump from 6 years to 20 years is enormous. If HMRC is trying to assess a tax year that is more than 6 years old, they must prove deliberate behaviour—and after Tooth, that means proving intent to mislead, akin to fraud.

In Danapal v HMRC [2023] UKUT 86 (TCC), the Upper Tribunal applied Tooth and overturned discovery assessments because HMRC had not proved that the taxpayer's accountant acted deliberately or even carelessly. Because the time limits depended on proving the behaviour classification, the assessments were simply out of time.

Penalties

The same definition of "deliberate inaccuracy" applies to penalties under Schedule 24 of the Finance Act 2007. The Supreme Court noted at paragraph 45 that Parliament used the same phrase in both the time limit and penalty contexts, and it would be "inconceivable" that it meant something different.

The test for deliberate inaccuracy in the penalty context was set out in Auxilium Project Management Ltd v HMRC [2016] UKFTT 249 (TC): a taxpayer "knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document." The Upper Tribunal confirmed in CF Booth Ltd v HMRC [2022] UKUT 217 (TCC) that the Supreme Court's decision in Tooth did not call the Auxilium test into question.

HMRC bears the burden of proving deliberate conduct. The standard is the balance of probabilities—but because a deliberate inaccuracy allegation is so serious (akin to fraud), tribunals expect HMRC to produce cogent, compelling evidence. A vague assertion is not enough.

If they allege your inaccuracy was deliberate and fail to prove it, the consequences depend on whether they've made a fallback argument for carelessness.

In Rodriguez-Issa v HMRC [2021] UKFTT 154 (TC), HMRC alleged the taxpayer deliberately omitted over £176,000 of income. They advanced a "deliberate only" case with no carelessness fallback. When the tribunal found HMRC hadn't proved the inaccuracy was deliberate, the entire penalty fell. For more on the penalty framework and how the burden of proof works, see our guide to HMRC penalties.

Agent Liability: A Warning

There is one scenario where Tooth's high threshold may not protect you as much as you'd expect.

Under section 36(1B) TMA 1970, the extended time limits apply where a loss of tax was brought about deliberately "by another person acting on behalf of" the taxpayer.

In Lucas v HMRC [2025] UKFTT 702 (TC), the tribunal found that a third-party "rebate company" acting on Mr Lucas's behalf had deliberately overclaimed expenses. Even though Mr Lucas never saw the returns or authorised their specific content, the assessments were upheld because the agent was acting on his behalf.

This is significant. If you've used an accountant, tax agent, or tax refund company to file returns on your behalf, and they deliberately included inaccurate information, you could face discovery assessments under the 20-year time limit—even if you personally had no intention to mislead anyone.

The Tooth requirement of intent to mislead still applies, but it can be satisfied by your agent's intent rather than yours.

What To Do If HMRC Calls You "Deliberate"

If HMRC has classified your behaviour as deliberate—whether in a discovery assessment or a penalty notice—here are the key practical points.

1. Identify what HMRC says is inaccurate. Ask HMRC to specify the exact inaccuracy they are relying on. A vague assertion that your return was "wrong" is not enough. Under Tooth, HMRC must identify a specific inaccuracy in a specific document.

2. Ask how HMRC says you intended to mislead. After Tooth, it's not enough for HMRC to show that you made a deliberate statement that turned out to be wrong. They must show you intended the statement to mislead them. What is their evidence for that intent?

3. Check whether your return explained the position. If you included white-space notes, accompanying letters, or any other explanation with your return, that context is part of the document. Under Tooth, HMRC must read the return as a whole—they cannot pick out one box entry and ignore your explanation.

4. Consider requesting an HMRC review first. Before filing a tribunal appeal, you can ask HMRC to carry out a statutory review of the decision. The reviewing officer may reclassify your behaviour—for example, from deliberate to careless—without you needing to go to tribunal at all.

5. Challenge the behaviour classification. If you believe the inaccuracy was careless rather than deliberate (or not even careless—just an honest mistake), say so clearly in your grounds of appeal. The classification affects both the time limit for discovery assessments and the penalty percentage. It's always HMRC's burden to prove the higher classification. If they fail, the time limit drops from 20 years to 6 (potentially making the assessment out of time entirely) and the maximum penalty falls from 70% to 30%.

6. Keep records of everything. Documents showing your state of mind at the time you filed the return are particularly valuable—correspondence with your accountant, advice you received, and any disclosures you made to HMRC.

7. Be aware of the agent liability risk. If someone else prepared or filed your return, consider whether their actions could be attributed to you under s.36(1B). That doesn't mean there's cause for panic—but it's worth knowing about, particularly if you used a tax refund company or an agent you didn't closely supervise.

If you want to appeal, you have 30 days from the date of the decision to act. There is no fee to file a tribunal appeal. For the step-by-step process, see our guide on how to appeal to the tax tribunal. If that deadline has already passed, you may still be able to make a late appeal.

The Judgment And Key Sources

The judgment:

• HMRC v Tooth [2021] UKSC 17 (BAILII)
• Supreme Court case page

Legislation:

• Section 29 TMA 1970 — discovery assessments
• Section 34 TMA 1970 — 4-year time limit
• Section 36 TMA 1970 — extended time limits (6 and 20 years)
• Section 118(7) TMA 1970 — interpretation of "deliberately"
• Schedule 24, Finance Act 2007 — inaccuracy penalties

Cases discussed:

• Langham v Veltema [2004] EWCA Civ 193 — s.29(5) information availability test
• Auxilium Project Management Ltd v HMRC [2016] UKFTT 249 (TC) — deliberate inaccuracy test for penalties
• Rodriguez-Issa v HMRC [2021] UKFTT 154 (TC) — HMRC's burden of proof; all-or-nothing risk
• CF Booth Ltd v HMRC [2022] UKUT 217 (TCC) — Tooth consistent with Auxilium
• Danapal v HMRC [2023] UKUT 86 (TCC) — discovery assessments overturned for failure to prove behaviour
• Lucas v HMRC [2025] UKFTT 702 (TC) — agent liability under s.36(1B)

On this site:

• HMRC enquiries and closure notices — discovery assessment framework, s.29(5) defence
• HMRC penalties explained — Schedule 24 penalty regime, burden of proof
• Writing grounds of appeal — challenging HMRC's behaviour classification
• Understanding your HMRC appeal rights — appeal routes overview
• HMRC internal review — requesting a review before going to tribunal
• How to appeal to the tax tribunal — step-by-step filing guide
• Late appeals to the tax tribunal — applying after the deadline

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.