The Upper Tribunal’s decision in New Claire Wine Ltd v HMRC [2026] UKUT 116 (TCC) clarifies whether “deliberate” behaviour for discovery and penalty assessments requires HMRC to plead and prove dishonesty.

The Upper Tribunal drew a clear distinction between deliberate conduct and dishonesty. It held that the Tribunal’s task is to consider the statutory distinction between deliberate inaccuracies and careless inaccuracies, without needing to go further and consider whether the appellant had acted dishonestly, overlaying the common law test for dishonesty. 

The decision strengthens HMRC’s position in cases involving inaccurate returns, reducing the evidential burden required to access extended time limits and higher penalties.

Background

The case concerned corporation tax, VAT assessments and a penalty imposed on the basis that the taxpayer had made deliberate inaccuracies in its returns.

The corporation tax assessments were “discovery assessments” pursuant to paragraph 41 Schedule 18 Finance Act 1998 (“FA 1998”) on the basis a loss of tax for an accounting period had been brought about “carelessly or deliberately”. An extended time limit of 20 years from the end of the accounting period applies where the loss of tax has been brought about deliberately.

The VAT assessments were made pursuant to section 73 Value Added Tax Act 1994 (“VATA 1994”), again under an extended time limit of 20 years from the end of the prescribed accounting period. The level of penalty assessed was also higher as a consequence of the deliberate inaccuracies.

The First‑tier Tribunal (FTT) found that the taxpayer had understated its sales and that the conduct was deliberate. On appeal, the taxpayer did not challenge the finding there were inaccuracies. Instead, the taxpayer sought to challenge the characterisation of the conduct. The taxpayer argued that a finding of “deliberate” behaviour necessarily implied dishonesty. On that basis, it contended that HMRC had failed to plead dishonesty and that the procedural safeguards associated with such an allegation had not been satisfied.

The issue

The appeal raised two closely related questions:

• whether “deliberate inaccuracy” necessarily involves dishonesty; and
• whether HMRC is required to plead and prove dishonesty in order to rely on deliberate conduct.

These issues are of practical importance. A finding of deliberate behaviour has significant consequences, including extended time limits (up to 20 years) and materially increased penalties.

The Upper Tribunal’s decision

The Upper Tribunal rejected the taxpayer’s case.

Deliberate conduct does not require dishonesty

The Tribunal confirmed that dishonesty is not a necessary element of deliberate behaviour. A deliberate inaccuracy may involve dishonesty, but it does not have to do so.

The Upper Tribunal confirmed that “deliberate” in this context is a question of knowledge and intention in relation to the return. It does not import the separate concept of dishonesty. Following Ivey, dishonesty requires not only knowledge of the relevant facts, but conduct which would be regarded as dishonest by the standards of ordinary decent people. By contrast, a deliberate inaccuracy is established where the taxpayer knew the return was inaccurate or intended to mislead HMRC. The latter does not require the Tribunal to make any broader assessment of moral culpability.

No requirement to plead or prove dishonesty

Given that dishonesty is not an element of the statutory test, the Tribunal held that HMRC is not required to plead a case of dishonesty in order to establish deliberate behaviour. It is sufficient for HMRC to plead and prove that the inaccuracy was deliberate.

The Tribunal accepted that an allegation of deliberate conduct is serious and must be clearly put. However, that obligation does not extend to pleading dishonesty where it is not part of the legal test.

No requirement to explain absence of dishonesty

The taxpayer also argued that, if dishonesty is not required, the Tribunal should nevertheless explain how conduct could be deliberate without being dishonest. The Upper Tribunal rejected that approach. It held that the FTT’s task was to consider the statutory distinction between deliberate inaccuracies and careless inaccuracies. It did not need to consider whether the appellant had acted dishonestly, overlaying the common law test for dishonesty.