Outram v HMRC [2026] UKFTT 248 (TC)

A married couple who took part in a marketed contracts-for-difference loss scheme succeeded in showing HMRC was out of time to assess them, not because the scheme worked, but because HMRC could not prove they had behaved deliberately.

The Facts

The taxpayers took part in a scheme marketed by promoters in the Montpelier group, structured around purported contracts-for-difference trades linked to the FTSE 100, intended to generate substantial trading losses that could be set against other income. HMRC opened enquiries and, after the ordinary time limits for the relevant years had passed, sought to raise assessments relying on the extended 20-year time limit available under s36(1A) TMA 1970, which applies where the taxpayer's loss of tax was brought about deliberately.

The taxpayers argued that they had taken the scheme on the recommendation of, and with advice from, appropriately qualified professional advisers, genuinely believed the arrangements were legitimate tax planning, and had no knowledge at the time that the losses claimed were not what they purported to be. HMRC's case was that participation in a scheme of this kind, marketed on the basis of contrived and artificial trades, was itself sufficient to establish deliberate inaccuracy once the scheme was shown not to work.

Procedural History

• First-tier Tribunal (earlier proceedings): the underlying technical dispute about whether the CFD losses were allowable was litigated separately; a procedural ruling in 2021 prevented HMRC from relying on a new argument raised only in its skeleton argument.
• Upper Tribunal: considered aspects of the scheme's technical treatment on a related reference.
• First-tier Tribunal [2026] UKFTT 248 (TC): determined, following remission, whether the taxpayers' behaviour had been deliberate for the purposes of the extended time limit, and found that HMRC had not discharged its burden of proof.

The Issues

1. Does HMRC bear the burden of proving deliberate behaviour where it seeks to rely on the extended 20-year assessment time limit under s36(1A) TMA 1970?
2. Is participation in a marketed avoidance scheme that is later found not to work, of itself, sufficient to establish that the resulting inaccuracy was deliberate?
3. What weight should be given to a taxpayer's reliance on professional advice obtained at the time the scheme was entered into?

The Ratio: The Burden of Proof on Deliberate Behaviour

The Tribunal was clear that the question is not whether the scheme worked as a matter of tax law, nor whether a reasonable person might, with hindsight, have been sceptical of its claims. Deliberate inaccuracy requires proof of the taxpayer's actual state of mind at the relevant time: that they knew the return was inaccurate, or were, at minimum, aware that it might well be and consciously chose not to address that risk. Participation in an ultimately unsuccessful avoidance scheme, without more, does not establish that state of mind, and HMRC cannot simply infer deliberateness from the fact that a scheme later failed technically.

The Role of Professional Advice

The Tribunal treated the taxpayers' reliance on appropriately sought professional advice as significant, though not automatically determinative, evidence bearing on their state of mind. Advice obtained from a qualified adviser, engaged with genuinely and acted upon in good faith, is inconsistent with the taxpayer having known the claimed tax treatment was wrong. This does not mean any professional advice, however cursory or however obviously self-interested the adviser, will protect a taxpayer; the Tribunal's focus was on whether the advice was genuinely sought and reasonably relied upon in the circumstances, consistent with the approach the Upper Tribunal has taken in other deliberate-behaviour cases to advice-reliance defences.

Authorities

HMRC v Tooth [2021] UKSC 17

The Supreme Court's authoritative statement that deliberate inaccuracy requires an intention to mislead HMRC as to the true facts, informing the Tribunal's approach in Outram to what deliberate behaviour actually requires.

Auxilium Project Management Ltd v HMRC [2016] UKFTT 249 (TC)

The frequently cited First-tier Tribunal formulation of deliberate inaccuracy as requiring both knowledge of the inaccuracy and an intention that HMRC should rely on the inaccurate return, applied in Outram's assessment of the taxpayers' state of mind.

CPR Commercials Ltd v HMRC [2023] UKUT 61 (TCC)

Upper Tribunal authority on blind-eye knowledge and the circumstances in which a taxpayer's wilful failure to make enquiries can itself amount to deliberate behaviour, relevant to distinguishing genuine reliance on advice from wilful blindness.

Relevance to Marketed Scheme Disputes

Outram is directly relevant to any dispute where HMRC seeks to assess outside the ordinary time limit on the basis that a taxpayer's participation in a marketed scheme was deliberate. It confirms that HMRC must prove deliberateness as a discrete, substantive question separate from whether the scheme achieved its intended tax result, and that genuine, evidenced reliance on professional advice remains one of the strongest defences available to scheme participants facing a late assessment.

Practitioner Application

Assessing an extended time limit challenge after Outram

• Separate the technical and behavioural questions. Whether a scheme worked as a matter of tax law is a different question from whether the taxpayer behaved deliberately; do not let HMRC conflate the two.
• Gather the advice trail. Engagement letters, correspondence with advisers, and evidence of genuine engagement with the advice received are central to rebutting a deliberate behaviour allegation.
• Press HMRC to particularise its case on deliberateness. A bare assertion that a scheme was contrived is not evidence of the taxpayer's own knowledge or intent; require HMRC to identify what it says the taxpayer actually knew and when.
• Consider the ordinary time limit first. If HMRC cannot establish deliberate behaviour, the ordinary 4-year (or, for careless behaviour, 6-year) time limit applies, and assessments outside that window are simply invalid regardless of the scheme's technical merits.

Common mistakes

• Assuming that participation in a scheme HMRC has successfully challenged on technical grounds automatically means the participant behaved deliberately.
• Overlooking that HMRC, not the taxpayer, carries the burden of proving deliberate behaviour for the extended time limit.
• Failing to preserve or produce contemporaneous evidence of advice sought and relied upon at the time the scheme was entered into.

Frequently Asked Questions