40 TC 176; [1962] AC 782; [1962] 1 All ER 854
This is an extremely important case which, along with Scorer v Olin Energy Systems Ltd, established a degree of protection for the taxpayer. The point at issue was whether a capital dividend received by a share dealing company was taxable. Although strictly a corporation tax case, it established an important principle as to whether an Inland Revenue inspector was able to issue a discovery assessment, following the determination of an appeal by agreement under TMA 1970, s54. The original inspector had issued estimated assessments and the company submitted tax computations in support of its appeal against the assessments with the capital dividend in question omitted. The inspector accepted the computations and settled the appeals. The case was subsequently taken over by another inspector, who raised discovery assessments, treating the capital dividend as a taxable receipt.
It was held that, where an appeal has been settled by agreement, HMRC is not permitted to raise a discovery assessment in respect of a particular point, which had been specifically dealt with and agreed in the course of determining the appeal – The Cenlon principle.