Time Limits for Discovery Assessments Clarified

HMRC has clarified the rules on time limits for making a discovery assessment into a tax return where the loss of tax is due to avoidance.

As a result, it has updated the HMRC internal manual, SALF411 – Enquiries into Tax Returns: time limits for discovery assessments, to amend section 34(1) and section 36(1) and (1A).

Section 34(1) now states that ‘in any case of incomplete disclosure without careless or deliberate conduct the time limit for a discovery assessment is not later than four years after the end of the tax year to which it relates’.

Under Section 36(1) and (1A), in any case involving a loss of tax brought about carelessly, the time limit for making a discovery assessment is not later than six years after the end of tax year to which the assessment relates.

It also stresses that the time limit for making a discovery assessment is not later than 20 years after the end of the tax year to which it relates where the loss of tax is:

  • brought about deliberately by the person;
  • attributable to a failure to notify liability under Section 7;
  • attributable to an avoidance scheme notifiable under DOTAS and the person making the return has not complied with their obligations under DOTAS to tell HMRC they have used that scheme; or
  • attributable to an avoidance scheme promoted by a Monitored Promoter (under POTAS [Promoters of tax avoidance schemes]) and the person making the return has failed to include the Promoter Reference Number on their return.

Section 59B(6) confirms that ‘the due date for tax charged by a discovery assessment is 30 days after the notice of the assessment is given (delivered)’.

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