Taxpayers and HMRC are bound by tax law. There are specific time limits that need to be observed. When an assessment is made outside of an enquiry window, it is necessary to consider if there has been a discovery. S.29 Taxes Management Act 1970 allows HMRC to raise discovery assessments where loss of income tax or capital gains tax is discovered. Similar provisions exist under separate legislation for corporation tax and inheritance tax.
Discovery assessments are designed to make good any loss of tax, if HMRC discovers:
There are two situations. Either there is:
Yes. Various time limits apply depending upon whether the taxpayer’s behaviour, namely:
So a taxpayer needs to understand which category they fall in. If in doubt, HMRC will tell you.
A taxpayer (or their agent) can appeal and separately postpone any tax demanded in discovery assessments in the normal way.