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. It has updated its internal manual: SALF411 - Enquiries into Tax Returns: time limits for discovery assessments, to amend its guidance on sections 34(1), 36(1) and 36(1A), Taxes Management Act 1970 (TMA).
In relation to section 34(1), the manual confirms 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”.
With regard to sections 36(1) and 36(1A), the manual provides that:
“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”.
The manual 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
- attributable to a failure to notify liability under section 7, TMA
- attributable to an avoidance scheme notifiable under the Disclosure of Tax Avoidance Schemes (DOTAS) regime and the person making the return has not complied with their obligations under the DOTAS regime to inform HMRC they have used that scheme, or
- attributable to an avoidance scheme promoted by a Monitored Promoter under the Promoters of Tax Avoidance Schemes regime and the person making the return has failed to include the Promoter Reference Number on their return.
The manual also confirms that under section 59B(6), TMA, the due date for tax charged by a discovery assessment is 30 days after the notice of the assessment is given.
A copy of the manual can be viewed here.