HMRC Discovery Assessments
Businesses often encounter challenges in maintaining full compliance with their tax obligations. We frequently receive enquiries from companies facing unexpected Tax Discovery Assessment from HM Revenue & Customs (HMRC), despite their belief that they have paid the correct amount of taxes.
In this article, John Veale will explore HMRC Tax Discovery Assessments, the circumstances under which they are issued, and the steps businesses can take to navigate them effectively.
When Will HMRC Look at a Self-Assessment Return?
HMRC retains the right to reopen a Self-Assessment Return and issue a Discovery Assessment, even after the deadline for initiating an investigation has passed. This may occur if HMRC believe an underpayment of tax has been identified or too many tax reliefs have been claimed.
Financial penalties can also be imposed if any discrepancies are found. This authority is granted under section 29 of the Taxes Management Act 1970 ("the Act").
Under section 29 (1) of the Act:
If HMRC discover, in relation to any taxpayer in a specific year, that:
- an amount of income tax or capital gains tax ought to have been assessed but has not been assessed,
- an assessment to tax is or has become insufficient, or
- any relief which has been given is or has become excessive,
HMRC may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which in its opinion ought to be charged in order to make good to the Crown the loss of tax.
Section 29 (2) of the Act provides that:
- where the taxpayer has made and delivered a return in respect of the relevant year of assessment, and
- the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed,
the taxpayer shall not be assessed under that subsection in respect of the year of assessment there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.
Section 29 (3) of the Act provides that:
Where the taxpayer has made and delivered a return …in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above:
- in respect of the year of assessment mentioned in that subsection; and
- in the same capacity as that in which he made and delivered the return,
unless one of the two conditions mentioned below is fulfilled.
Those two conditions are contained in sections 29 (4) and (5), and state:
- The First Condition: the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on their behalf,
- The Second Condition: at the time when HMRC ceased to be entitled to give notice of its intention to enquire into the taxpayer’s return or in a case where a notice of enquiry into the return was given, issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) above relates, or, if no such partial notice was issued, issued a final closure notice.
HMRC could not have been reasonably expected, on the basis of the information made available to it before that time, to be aware of the situation mentioned in subsection (1) above.
As well as Assessments being issued by HMRC, the taxpayer can become subject to interest on the Assessment amount if unpaid.
In circumstances where the taxpayer or those acting for them have acted carelessly or deliberately in completing an assessment, the taxpayer can be liable to a penalty of between 30% to 100% of the Assessment amount.
How can we help?
If you receive a Notice of Enquiry into your Self-Assessment Return from HMRC, or facing a HMRC tax investigation or dispute, you do not have to face it alone. HMRC investigations are typically complex and detailed, with potentially serious consequences if not properly addressed or ignored.
Our experienced team of solicitors specialise in defending clients against HMRC challenges, including tax investigations, tribunals, VAT assessments, and complex tax disputes. We understand the intricacies of tax law and will work tirelessly to protect your rights and achieve the best possible outcome for you.
Contact us today for expert advice and a confidential consultation using the details below. Let us provide the strong representation you need to navigate your HMRC case with confidence.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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