'Tis the season to discover (that HMRC think you owe them money)

[webberg]

We are in "discovery" season.

HMRC is able to access powers in TMA 1970 whereby if they have made a "discovery" (that tax has been under assessed) they can raise an assessment.

These are subject to various time limits and terms and conditions.

HMRC routinely ignores the terms and conditions and has a tendency to use discovery as a sticking plaster to cover a lack of action from previous years.

HMRC also says that decisions reached at FTT, UTT and Court of Appeal are "wrong" and that they can (and do) ignore them in issuing assessments.

If you have a discovery assessment, you can appeal it and ask for the tax to be postponed until the underlying liability is agreed (at more than, less than or exactly the same as the charge in the assessment).

You have to appeal within 30 days. HMRC has usually been lenient with slightly late appeals but we have seen a hardening of attitudes here so better to appeal in time.

Space is insufficient here to go into depth around what a discovery actually is. In most circumstances it will mean that HMRC has "discovered" that you used a particular scheme but have not had any previous enquires from them. How they now know you used a scheme and did not know before now, is a matter that should certainly be part of the appeal.

You do NOT need an adviser to make an appeal.

A simple letter to HMRC saying you disagree and can the tax be postponed, should be enough.

The actions after that may well need an advisers' help. There are some here and plenty on Google.

Summary.

• A discovery assessment is a guess from HMRC.
• It should be appealed with a request to postpone the tax
• Once done, access a free call with an adviser (most of us offer this)
• Think about what outcome is realistic
• If that is to pay and be done with it, withdraw the appeal (simple letter)
• If that is to settle -we may see a renewed "opportunity" next week
• If that is to resist, make sure you understand how that works and the timing

[BrilloPad]

HMRC routinely ignores the terms and conditions

HMRC think they are above the law!

[DealorNoDeal]

The "normal" discovery window is 4 years from the end of tax year. Is that correct?

So, they've got until 5 April 2020 to discover 2015/16?

If they go back more than 4 years (2014/15 or earlier) then they may be on even thiner ice?

[lowpaidworker]

HMRC think they are above the law!

How have we ended up here. Firstly how are HMRC consistently allowed to be above the law or break the law.

Most people know the laws. You speed you're fined, you assult someone you go to jail, park on double yellow you get a ticket etc. etc.

Then we have tax law.....

[BrilloPad]

How have we ended up here. Firstly how are HMRC consistently allowed to be above the law or break the law.

Most people know the laws. You speed you're fined, you assult someone you go to jail, park on double yellow you get a ticket etc. etc.

Then we have tax law.....

Government has to pass finance act each year. If MP votes against, its in effect a vote of no confidence. HMRC dictate the wording, hundreds of pages long. MPs don't understand most of it.

My former MP was on finance committee that approved finance act 2008. He had no idea retrospection was in it.

To change this, it will require revolution....

[webberg]

The "normal" discovery window is 4 years from the end of tax year. Is that correct?

So, they've got until 5 April 2020 to discover 2015/16?

If they go back more than 4 years (2014/15 or earlier) then they may be on even thiner ice?

Yes the "normal" window is 4 years and your example is correct.

There is also a 6 year window that can be used where there has been (or is claimed to have been) some deliberate action by the taxpayer preventing HMRC knowing that a tax has been under assessed.

Real life example.

We have a client who used a scheme. First HMRC enquiry in 2016. Letters have been exchanged, one of which (March 16) set out the schemes he used and the values. These went back to 2012/13.

Client has submitted no tax returns (promoter advised she did not need to - wrong) and therefore there could be no enquiry and if HMRC considered tax was due, discovery was the way to go.

5th April 2017 came and went with no 2012/13 DA. 5th April 2018 came and went with no 2013/14 DA.

In March 2019 we had a DA for 2014/15.

In the last few weeks we've had a letter from HMRC saying that unless our client settles, they consider that she has been careless enough to trigger the 6 year DA window and a 2013/14 assessment - which will include loans from that year and the earlier year - will be issued.

So we have a threat, an inappropriate use of discovery, an abuse of "just and reasonable".

Thankfully our client is made of strong stuff and is saying "bring it on".

I really hope this particular officer is allowed to continue with this sort of plan because I am confident that he will be crushed in Tribunal.

(A recent case saw one HMRC officer replaced by another part way through an enquiry. In Tribunal the replacement officer admitted that he had no intention of raising an enquiry - the case was about a closure notice being invalid which needs to start with an enquiry- because he thought the earlier officer had done that. Court said, "no enquiry = no closure notice = no liability". Loss to HMRC? £83m.)

[lowpaidworker]

Yes the "normal" window is 4 years and your example is correct.

There is also a 6 year window that can be used where there has been (or is claimed to have been) some deliberate action by the taxpayer preventing HMRC knowing that a tax has been under assessed.

Real life example.

We have a client who used a scheme. First HMRC enquiry in 2016. Letters have been exchanged, one of which (March 16) set out the schemes he used and the values. These went back to 2012/13.

Client has submitted no tax returns (promoter advised she did not need to - wrong) and therefore there could be no enquiry and if HMRC considered tax was due, discovery was the way to go.

5th April 2017 came and went with no 2012/13 DA. 5th April 2018 came and went with no 2013/14 DA.

In March 2019 we had a DA for 2014/15.

In the last few weeks we've had a letter from HMRC saying that unless our client settles, they consider that she has been careless enough to trigger the 6 year DA window and a 2013/14 assessment - which will include loans from that year and the earlier year - will be issued.

So we have a threat, an inappropriate use of discovery, an abuse of "just and reasonable".

Thankfully our client is made of strong stuff and is saying "bring it on".

I really hope this particular officer is allowed to continue with this sort of plan because I am confident that he will be crushed in Tribunal.

(A recent case saw one HMRC officer replaced by another part way through an enquiry. In Tribunal the replacement officer admitted that he had no intention of raising an enquiry - the case was about a closure notice being invalid which needs to start with an enquiry- because he thought the earlier officer had done that. Court said, "no enquiry = no closure notice = no liability". Loss to HMRC? £83m.)

saw that case mentioned on Twitter

[NickLeeson2]

I was assessed for years 2013-2019 and paid the outstanding tax, can I now be reassessed on those years?

[webberg]

I was assessed for years 2013-2019 and paid the outstanding tax, can I now be reassessed on those years?

Have you read the above?

[NickLeeson2]

Have you read the above?

LOL, do you know why/ how accountants make money?

If we all understood accountancy practices we would not ask questions. I will re-read to the full post for the one answer.

Are you known for anger management issues?