For whatever reason, a taxpayer may not have complied with his or her obligations.
Perhaps one of the most common questions you’re asked as a tax adviser is, “how will HMRC find out?”
I am sure the viewer would never ask such a thing, but we will try to answer that question in this video.
Firstly, HMRC might issue a taxpayer with a notice of enquiry.
There are separate provisions dealing with the issue of enquiry notices depending on whether you are:
HMRC will usually be subject to a strict time limit within which to open an enquiry.
For individuals and partnerships, this is generally 12 months from the date on which the tax return is delivered to HMRC.
However, if the return is delivered late then the window is 12 months from the end of the quarter date in which it is eventually delivered.
For companies, HMRC has 12 months from the date on which the tax return was delivered or, if delivered late, 12 months from the relevant quarter date.
Beyond the enquiry window, HMRC will also have an opportunity to re-open a taxpayer’s tax returns. This could be many years later under the rules for discovery assessments.
If the taxpayer has submitted a tax return for the relevant tax year, HMRC will need to show that:
The careless or deliberate conduct could by an agent of the taxpayer.
The usual time limit for HMRC to raise a discovery is four years from the end of the year of the assessment in question.
This extended to six years where the tax deficiency is brought about by careless behaviour.
The time limit may be further extended to 20 years where the deficiencies are brought about by:
Discovery assessments can be appealed on various grounds – however, this must usually be done within 30 days.
If you have received a notice of enquiry, a discovery assessment or believe you have had a failure in compliance, please get in touch as soon as possible.
