HMRC have 12 months from the date that a tax return is filed to open an enquiry. So, if a 2016/17 tax return is filed on 31 January 2018, HMRC have until 31 January 2019 to open an enquiry.
We are increasingly seeing HMRC raising enquiries outside of these time limits using the discovery provisions.
Discovery is the power that allows HMRC to reopen closed periods, including those past their time limit above, where they believe that there has been an underpayment of tax.
There are conditions that must be met for discovery to apply, such as incomplete or inaccurate information included in a tax return.
If you do receive an enquiry or assessment from HMRC under these provisions it is important to make sure that these conditions are met. HMRC have been known to try to use discovery as a substitute for other enquiry provisions where they were (for example) simply out of time.
The number of reported tax tribunal cases concerning HMRC’s use of its powers is clearly on the increase, showing the willingness of HMRC to push the boundaries. Interestingly the number of decisions found in favour of the taxpayer also appears to be increasing too!
For more information please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org