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Section 29(1) Taxes Management Act 1970
If you receive a Discovery Assessments letter from HMRC quoting Section 29(1) TMA 1970, then HMRC have information that you have under-paid tax or received too many tax reliefs.
Before replying to the officer who sent the discovery assessments letter, you should speak to a discovery assessments tax expert at KinsellaTax.
Even if the time-limit for opening a tax investigation has passed or an investigation has been concluded and may not be re-opened, HMRC may still raise discovery assessments for tax lost.
Discovery assessments are issued by HMRC under Section 29(1) of the Taxes Management Act 1970.
What are Discovery Assessments?
Discovery assessments may be raised if income has not been declared, tax has been under-assessed, or excessive tax relief has been awarded.
Discovery assessments are often issued in relation to offshore bank and building society accounts, as these are harder for HMRC to find.
HMRC officers may raise discovery assessments if one of the two following conditions applies:-
- The full and accurate facts were not available due to incomplete disclosure, negligence or fraudulent behaviour by the taxpayer or agents
- The officer completing an enquiry could not have reasonably been expected to have been aware of the loss of tax
There are instances however, when HMRC officers may NOT issue discovery assessments.
Are there any discovery assessments exceptions?
If the HMRC officer making an enquiry into a tax return made an error in agreement or failed to consider a point, despite being in possession of all the relevant facts, they may not later raise discovery assessments.
One interesting case in the Court of Appeal, Langham v Veltema (2004 (STC 544)), awarded a victory to HMRC when judges ruled that HMRC officers may raise discovery assessments if new information comes to light, even if the taxpayer has not been negligent or fraudulent in submitting their tax return.
The discovery assessments case in question involved the valuation of a property from the taxpayer to a company owned by him.
The taxpayer had a professional valuation carried out on the property for capital gains calculations for his Self-Assessment Tax Return but, after this had been submitted, a higher market value for the property was agreed (for the purposes of the company’s Corporation Tax Return).
It was ruled that discovery assessments could be raised by HMRC as this constituted new information that tax had been under-assessed as HMRC could not possibly have been made aware of this at the time.
HMRC then issued guidance for taxpayers to protect themselves from discovery assessments by stating, in the additional information section of their tax return, that the capital gain was calculated using an independent professional valuation and giving the name of the person/company who carried out the valuation.
How long do HMRC have to raise discovery assessments?
HMRC have a fair amount of time to raise discovery assessments.
HMRC officers have:-
- 6 years from the filing date in cases of incomplete disclosure to raise discovery assessments, and
- 20 years from the filing date in cases of tax fraud or neglect to raise discovery assessments.
If you have already undergone a tax investigation by HMRC and know that you have left out information or have offshore bank accounts stashed away then you NEED to contact a discovery assessments expert who can guide you through.
If you don’t… you could be faced with discovery assessments from HMRC and risk going to prison.
It is that simple.
Call KinsellaTax with your Discovery Assessments tax enquiry and put your mind at rest.
Telephone us now on 0800 471 4546 and speak with a discovery assessments tax expert today.
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