Have HMRC sent you a discovery assessment under Section 29(1)? 

If you receive a Discovery Assessment Letter referring to Section 29(1) of the Taxes Management Act 1970, HMRC believe that there is an underassessment of tax.

Every year, usually around February and March time, HMRC issue a number of discovery assessments. The agenda is to protect the year which is ‘expiring’ and will soon be outside the 4-year time limit for standard discovery assessments.

The number of years after the end of the tax year that HMRC may go back to depends on the underlying conduct of the taxpayer as follows:

• 4 years whereby there has been an insufficient disclosure (not due to careless or deliberate conduct)
• 6 years whereby there is loss of tax due to careless conduct
• 20 years whereby there is loss of tax due to deliberate conduct

Within the 4-year period, the burden is on the taxpayer to prove that there is no insufficiency which led to loss of tax. This means that you have to demonstrate that HMRC have erred in raising this assessment. 

After four years, the burden shifts on HMRC to prove that (1) there was insufficiency and (2) that the insufficiency was due to careless or deliberate conduct. The standard of proof is the balance of probabilities. The question would be whether, on the evidence, it is more likely than not that the inaccuracy or the failure to comply with an obligation was made carelessly or deliberately. According to HMRC’s own compliance manual, whilst the standard of proof is the same whether the inaccuracy or failure is careless or deliberate, the quality of evidence should be higher for the more serious behaviour.

If you have received a Discovery Assessment, it is strongly recommended that you obtain specialist tax advice. We can assist with drafting an appeal against the assessment. The purpose of the appeal is to postpone any tax collection until the appeal is resolved. If you do not appeal, ordinarily you would have to pay the assessed amount within 30 days of the date of the letter. 

Contact us today for a no obligation consultation.

We can help you deal with any tax investigation through expert advice and specialist representation. Our team deals with matters ranging from individual tax disputes to large and complex multiple client cases. 

• Formal and Informal Notices
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• Code of Practice 8 – CoP 8 Investigations
• Code of Practice 9 – CoP 9 Investigations
• Contractor Loan Schemes and the Loan Charge
• DOTAS/POTAS Inquiries
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