In certain cases, HMRC has the right to issue Discovery Tax Assessments for the previous 20 years. While the Section 29(1) TMA 1970 Discovery powers are broad, they do have limitations. One should always be alive to challenging the validity of a Discovery Tax Assessment by way of an appeal. Clients/advisers should ask themselves a number of questions: -
Is there a ‘Discovery’ – is there actually any evidence to support HMRC’s belief that you have under-paid tax or received too many tax reliefs?
Was any return entry in question not in accordance with a generally prevailing practice at the time?
Was the situation brought about carelessly or deliberately?
The Officer could only have reasonably been expected to be aware of the situation on the basis of the information made available to him after the Self-Assessment enquiry window closed and not before it?
Has the Discovery Tax Assessments been made in accordance with the correct time limit for the raising an assessment based on the established behaviour?
If the answer is “No” to any of the above then the Discovery Tax Assessment is not valid.