HMRC discovery assessments: raised outside the enquiry window
A discovery assessment is HMRC asserting it has found a loss of tax for a year it can no longer enquire into. Whether it stands is often the real question.
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Discovery assessments carry appeal rights with strict time limits — normally 30 days from the date the notice of assessment was issued. Do not let the period lapse while deciding what to do.
What is a discovery assessment?
A discovery assessment is an assessment HMRC raises outside the normal enquiry window, on the basis that it has discovered a loss of tax. For Self Assessment it is made under Section 29 of the Taxes Management Act 1970. It is not the same as opening an enquiry, and it is subject to statutory conditions.
What HMRC has to establish
A discovery assessment is not simply a late enquiry. Under Section 29 of the Taxes Management Act 1970, HMRC must have made a discovery, and statutory conditions must be satisfied before an assessment can validly be raised outside the ordinary window.
That creates two distinct questions, and they are often confused. The first is whether the tax figure is right. The second is whether HMRC was entitled to raise the assessment at all. The second question is frequently the stronger ground, and it is the one most often left unexamined.
What we do
- Protect the position by appealing within the statutory time limit
- Examine whether the conditions for a valid discovery are actually met
- Test which behaviour HMRC is asserting, since it drives how far back it can go
- Review whether earlier disclosure made the position sufficiently apparent to HMRC
- Deal with postponement of the tax pending resolution where appropriate
- Take the matter through review or to tribunal where that is the right course
Behaviour drives the time limits
How far back HMRC can assess depends on whether it says the position arose despite reasonable care, from carelessness, or from deliberate conduct. Offshore matters have their own extended limits. An assessment that assumes deliberate conduct where the facts support carelessness is asserting a longer reach than it may be entitled to, and that is a point worth putting rather than accepting.
How to appeal a discovery assessment
A discovery assessment is appealed in the same way as other HMRC assessments, and each step runs to a time limit. In outline:
- Notice of appeal to HMRC. The appeal is made in writing to the HMRC officer who gave the notice of assessment, within 30 days after the date that notice was issued (sections 31 and 31A of the Taxes Management Act 1970). The notice of appeal must state the grounds of appeal.
- Grounds of appeal. Grounds can go to the amount, to whether the assessment was validly made, or to both. Where a return was filed, validity usually turns on whether HMRC really made a discovery, and whether either statutory condition is met: that the loss of tax was brought about carelessly or deliberately (section 29(4)), or that an officer could not reasonably have been expected to be aware of it, on the information made available, by the time the enquiry window closed or any enquiry was completed (section 29(5)). The other common ground is time: whether the assessment was made within the limits in sections 34 and 36, or section 36A for offshore matters. The Act provides that objections on either footing can only be made on an appeal.
- Statutory review or the First-tier Tribunal. Once the appeal is with HMRC, you can ask for a statutory review by a different HMRC officer, HMRC can offer one, or the appeal can be notified to the First-tier Tribunal (section 49A). If HMRC offers a review, there are 30 days from the date of its letter to accept it or to go to the tribunal; otherwise the appeal is treated as settled on HMRC’s view. A review must be concluded within 45 days unless a different period is agreed, and if the conclusion goes against you there are 30 days from the date of the conclusion letter to notify the tribunal (sections 49C to 49G).
- Postponing the tax. An appeal does not by itself stop the tax being payable. To postpone the disputed amount, a separate written application must be made to HMRC within 30 days of the date the notice of assessment was issued, stating the amount believed to be overcharged and why (section 55). Without one, the tax is generally due as if there were no appeal. If HMRC does not agree the amount, the application can be referred to the tribunal. Interest runs on any postponed tax that later turns out to be due.
- Late appeals. If the 30 days have passed, HMRC can agree to a late appeal, and must do so where a written request shows a reasonable excuse and was made without unreasonable delay after the excuse ended. If HMRC does not agree, the tribunal can give permission (section 49).
The 30 days run from the date the notice of assessment was issued, not the date it arrived. If a notice has landed, that date is the first thing to check.
Further reading
Common questions
What is a discovery assessment?
It is an assessment HMRC raises outside the normal enquiry window, on the basis that it has discovered a loss of tax. For Self Assessment it is made under Section 29 of the Taxes Management Act 1970. It is not the same as opening an enquiry, and it is subject to statutory conditions.
Can a discovery assessment be challenged?
Yes. Discovery assessments carry appeal rights with strict time limits: an appeal must normally reach HMRC within 30 days of the date the notice of assessment was issued. A challenge can go to the validity of the discovery itself, not only to the amount assessed.
How far back can HMRC go?
The time limits depend on the behaviour involved, with longer periods where the position arose from carelessness and longer still for deliberate conduct. Offshore matters have their own extended limits. Which applies is frequently the point in dispute.
What if I have missed the appeal deadline?
A late appeal can be made, but it requires HMRC or the tribunal to accept it, and acceptance is not automatic. If the deadline has passed it is worth taking advice quickly rather than assuming the position is closed.
Start with the letter
Send a photo of page one on WhatsApp. We will tell you what it is, what the deadline means, and what a fixed fee would look like — within one working hour during office hours — Monday to Friday, 9am to 5pm.
We only need the letter. Please do not send bank statements, identity documents or your UTR at this stage.