UT (Tax & Chancery) UT-2024-000024 - [2025] UKUT 00156 (TCC)

HMRC may issue discovery assessments pursuant to paragraph 28(1) Schedule 10 FA 2003 where a loss of tax is discovered:

“Assessment where loss of tax discovered

28(1) If the Inland Revenue discover as regards a chargeable transaction that—

(a)

an amount of tax that ought to have been assessed has not been assessed, or

(b)

an assessment to tax is or has become insufficient, or

(c)

relief has been given that is or has become excessive,

they may make an assessment (a “discovery assessment”) in the amount or further amount that ought in their opinion to be charged in order to make good to the Crown the loss of tax.”

The general time limit for making an assessment is 4 years after the effective date of the transaction pursuant to paragraph 31(1) Schedule 10 FA 2003. The assessments in this case were made in 2017, over 6 years after the effective date of the transactions. However, where the loss of tax is attributable to a person failing to comply with an obligation under s76, namely an obligation to file a land transaction return in respect of a ‘notifiable transaction’, the time limit for issuing an assessment is 20 years from the effective date of the transaction by virtue of paragraph 31(2A)(b):

“Paragraph 31 – Time limit for assessment

(1)

The general rule is that no assessment may be made more than 4 years after the effective date of the transaction to which it relates.

(2)

An assessment of a person to tax in a case involving a loss of tax brought about carelessly by the purchaser or a related person may be made at any time not more than 6 years after the effective date of the transaction to which it relates (subject to sub-paragraph (2A)).

(2A) An assessment of a person to tax in a case involving a loss of tax—

(a)

brought about deliberately by the purchaser or a related person,

(b)

attributable to a failure by the person to comply with an obligation under section 76(1) or paragraph 3(3)(a), 4(3)(a) or 8(3)(a) of Schedule 17A, or

(c)

attributable to arrangements in respect of which the person has failed to comply with an obligation under section 309, 310 or 313 of the Finance Act 2004 (obligation of parties to tax avoidance schemes to provide information to Her Majesty's Revenue and Customs),

may be made at any time not more than 20 years after the effective date of the transaction to which it relates.

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