Time Limits for Assessments

If HMRC wants to collect  extra Tax from you or your business for earlier years, as part of a tax enquiry, it needs to be in a position where the law allows it to issue a formal "Tax Assessment".  There are strict legal time limits in which the Tax Inspector can issue an Assessment to you.  But in some cases HMRC can claim extra tax off you for the last 20 years! 

The basic rules for PAYE, Income Tax, Capital Gains Tax and Corporation Tax and VAT are "behaviour" driven.  If the Tax Inspector believes you have under-declared your tax for previous years they can make further assessments - as long as they do so within the following time limits.  And those limits depend on what behaviour they think caused the under-declaration.

HMRC Deadlines to Claim More Tax

  • 1 year: Where HMRC have opened an Enquiry within the statutory time limit (of roughly a year) they can normally collect any additional tax that they can prove is due - regardless of the reason for the under declaration;
  • 4 years: the Normal Time Limit, in all cases, even innocent error.  But the taxman has to show that he has made a Discovery.  Usually if more tax is due then a Discovery has been made.  But this can be a complex area - and successful challenges can sometimes be made;
  • 6 years: Extended Time Limit for Errors caused by Failure to Take Sufficient care (aka Carelessess) (except for VAT which is 4 years).  The onus is on the taxman to prove that tax was understated as a result of your failure to take sufficient care or the.carelessness of someone acting on your behalf.  This is another area where challenges can succeed;
  • 20 years: Extended Time Limit for Deliberate Errors; Failure to Register for VAT, Failure To Notify chargeability to tax, Failure To Notify tax avoidance schemes.  The onus is on the taxman to prove that the relevant behaviour was Deliberate: in other words, fraudulent.  This is a key area where our challenges are often successful - and where significant amounts of tax, interest, and penalties can be at stake.

Working Out The Deadlines
The simple way to calculate the so-called assessing time limit is to add say 4 (or 6, or 20 years) to the year where HMRC allege that more tax is due. For example, if HMRC think you owe more tax for the year 2016/17 as a result of your careless behaviour, they have to issue a formal assessment by 5 April 2021-or else they are “out of time”.  During a tax enquirythe Inspector may issue a so-called “protective assessment” to stop the year going out of time. For example, an enquiry may have started in July 2017.  At April 2018 the year 2011/12 would go “out of time” (on the basis of careless behaviour).  So in early 2018 the inspector might issue a protective assessment for 2011/12, even though the enquiry is not finished. The enquiry might not be concluded until say December 2019; more than 6 years after the end of 2011/12. But as the assessment for that year was issued within the 6 year window, then 2011/12 would still be included in the investigation settlement (although, of course, the actual figures assessed could still be appealed and negotiated).

Interest, Penalties, Offshore Matters
Where there is additional tax to pay, then interest is always charged on that tax.
Since 2018 they have been different (and harsher) assessing time limits where offshore matters are concerned. These are covered in our offshore disclosures section.

Where the taxman demonstrates that tax had been underdeclared as a result of your carelessness or deliberate behaviour: then tax-geared penalties will be charged.  For more information about this see our separate pages regarding onshore penalties and penalties for offshore matters.

How Can Lynam Tax Dispute Specialists Help me?
Is the taxman  alleging you owe extra tax?  Lynam Tax Dispute Experts have a great track record in challenging such claims, and saving clients significant sums in tax, interest, and penalties.

If you need advice and help in a tax dispute where HMRC want to assess an earlier year then call Lynam Tax now on:

0845 643 9997
or email partners@lynamtax.co.uk


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We specialise in managing all Tax Enquiry, Tax Disclosures & Tax Disputes with HMRC.

We will help you throughout the Tax Investigation or Disclosure and save you money, so you can concentrate on running your business and enjoying your private life.

For a helpful, sympathetic, confidential and no obligation discussion:

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Email: partners@lynamtax.co.uk

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