When Can HMRC Make a Discovery Assessment?


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Change of View… When HMRC Launches a Discovery Assessment

In order for them to make a discovery, it must be as a result of HMRC coming to a new conclusion or a change of view.

This change of view must come about as a result of:

  • new information;
  • a change of view of the law;
  • Noticing an error; or
  • A HMRC officer changing their mind

Once the change of view has taken place, then the courts have dictated that HMRC must act promptly. Where they do not act, then this ‘discovery’ may have ‘gone stale’. Please see our separate article on staleness.


In addition, this new conclusion or change of view must reveal that that tax declared has been less than that due (“under-declaration”).

An under-declaration will include any income or gains that should have been assessed and have not been.

It will also include a scenario where an assessment made by HMRC is not sufficient or one which has become so.

Finally, an under-decleration will also include a scenario where a tax relief has been claimed and given and that relief was either excessive or should not have been given at all.

Under-declaration must be as a result of error / failure to file

As well as there being an under-declaration, the undeclaration must also be as a direct result of:

  • where a tax return has been filed, an error on that return; or
  • a failure to file a return.

As such, and as established in Tooth, it follows that a discovery cannot be made if the tax return was filed correctly.

In addition, if the tax return was prepared and filed on the basis of the ‘practice generally prevailing at the time’, then there is no error and no discovery assessment can be raised.

Further, there must be a strong nexus between the under-declaration and the error. As such, where the link between the error and the under-declaration is too remote then there cannot be a valid discovery.

Further Conditions for Discovery

Even where the above conditions are satisfied then that is not the end of the story. In order for there to be a valid discovery, then one of the following conditions also need to be met:

  • The error occurred due to the taxpayer’s careless or deliberate behaviour or that of his agent:
  • A hypothetical officer of HMRC could not have been expected, based on the information made available to him, to be aware of the under-declaration when the enquiry window closed; or

Amount of Discovery Assessment

The amount of a discovery assessment is set out as:

 “the amount, or the further amount, which ought… to be charged in order to make good to the Crown the loss of tax”.

As such, the amount of the discovery assessment must be made in the reasonable judgement of the officer. If it is not, then the discovery assessment is invalid.

If you receive a letter from HMRC where they say they are raising a discovery assessment then you must take action immediately. In the first instance you may look at appeal this discovery assessment and normally the time limit for doing so to HMRC is 30 days. Late appeals may be accepted by HMRC but, if not, you will need to appeal to the First Tier Tribunal.

We would recommend that if you receive such an assessment from HMRC that you speak to a specialist adviser without delay.

For more articles on discovery assessment please visit our signpost document.

If you, or your clients, have received a discovery assessment or have any queries about discovery assessment, then please do not hesitate to get in touch.

When can a HMRC make a discovery assessment? was last updated on 12 November 2019

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