Disclosure ― relationship with discovery

Produced by Tolley in association with Emma Broadbent of Grant Thornton

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Emma Broadbent of Grant Thornton provides comprehensive and up to date tax information covering:

  • Disclosure ― relationship with discovery
  • Discovery assessments ― relevance of full disclosure
  • Relevant case law
  • Disclosure opportunities

Disclosure ― relationship with discovery

The issue of disclosure is a fundamental risk management consideration for both compliance and planning work. The reason for this is that where insufficient disclosure has been provided, HMRC is able to open an enquiry beyond the normal enquiry window on the grounds of ‘discovery’.

Discovery assessments ― relevance of full disclosure

HMRC’s discovery provisions are in place so that a taxpayer who has made a full disclosure in their tax return can expect finality once the window for raising enquiries has passed.

The discovery legislation is contained within TMA 1970, s 29. A discovery assessment can only be made if one of the following two conditions is met:

  1. any additional tax that is due arises from the careless or deliberate behaviour of the taxpayer or a person acting on his behalf, or

  2. the officer could not have been reasonably expected, on the basis of the information made available to him, to be aware of the under-assessment

The second condition relates to disclosure. In this respect information ‘made available’ is defined as being:

  1. contained in a relevant return or any accounts, statements or documents accompanying a relevant return

  2. contained in any relevant claim or accompanying accounts, statements or documents

  3. contained in any documents, accounts or particulars supplied in connection with an enquiry into any relevant returns or claims

  4. information whose existence could be reasonably expected to be inferred from information available under the items above or information notified in writing to HMRC by the taxpayer

TMA 1970, s 29(6)

TMA 1970, s 30(1B) also allows HMRC to apply the discovery provisions in order to recover an excessive repayment of tax that it has made.

Note that the discovery provisions do not apply where the return was made in accordance with prevailing practice, but where, at a later date, HMRC changes its practice and realises that there has been a loss of tax.

Relevant returns and claims for these purposes are those for the yea

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