DST63100 - Scope of Discovery Assessments 

HMRC can make a discovery assessment if it is discovered that:

  • an amount which ought to have been assessed to tax has not been assessed, or
  • an assessment to tax is or has become insufficient.

A discovery assessment is only appropriate when a ‘discovery’ leads to additional tax liability on the group for that DST accounting period. It is a separate charge from the self-assessed return and not an amendment to it.

Restrictions

By law, HMRC may only use this power where the group has delivered a return where:

  • there has been careless or deliberate behaviour by either a member of the of the group (or a person acting on behalf of a member of the group), or
  • HMRC could not have been reasonably expected to be aware of the loss of tax from the information made available in the return or in related documents.

The group has made information available if it is contained in:

  • a DST return made by it for the period (or either of the two preceding accounting periods), or
  • any documents, accounts or other information produced or provided for the purposes of a compliance check into any such DST return or claim.

Also included is information whose existence and relevance to the loss of tax or statement of an incorrect amount could reasonably be expected to be inferred from any of the above or was notified in writing to HMRC.

A change of opinion on information previously made available in a relevant return, and whose relevance was clear, is not grounds for making a discovery assessment.

It should be noted that information is not considered to be made available if it is contained in a return other than a DST return (e.g. a Corporation Tax return) or any documents, accounts or other information produced or provided for the purposes of a compliance check into a return or claim other than for DST.

Restriction on Assessments

HMRC cannot make a discovery assessment if:

  • the compliance check window is still open, or there is an open DST compliance check into the group, or
  • the loss of tax referenced is attributable to a mistake in the return as to the basis on which the tax liability ought to have been calculated and the return was in fact made on the basis or in accordance with the practice generally prevailing at the time it was made.