EM3235 - Discovery: making a discovery - whether there is a discovery: checking a potential discovery position - information powers - Schedule 36, FA 2008

Where a person has made a tax return, Para 21(6), Sch 36 FA 2008 allows an officer to use information powers where they have reason to suspect a loss of tax.

Para 21(7), Sch 36 FA 2008 also allows an officer to use information powers to obtain information or documents reasonably required to check a taxpayer’s tax position in relation to any tax other than income tax, capital gains tax or corporation tax. However, it must still be a tax listed at para 63.

There is no need for a formal enquiry in order to use these powers; they can be used when there is no enquiry open.

Where a return has not been delivered to HMRC there is no restriction on the use of Sch 36 information powers.

Information powers can be used both before and after an assessment has been made. An information notice can be issued after an assessment has been made if the officer is still genuinely checking the taxpayer’s tax position.

Examples of when an information notice can be issued after an assessment has been made include

  • There are other years that could be affected.
  • HMRC might be checking the position in more than one tax/duty.
  • There might be another inaccuracy that was not ‘discovered’.

If HMRC officers have any queries about information powers they should contact the Specialist Technical Team, see EM21000.

Where a return has not been delivered to HMRC

Where no return has been delivered to HMRC then s29(3) TMA 1970 and Para 42 Sch 18 FA 1998 do not apply and there is no requirement to meet the assessment conditions.

A discovery assessment may be made subject to the 4 year time limits at s34 TMA 1970 and Para 46 Sch 18 FA 1998. However, HMRC will need to consider whether the loss of tax has been brought about carelessly or deliberately in order to make an assessment using the extended time limits in s36 TMA 1970, see EM3214, and Para 46 Sch 18 FA 1998, see EM3215.

Where there is a failure to notify

Where a taxpayer has not received a notice to file under s8 TMA 1970, or where they have received a notice and subsequently had it withdrawn, then s7 TMA 1970 states that they have an obligation to notify HMRC that they are chargeable to tax within the time limit given at s7(1C) TMA 1970.

The taxpayer must notify HMRC for each year that they are chargeable.

Where the taxpayer has not notified HMRC of chargeability then there is a failure to notify under s7 TMA 1970. Section 36(1A)(b), TMA 1970 or Paragraph 46(2A)(b), Sch 18, FA 1998 apply where a loss of tax is attributable to a failure to comply with an obligation under s7 TMA 1970 and allows for an assessment to be made within the 20 year extended time limit.

In order to utilise the extended time limit for

  • ITSA discovery assessments where the year of assessment is 2008-09 or earlier, or
  • CTSA discovery assessments where the end of the accounting period was on or before 31 March 2010

HMRC must be able to show that the loss of tax was attributable to negligent conduct, not carelessness.

Note: as no return has been delivered to HMRC then s29(3) TMA 1970 and Para 42 Sch 18 FA 1998 do not apply and there is no requirement to meet the assessment conditions.

When a taxpayer has delivered a voluntary return it is treated as if a notice to file was served and the filing obligations have been met, see SAM121140.