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HMRC internal manual

Claimant Compliance Manual

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HM Revenue & Customs
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Discovery Decisions: Time limit for S20(1) decision

S20(3), says that no decision under S20(1) may be made

a.  unless it is too late to enquire into the person’s entitlement under section 19, or

b.  after the period of one year beginning when the person’s income tax liability is revised.

This means that if you can still open a S19 enquiry then you must do so. However, S20(3)(b) places an over-riding time limit on a discovery decision. Such a decision can only be made if it is actioned within 12 months of the date on which the income tax liability is revised.

Example 1

Scott submits his 2009/2010 tax return and S17 notice on 2 August 2010. A S18 final decision is made on 22 August 2010. On 1 November 2010 Scott amends his return because he realised he had understated his car benefit by ₤800. The information is passed on to the CCRO.

Scott’s NTC enquiry window is due to close on 31 January 2012 which is the date his 2009/2010 tax return will become final unless an enquiry is closed before that date.

The consequential adjustment for the revised income tax liability is considered for NTC purposes in December 2010. At this stage the enquiry window is still open. So if the NTC award is to be revised you must open a S19 enquiry.

Example 2

Sophie also submits her 2009/2010 tax return and S17 notice on 2 August 2010 and again a S18 final decision is made on 22 August 2010. On 1 February 2011 Sophie’s tax office opens a S9A enquiry because she appears to have understated her car benefit. On 11 March 2011 the tax office issues a closure notice and amends her return to reflect an additional ₤900 car benefit. The information is passed to the CCRO. The error arose because Sophie’s employer gave her incorrect details about the list price of her car. It is accepted there has been no neglect by Sophie.

Sophie’s NTC enquiry window closed on 11 March 2011 (rather than on 31 January 2012) because this is the date on which her SA return becomes final.

The consequential adjustment for the revised income tax liability is considered for NTC purposes in April 2011. The NTC enquiry window has now closed but it is only one month after the revision to her income tax liability so a S20(1) discovery decision can be made.

Example 3

Bob’s situation is exactly the same as Sophie’s but the adjustment to the income tax liability was not referred to the NTC team at the appropriate time. It finally came to light in May 2012. S20(3)(a) is satisfied because the NTC enquiry window closed on 11 March 2011 but S20(3)(b) is not satisfied because it is now more than 12 months since Bob’s income tax liability was revised.

It is therefore not possible to revise the NTC award under S20(1). If Bob’s failure to return the correct amount of car benefit for NTC purposes arose out of fraud or neglect (CCM13170) it will be possible to make a discovery decision under S20(4) If, however, there is no fraud or neglect then the previous conclusive decision must stand.