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HMRC internal manual

Compliance Handbook

Assessing Time Limits: Extended time limits: Examples of deliberate behaviour

Example 1

Eric is a market trader. Long ago he decided that he was paying too much income tax. He got into the habit of putting £20 in his back pocket before counting his cash takings at the close of business each day. Over the years this grew to £40 each day then £50 each day until he was discovered. Clearly he has deliberately understated his takings, profits and income tax liability. Assessments for income tax and VAT, if appropriate, (including default surcharge, interest on VAT and VAT penalties, see CH51250) can be made for all relevant tax periods ending not more than 20 years ago.

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Example 2

Anwar, controlling director of Anwar’s Ltd, finds a trade supplier whose practice is to reward customers with a discount in the form of a cash-back cheque every month. Anwar has these cheques made out to him personally and pays them into his private bank account. In addition he uses his personal computer to create fictitious invoices for goods and services purportedly supplied to the company, the company cheques for which are paid into that same private bank account. He deliberately ensures the company’s returns understate its true liability. Assessments can be made within 20 years of the end of any accounting period involved.