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HMRC internal manual

Enquiry Manual

Reopening Earlier Years: Discovery in SA Years: Examples where Discovery Assessments may be made

Example 1 - Pre-enquiry Years

In a non-return case, information suggests the taxpayer has untaxed rental income. A return for the current year is issued. The rental income is declared and figures are provided and agreed for earlier years.

Where penalties are appropriate settlement should be sought through a contract offer. Otherwise discovery assessments may be made, without issue of returns for the earlier years, to conclude the enquiry.

Example 2 - Post-enquiry Years

An enquiry shows that a trader has diverted sales into a Building Society account. The amounts shown in the passbook are agreed as the basis of settlement. Discovery assessments can be made for earlier years if necessary.

The post enquiry year return has been received and the enquiry window is still open. As the diversions into the Building Society passbook are known and will be the basis of settlement for this year, it may be preferable to use the discovery provisions of S29(4) as the basis for including this year in the contract settlement, instead of opening a S9A enquiry.

Example 3 - Post Enquiry Year

A similar position could arise where the documentation received during an enquiry into an omitted share option shows a further receipt in the post enquiry year and the return for that year has again no mention of the share option receipt.

Example 4 – Partial closure notice

During a full enquiry you issue a partial closure notice which covers matters relating solely to a taxpayer’s employment income.

As your enquiries continue further information comes to light which shows the amendments reflected in your previous partial closure notice were insufficient. 

As you can’t reopen your enquiry into the matters covered by the PCN relating to the taxpayer’s employment under S9A, you may instead make a discovery assessment, provided you have fulfilled the conditions at EM3255.