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HMRC internal manual

Enquiry Manual

Reopening Earlier Years: Discovery - Unexplained Savings

If you can show that means available appear to be insufficient to account for the savings and still leave enough for adequate recurring personal and private expenditure and other non-business expenditure, and the taxpayer is unable to provide acceptable explanations of the deficiencies, you can contend that you have reason to believe that profits or income have been omitted or understated. This would constitute a discovery, providing grounds for rejecting the current year’s return or for making further assessments.

Such a discovery need not be based on evidence which would satisfy a court of law. It is sufficient if the Inspector `comes to the conclusion from the examination he makes and, if he likes, from any information he receives’.

Indeed, on the grounds that the omissions or understatements were due to carelessness or are deliberate you could make assessments for years outside the normal time limit for assessment for which tax has been lost.