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HMRC internal manual

International Manual

Non-residents trading in the UK: Returns and assessments outside normal time limits: Assessing time limits

The normal time limit for assessments is not more than 4 years after the end of the relevant accounting period (FA98/SCH18/PARA46(1).

Outside the normal time limit, it is only possible to impose a charge by making a discovery assessment and this is only permissible where:

  • a loss of tax is brought about carelessly by a company, when an assessment may be made not more than 6 years after the end of the relevant accounting period (FA98/SCH18/PARA 46(2), or
  • a loss of tax is brought about deliberately by the company or a person related to it, when an assessment may be made not more than 20 years after the end of the relevant accounting period (FA98/SCH18/PARA 46(2A).

Where there has been Failure to Notify chargeability (as required under FA98/SCH18/PARA2) then prima facie there will have been at least negligence so that a discovery assessment can be raised under FA98/SCH18/PARA41 within the 20 year time limit (FA98/SCH18/PARA46(2A)). Where no return has been delivered the restrictions in FA98/SCH18/PARA42 to FA98/SCH18/PARA45 are irrelevant.

In a potential Permanent Establishment or Residence case where no return notice has been issued to the relevant party, and no return has been delivered, (and hence FA98/SCH18/PARA42 to FA98/SCH18/PARA45 do not apply) the only restriction on making a discovery assessment is provided by FA98/SCH18/PARA46. If we come to the reasonable conclusion that there is a PE, or that the company is resident in the UK, there must have been careless or deliberate conduct in the failure to notify.

To make a discovery you have to find something out that leads to the conclusion that something is assessable. (Thinking it may be assessable is not sufficient.) You do not need legal evidence of that - but your conclusion has to be reasonable on the information available. But failure to provide any information does not necessarily provide protection if your conclusions are reasonable in the circumstances. SP1/06 (which external users can read at the Library section of the HMRC website) clarifies the circumstances where HMRC seeks to recover tax when a self - assessment is found to be insufficient following the case of Langham v Veltema.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)