MTT55320 - Administration: Compliance: Discovery assessments and HMRC determinations: Scope of discovery assessments

HMRC can make a discovery assessment for a period if it is discovered that there would otherwise be a loss of tax for that period. The loss of tax would arise because either:

  • an amount of MTT which ought to have been assessed to tax has not been assessed, or
  • an assessment to tax is (or has become) insufficient.

A discovery assessment is only appropriate when a ‘discovery’ leads to the identification of such a loss of tax.

This is set out in paragraphs 27 and 28, schedule 14 to Finance (No.2) Act 2023.

Meaning of discovery

For a period where the filing member has submitted a self-assessment return, HMRC may only make a discovery assessment if:

  • the loss of tax arose through careless or deliberate behaviour by a member of the group (or a person acting on behalf of a member of the group), or
  • at the time the compliance check window closed (see MTT55130) or a compliance check was completed, HMRC could not have been reasonably expected to be aware of the loss of tax from the information made available to it.

A change of opinion on information that was previously made available in a relevant return is not grounds for making a discovery assessment.

See MTT55320 for guidance on the meaning of ‘made available to HMRC’.

No self-assessment return submitted

A discovery assessment can still be made where a group has not submitted a self-assessment return for a period, including where it has submitted a below threshold notification or been de-registered.

An HMRC determination may be more appropriate (see MTT55360).

Restrictions on discovery assessments

HMRC cannot make a discovery assessment if:

  • the compliance check window is still open,
  • there is an open MTT compliance check into the group, or
  • the loss of tax is attributable to a mistake in the return as to the basis on which the tax liability ought to have been calculated, and the return was made on that basis, or in accordance with the practice generally prevailing at the time it was made.