Compliance: enquiry work: discovery
An enquiry cannot be opened into a return (or amendment to the return) if either
- The return or amendment has already been the subject of an enquiry
- The enquiry window (SAM31100) has expired
Full details of the discovery provisions are set out in the Enquiry Manual.
Instructions about when and how to make discovery assessments are contained in the SA Manual under business area ‘Assessments’ (SAM20000 onwards).
ITSA Discovery records on the CQI Workbench
CQI Workbench function CREATE ITSA DISCOVERY allows records to be created on the CQI Workbench for ITSA cases where the last date for enquiry has passed, and no open or settled enquiry record already exists.
It will mostly be used to record discovery investigation cases on the CQI Workbench. However, it can also be used in cases where an enquiry has been opened, but it has not been possible to register the case on the CQI Workbench before the last date for enquiry.
The main difference between the ITSA Discovery record and a ‘standard’ enquiry record (set up from a work item) is that the SA record is not updated in any way when an ITSA Discovery record is created. The details are only sent to the SA system to check that the record set up on the CQI Workbench is appropriate.
Follow the Action Guide ‘Discovery: Recording cases on the CQI Workbench’ (SAM31052) when creating this record for a discovery case and when settling the case.
Payments on account
The payments on account position for the year after the last year of discovery must be reviewed clerically on
- Making the discovery assessment (unless it relates solely to a Capital Gain and/or Student Loan repayments)
- Amending the assessment
- Formally holding over liability on the assessment
Function CREATE RETURN CHARGE is used to adjust the return charge of the year of discovery to generate the correct payments on account for the next year. This can only be done where a return charge exists for the year of the discovery. If you are making a discovery assessment for a year where the return was not received before the time limit for making the self-assessment, function CREATE RETURN CHARGE must not be used to correct the payments on account for the next year.
The adjustment you make will depend on whether or not payments on account were originally due for the year following the year of discovery.
The payments on account for the year following the year of discovery should each be increased by 50 per cent of the amount of the discovery assessment. If the original payments on account were nil, because either less than £500 was due through SA or more than 80 per cent of the tax was deducted at source, the payments on account can only be based on the amount of the discovery assessment, and should not include any amount of the original self assessment.
In limited circumstances, where payments on account exist for the year of discovery but not for the year following the year of discovery, the adjustments made will reduce the payments on account for the year of discovery.
Exceptionally, the use of the function may result in payments on account for the year of discovery being increased and a balancing charge credit being created to cover the increase. The Effective Date of Payment of the balancing charge credit will be later than the relevant due dates of the payments on account.
As a result the computer will create inappropriate interest based on the increase. To correct this, the balancing charge credit should be transferred to OAS and instructions sent to Banking Operations to amend the Effective Date of Payment to the Relevant Date of the payments on account.
See the available Action Guide on ‘Discovery: Update Payments on Account for Next Year’ (SAM31054).
Student Loan repayments
If the discovery assessment relates to 2000-2001 or later and the taxpayer is required to make Student Loan repayments through SA, the Student Loan repayment liability must be agreed with the taxpayer. The additional Student Loan repayments need to be calculated using the customer’s correct plan type. If you are unsure of the plan type, you can call the East Kilbride Student Loans Unit (EKSLU) for assistance. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) These numbers are for HMRC staff only and are not to be given to the public. You must also amend the SA record to make sure that the correct amount is notified to the Student Loans Company.
There are three different scenarios
- The Student Loan will not be repaid by the additional repayments
- The Student Loan has already been repaid
- The additional repayments result in the Student Loan being repaid
For details of the amounts of Student Loan repayments to be included in the SA record, refer to the subject ‘Borrower Compliance’ in the Collection of Student loans (CSL) Manual (CSLM8500). Follow the Action Guide on ‘Discovery: Student Loan repayments’ (SAM31053) to record these amounts on the SA record.