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HMRC internal manual

Tax Credits Technical Manual

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HM Revenue & Customs
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Decision Making: Revised decisions, considering evidence and recording of decisions: Section 20 Discovery Decisions

There are two situations where a decision maker (DM) may be able to make a discovery decision:

  • S20(1)TCA - where a person’s income tax liability has been revised and as a consequence the DM has reasonable grounds for believing that a conclusive tax credits decision is not correct.
  • S20(4)TCA- where the DM has reasonable grounds for believing that a conclusive tax credits decision is not correct and this is attributable to there being fraud or neglect. In most cases where a revision is needed to the conclusive award there will have been neglect but if there is no neglect a discovery decision cannot be made.

A conclusive decision is defined in the Tax Credits Act as:

(a) a decision in relation to it under section 18(1), (5), (6) or (9) or 19(3) or a previous decision under this section, or

(b) a decision under regulations under section 21 relating to a decision within paragraph (a)

When can an s20 decision be made?

A discovery decision can only be made once the entitlement for the year has become conclusive, for example:

  • if a conclusive decision on the entitlement for that year has been made, and
  • it is too late to enquire into the entitlement, or joint entitlement, under s19 (that is to say the enquiry window has now closed)

The time limit on making an s20(1) decision (a change to SA liability) is no later than one year after the Income Tax liability has changed. The full list is available at Section 20 of the Tax Credits Act 2002 (see TCTM12000)

The time limit on an s20(4) change (fraud or neglect) is no later than five years from the end of the tax year to which the decision relates.

In both cases an s20 decision can only be made after the s19 enquiry window has closed.

Where HMRC believe a conclusive decision is incorrect because the person’s income tax liability has been revised and there is another error which is attributable to fraud or neglect the time limit is five years after the end of the tax year to which the decision relates.

Further information on s20 can be found at chapter 13 of the Claimant Compliance Manual.