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Category: Budget

Budget round-up: Tax Administration

Discovery Assessments

A change to the law is being made to clarify the use of discovery assessments by HMRC to recover tax in three areas – High Income Child Benefit Charge, Gift Aid, and pension scheme tax charges – where the individual tax payer is not in the self assessment system.

Discovery assessments are usually used to enable HMRC to look back up to four tax years and amend a tax assessment where they “discover” something that was not declared, and to assess it to tax.

A recent case involving HICBC was decided against HMRC, where the Upper Tribunal found that the assessments raised were not legally valid.

While HMRC are appealing the decision to the higher courts, they are changing the law in the meantime to clarify the rules to put beyond doubt what was generally accepted to be the case until the recent appeal threw it into doubt.

This is not a particularly shocking or unfair measure, as the case had shown that there was a risk that those who do not declare their liability could escape it, which of course would be unfair on those who did declare and pay it.

However it does highlight the need not to ignore publicity or correspondence from HMRC, and to speak to a tax adviser if there is any doubt over whether there might be such tax liabilities.

If you have any questions for our Tax experts as a result of this Budget, please contact us on 01242 776000 or