What is a discovery assessment, and can I challenge it?

Full answer

Normally, HMRC has a limited window (generally 12 months from the date a Self Assessment return is filed, if filed on time) to open a formal enquiry into that specific tax return and query anything within it — once this enquiry window closes without HMRC opening a check, the return is generally treated as final for most ordinary purposes. A discovery assessment is a distinct legal mechanism that allows HMRC to reopen a tax year and assess additional tax even after this normal enquiry window has closed, but only where specific statutory conditions are met: broadly, HMRC must genuinely discover new information suggesting tax has been underpaid, and depending on the taxpayer's behaviour, must act within the relevant extended time limit (4, 6, or 20 years from the end of the tax year, depending on whether the original error was innocent, careless, or deliberate, as with HMRC's general investigation time limits). Discovery assessments have historically been used in cases involving offshore income coming to light through international data sharing, previously undisclosed sources of income or gains, or situations where HMRC's data-matching reveals information the taxpayer's original return did not reflect, sometimes years after the return itself was filed and any normal enquiry window has long since closed. If you receive a discovery assessment, you have the right to formally appeal it, and there are two broad grounds on which such an appeal might succeed: first, arguing that HMRC's own discovery conditions were not actually satisfied — for example, that the information relied upon was not genuinely new or could reasonably have been identified by HMRC within the normal enquiry window using information already provided, which is a specific and sometimes technical legal argument that has succeeded in various tax tribunal cases where HMRC's discovery process was found to be procedurally flawed; and second, disputing the substantive tax figure itself, arguing that even if the discovery assessment was validly raised, the actual amount of tax HMRC says is owed is incorrect. Given that discovery assessment appeals often turn on technical legal points about whether HMRC's discovery conditions were genuinely met, specialist tax investigation or tax litigation advice is strongly recommended before deciding whether and how to challenge one, rather than accepting the figure or attempting a purely factual dispute alone.

Try the calculator

More answers

• How long does HMRC have to open a tax investigation or assess back taxes?