Beware the one year window

With the deadline for submitting self assessment tax returns rapidly approaching, we have had a timely reminder of the importance of submitting returns on time. Those wanting to submit a paper return had until last October to do so, leaving on line filing as the only option now open. HMRC will issue a £100 fine to all those who have not submitted their self assessment return by the 31 January deadline and this includes those who are expected to file online even if they have no tax to pay.

In particular HMRC are warning those who have not previously filed on line that they will need to pre-register and then wait for an activation code to be posted to them and this can take up to seven working days. The 31 January is also the deadline for paying tax due in respect of the last financial year.

Once the self-assessment return has been filed, HMRC usually have a period of one year to challenge and investigate it. This leads many into the belief that if there has been no challenge within one year, the return cannot be altered. In fact Section 29 of the Taxes Management Act 1970 allows HMRC to challenge tax returns outside the one year window subject to one of two conditions. These are:
• That due to fraud or negligence on the part of the taxpayer or their agents the full facts were not available to HMRC
• That any HMRC officer conducting an investigation could not have reasonably been expected to have be aware of the true position

This power to review tax after the one year period was recently challenged in the Court of Appeal.* The challenge related to an assessment of tax six years after the tax period had closed, once HMRC had discovered that Mr Hankinson had in fact been resident in the UK in the period in question. The court of Appeal upheld the right of HMRC to issue the discovery assessment letter in this case.

Whilst the judgement was no surprise to those dealing with tax on a daily basis it came as a timely reminder to ensure that full facts are included on tax returns. This was backed up by another recent ruling which went against HMRC in that the Court of Appeal ruled that HMRC did have sufficient information at the time to conclude that insufficient tax had been paid and could not therefore rely on Section 29 to make subsequent enquiries.**

As tax mitigation specialists Newshams are able to give advice on tax matters, how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can mitigate your tax costs or e-mail us at and we’ll get straight back to you.
19 January 2012

*Derek William Hankinson v HM Revenue and Customs
**The Commissioners for Her Majesty’s Revenue and Customs v Lansdowne Partners

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