Can someone please help me understand what a discovery assessment is?

[sparkyjoe12]

Hi all,

So long story short, I sell items that I make in a online marketplace.

There were some previous years where I did not realise or was naïve enough to realise that tax would be due (I only sold these items here and there and wasn't my full time job). It was a mistake on my part and I hold my hands up to it.

This sparked a compliance check by the HMRC, where they requested a load of data. Thankfully I had records so I gave them a detailed breakdown and calculations of profits for each of these years.

I have now received a letter from them stating the tax owed for each year (which matches my calculations) and that interest charges and a fine would be due added on the loss of tax. The letter then states that they make discovery assessments using extended time limits when they detect things like this.

However I cannot find a definitive (or simple) answer on what a discovery assessment is. Is this another assessment of information or essentially an demand document of payment for the loss of tax they have stated in this letter, together with the interest and fine?

Thanks in advance.

 

[Elliot Green]

Hi all,

So long story short, I buy and sell items that I make in a online marketplace.

There were some previous years where I did not realise or was naïve enough to realise that tax would be due (I only sold these items here and there and wasn't my full time job). It was a mistake on my part and I hold my hands up to it.

This sparked a compliance check by the HMRC, where they requested a load of data. Thankfully I had records so I gave them a detailed breakdown and calculations of profits for each of these years.

I have now received a letter from them stating the tax owed for each year (which matches my calculations) and that interest charges and a fine would be due added on the loss of tax. The letter then states that they make discovery assessments using extended time limits when they detect things like this.

However I cannot find a definitive (or simple) answer on what a discovery assessment is. Is this another assessment of information or essentially an demand document of payment for the loss of tax they have stated in this letter, together with the interest and fine?

Thanks in advance.

Hi all,

So long story short, I sell items that I make in a online marketplace.

There were some previous years where I did not realise or was naïve enough to realise that tax would be due (I only sold these items here and there and wasn't my full time job). It was a mistake on my part and I hold my hands up to it.

This sparked a compliance check by the HMRC, where they requested a load of data. Thankfully I had records so I gave them a detailed breakdown and calculations of profits for each of these years.

I have now received a letter from them stating the tax owed for each year (which matches my calculations) and that interest charges and a fine would be due added on the loss of tax. The letter then states that they make discovery assessments using extended time limits when they detect things like this.

However I cannot find a definitive (or simple) answer on what a discovery assessment is. Is this another assessment of information or essentially an demand document of payment for the loss of tax they have stated in this letter, together with the interest and fine?

Thanks in advance.

This is a mechanism available to HMRC in legislation to raise a tax assessment when they ordinarily might be out of time to do so.

 

[sparkyjoe12]

This is a mechanism available to HMRC in legislation to raise a tax assessment when they ordinarily might be out of time to do so.

Thank you for your reply.

So just so I understand in simple terms, it is just a legal document for them to claw back the back dated tax for those years?

 

[Elliot Green]

Thank you for your reply.

So just so I understand in simple terms, it is just a legal document for them to claw back the back dated tax for those years?

It will specify the amount of tax they are claiming and potentially interest and penalties.

 

[sparkyjoe12]

It will specify the amount of tax they are claiming and potentially interest and penalties.

Thank you Elliot. This really helps me understand what it is. Much appreciated.

 

[MyAccountantOnline]

Have a read here it explains what a Discovery assessment is https://www.gov.uk/hmrc-internal-manuals/enquiry-manual/em3220