The Finance Act 2022 gave HMRC controversial new powers that now allow HMRC to issue so-called discovery assessments to collect tax if it believes a person has failed to report a liability. Its discovery powers were last overhauled in 2008 and the new law closes a loophole exposed in a recent court case (HMRC v Jason Wilkes 2021).
So what’s changed?
The new rules close a loophole which prevented HMRC from issuing discovery assessment for undeclared high income child benefit charge, pension charges and the clawback of gift aid relief.
What is a discovery assessment?
HMRC can issue a discovery assessment if: they ‘discover’ an under-assessment for the period: the original under-assessment was brought about by the careless or deliberate conduct of the taxpayer (or a person acting on their behalf)
Who is likely to be affected?
Individuals who incur certain tax charges (the High Income Child Benefit Charge (HICBC), those relating to Gift Aid Donations and a number of different pension charges) but fail to notify HMRC and fail to complete a Self Assessment tax return for the tax year in which the charge(s) arose. The measure confirms the longstanding basis on which HMRC can assess these charges and does not impose any additional liability.
For more information: https://www.gov.uk/government/publications/discovery-assessments/discovery-assessments