The hypothetical officer test for discovery

Section 29(5) of the Taxes Management Act 1970 lets HMRC make a discovery assessment on a filed return, without proving carelessness, only if a notional HMRC officer, looking at the return and certain related information when the enquiry window closed, could not reasonably have been expected to be aware of the loss of tax. The test is about the quality of the taxpayer’s disclosure: if the return and accompanying information made the actual shortfall apparent, HMRC should have enquired in time and cannot use this route later.

What does section 29(5) actually say?

Where a taxpayer has filed a return, section 29(3) TMA 1970 bars a discovery assessment unless one of two conditions is met. The first, in section 29(4), is that the loss was brought about carelessly or deliberately. The second, in section 29(5), is that at the relevant time an officer “could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of” the loss of tax.

The relevant time is when the officer:

• ceased to be entitled to give notice of enquiry into the return, in other words the end of the enquiry window; or
• if an enquiry was opened, issued a partial closure notice on the matter concerned or, if there was none, the final closure notice.

HMRC’s guidance at EM3232 notes that only one of the two conditions needs to be met. The information condition is therefore HMRC’s route where it cannot, or does not want to, allege careless behaviour.

What information is treated as made available?

Section 29(6) limits the officer to a fixed body of information:

1. the return for the year and any accounts, statements or documents accompanying it;
2. any claim for the year and documents accompanying it;
3. documents, accounts or particulars produced to an officer for an enquiry into the return or claim;
4. information whose existence and relevance could reasonably be expected to be inferred from the above, or which the taxpayer notified to an officer in writing.

Section 29(7) widens “the return” to include the returns for the two immediately preceding years and, for a partner, the partnership return. Information supplied by someone acting on the taxpayer’s behalf, such as an agent, counts. Anything else HMRC holds, such as third party data or information on another taxpayer’s file, is outside the test unless it can be inferred from these sources.

Who is the hypothetical officer?

EM3233 describes the hypothetical officer as having the general competence, knowledge and skills needed to understand the return in front of them, including knowledge of court decisions and HMRC publications. This is a notional person, not the officer who actually handled the file. In Sanderson v HMRC [2016] STC 638, quoted by the Upper Tribunal in Hargreaves v HMRC [2022] UKUT 00034 (TCC), Patten LJ explained that the real officer’s power to assess and the hypothetical officer’s awareness are different tests: the hypothetical officer evaluates the return at a fixed time on a fixed and limited class of information, and the purpose of the condition is to test the adequacy of the taxpayer’s disclosure.

How aware does the officer need to be?

The Upper Tribunal in Hargreaves summarised the law drawn from Langham v Veltema and Sanderson:

• the awareness required is of an actual insufficiency in the tax self assessed;
• mere awareness that HMRC should prudently ask further questions is not enough;
• the information condition tests the adequacy of the taxpayer’s disclosure, not whether the real officer was justified in assessing.

The First tier Tribunal in that case applied the Upper Tribunal’s formulation in Beagles v HMRC [2018] UKUT 380 (TCC) that the information need not be enough to enable HMRC to prove its case, but must be more than would merely prompt the hypothetical officer to open an enquiry. EM3233 takes the same line: it is not enough for the disclosure to make the officer aware that they need to ask questions or check something.

What does this look like in a real case?

In Hargreaves, the taxpayer’s return said in the white space that he had left the UK permanently on 11 March 2000 and was regarded as provisionally not resident and not ordinarily resident. He did not complete the capital gains pages, and on 16 May 2000 he sold shares in Matalan for about £231m. The tribunals held that HMRC met the information condition. The return did not mention any capital gains, and it left out the facts that showed he was in fact resident: his regular weekly visits to the UK as executive chairman of Matalan and the house still available to him. The word “provisionally” might have suggested a question to ask, but it did not reveal an actual insufficiency.

Illustrations of disclosure that does and does not protect

Illustration only.

Situation	Likely result
A landlord deducts £12,000 of roof works as a repair. The white space explains that the old slate roof was replaced with a like for like slate roof, gives the cost and says the work was treated as a repair.	A competent officer could see exactly what was claimed and on what basis. If HMRC thinks it is capital, it should have enquired; the information condition is unlikely to be met.
The same £12,000 appears only inside total property expenses, with no explanation.	Nothing reveals an insufficiency. The information condition is likely to be met.
A return says “I have relied on an exemption for a share disposal”, with no details.	This prompts questions but does not show an actual insufficiency, so it is unlikely to protect the taxpayer.
A detailed computation of a gain, valuation report and the legal basis for a relief claim are sent with the return.	If HMRC disagrees with the relief, the shortfall was apparent from documents accompanying the return. HMRC would need to rely on carelessness instead.

Who has to prove it, and how is it raised?

EM3251 accepts that where a return was filed HMRC carries the burden of showing that one of the two conditions applies, although the officer does not need to establish it at the time of assessing. Section 29(8) says an objection that neither condition is met can only be made on an appeal against the assessment, so it must be in your grounds of appeal within 30 days. The burden of proof then moves to the taxpayer on the amount.

The same test applies to companies under paragraph 44 of Schedule 18 to the Finance Act 1998, where the relevant returns are those for the period and the two preceding accounting periods; see discovery assessments on companies.

What mistakes do taxpayers make?

• Thinking a hint is enough. A vague white space note that flags an issue without the figures or facts rarely meets the actual insufficiency standard.
• Relying on what HMRC knew from elsewhere. Only the information in section 29(6) counts, not HMRC’s wider records.
• Disclosing too late. Information sent after the enquiry window closed is not taken into account, because the test is fixed at that date.
• Forgetting the other condition. Full disclosure defeats section 29(5) but not section 29(4). If the return was careless, HMRC can still assess within the 6 year limit in section 36.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• Discovery assessments on companies
• How to appeal a discovery assessment
• Senior accounting officer duties
• The statutory residence test
• Enquiry or discovery assessment: the difference

Related cover: Directors and officers liability insurance and Management liability insurance.

Sources

• legislation.gov.uk: Act 1970 c. 9, section 29
• GOV.UK: Manual page EM3232
• GOV.UK: Manual page EM3233
• GOV.UK: John hargreaves v the commissioners for hm revenue and customs 2022 uk
• GOV.UK: Manual page EM3251
• legislation.gov.uk: Act 1970 c. 9, section 31A
• legislation.gov.uk: Act 1998 c. 36, schedule 18
• legislation.gov.uk: Act 1970 c. 9, section 36

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.