A discovery assessment is how HMRC collects tax after the normal enquiry window has closed. Where you delivered a tax return, HMRC cannot make one unless the loss of tax was brought about carelessly or deliberately by you or someone acting on your behalf, or an officer could not reasonably have been expected to be aware of the under-assessment from the information made available. The time limits are four years in ordinary cases, six for carelessness, twelve for offshore matters and twenty for deliberate conduct, and the tax is payable 30 days after the notice of assessment.

Discovery is the reason a closed year is not always a safe year. It is also, read the other way, the strongest argument for full disclosure: a return that disclosed everything is very hard to reopen.

What discovery is for

The self assessment system trades finality for honesty. Once the enquiry window closes, a taxpayer who made a full disclosure in the return has absolute finality, even if the return later turns out to be wrong, unless it was wrong because of careless or deliberate conduct. Discovery exists for the cases where that trade was not honoured: something was missed, hidden, or could not have been seen.

The two gateways

Where a return was delivered, one of two conditions must be met before HMRC can assess.

The first is behaviour: the loss of tax was brought about carelessly or deliberately by the taxpayer or a person acting on their behalf. An agent’s carelessness counts against the client here, which surprises people.

The second is awareness: the officer could not reasonably have been expected, on the basis of the information made available, to be aware of the under-assessment when the window closed. Information counts as made available if it was in the return, the accounts, a claim, or documents supplied for an enquiry, or could reasonably be inferred from them. This is why disclosure is a defence, and why the onus sits on the taxpayer to draw attention to anything important.

The time limits

Four years from the end of the tax year in the ordinary case. Six years where the loss of tax arose from carelessness. Twelve years where it involves an offshore matter or offshore transfer. Twenty years where it was brought about deliberately, or involves a failure to notify liability or an unnotified avoidance scheme.

Tax charged by a discovery assessment is payable 30 days after the notice of the assessment is given.

Fighting one

A discovery assessment can be appealed, and the gateways themselves are often the battleground: whether there was carelessness at all, and whether the officer really could not have been aware from what was disclosed. These are evidence-heavy arguments about what was in the return and what a competent officer should have taken from it, which makes them slow and expensive to run, and the cost of running them falls on you.

Common questions

How far back can a discovery assessment go?

Four years in the ordinary case, six for careless behaviour, twelve for offshore matters, and twenty for deliberate conduct or failure to notify.

Can HMRC reopen a year after the enquiry window closes?

Only through the discovery gateways: careless or deliberate conduct, or an officer who could not reasonably have been aware of the position from the information made available. A full and accurate return that disclosed everything gives finality once the window closes.

Does my accountant’s mistake count against me?

For the behaviour gateway, yes: the condition covers carelessness by the taxpayer or a person acting on their behalf.

When is the tax payable?

Thirty days after the notice of the assessment is given, whether or not an appeal is under way, unless postponement is agreed or directed.

Does tax fee protection insurance cover a discovery assessment?

It depends on the wording, particularly around when the check is treated as starting and how deliberate conduct is handled: policies do not exist to fund the defence of deliberate evasion. Where the underlying enquiry is covered, the professional fees of arguing the discovery conditions are normally the substance of the claim.

Related guides

This page explains HMRC discovery assessments under section 29 TMA 1970. It is general information, not tax advice, and it does not describe the terms of any particular insurance policy.

Solar Insurance Services (Medway) Limited is registered in England and Wales, company number 05439438, and is authorised and regulated by the Financial Conduct Authority, firm reference number 459582.

Sources: HMRC Self Assessment Legal Framework manual SALF409 and SALF411 on discovery assessments and their time limits.