What is an HMRC discovery assessment?

A discovery assessment allows HMRC to recover tax after the normal enquiry window closes. HMRC must 'discover' that income or gains were not assessed or were under-assessed. Time limits are 4 years (innocent), 6 years (careless), or 20 years (deliberate). A discovery assessment is HMRC's power to recover tax after the normal enquiry window (typically 12 months from the filing date) has closed. HMRC can issue a discovery assessment under TMA 1970, Section 29 if it 'discovers' that: (1) Income or chargeable gains have not been assessed (i.e., they were not included in the self-assessment return). (2) An assessment is or has become insufficient (i.e., the return understated the tax due). (3) Relief has been given that is excessive (i.e., too much relief was claimed). The key concept is 'discovery' — HMRC must have discovered new information that was not available during the enquiry window. If HMRC had the information during the enquiry window but did not act on it, it is not a genuine discovery, and the assessment may be invalid. The time limits for discovery assessments depend on the taxpayer's behaviour: (a) Innocent error (the taxpayer took reasonable care) — 4 years from the end of the tax year. (b) Careless behaviour (the taxpayer did not take reasonable care) — 6 years. (c) Deliberate behaviour (the taxpayer deliberately understated tax) — 20 years. HMRC must also meet one of three conditions to issue a discovery assessment (careless/deliberate behaviour, failure to disclose, or change in practice). Relevant legislation: TMA 1970, Section 29 (discovery assessments); TMA 1970, Section 34 (4-year time limit); TMA 1970, Section 36 (20-year time limit for deliberate behaviour). Example: A taxpayer files their 2022/23 self-assessment return on 31 January 2023. The enquiry window closes on 31 January 2024. In March 2026, HMRC discovers that the taxpayer omitted £50,000 of rental income from the return. If the omission was careless, HMRC can issue a discovery assessment by 5 April 2029 (6 years from the end of the 2022/23 tax year). If the omission was deliberate, the limit is 5 April 2043 (20 years). Common mistake: Assuming that HMRC cannot assess tax after the enquiry window closes. The discovery assessment power allows HMRC to recover tax for several years after the enquiry window, depending on the taxpayer's behaviour.

What are the time limits for a discovery assessment?

4 years for innocent errors (taxpayer took reasonable care), 6 years for careless behaviour, and 20 years for deliberate behaviour. The time limit runs from the end of the tax year to which the assessment relates. The time limits for discovery assessments are set out in TMA 1970, Sections 34 and 36: (1) Innocent error (4 years) — if the taxpayer took reasonable care but made a mistake, HMRC can issue a discovery assessment within 4 years from the end of the tax year. For example, for the 2022/23 tax year (ending 5 April 2023), the 4-year limit expires on 5 April 2027. (2) Careless behaviour (6 years) — if the taxpayer did not take reasonable care (e.g., failed to keep adequate records, did not check the return), HMRC can issue a discovery assessment within 6 years. For the 2022/23 tax year, the 6-year limit expires on 5 April 2029. (3) Deliberate behaviour (20 years) — if the taxpayer deliberately understated their tax (e.g., knowingly omitted income), HMRC can issue a discovery assessment within 20 years. For the 2022/23 tax year, the 20-year limit expires on 5 April 2043. The time limits are strict — HMRC cannot issue a discovery assessment outside the applicable limit. However, the time limit depends on the taxpayer's behaviour, and HMRC may argue that the behaviour was careless or deliberate to extend the limit. The taxpayer can challenge the behaviour categorisation if they believe the error was innocent (4-year limit). Relevant legislation: TMA 1970, Section 34 (4-year and 6-year time limits); TMA 1970, Section 36 (20-year time limit for deliberate behaviour); FA 2007, Schedule 24 (behaviour-based assessments). Example: A taxpayer omits £20,000 of interest income from their 2021/22 return. The enquiry window closed on 31 January 2023. If the omission was innocent (reasonable care taken), HMRC has until 5 April 2026 (4 years from the end of 2021/22) to issue a discovery assessment. If careless, until 5 April 2028 (6 years). If deliberate, until 5 April 2042 (20 years). Common mistake: Assuming that the 4-year time limit always applies. If HMRC determines that the behaviour was careless or deliberate, the time limit is extended to 6 or 20 years, significantly increasing the period of exposure.

What conditions must HMRC meet for a discovery assessment?

HMRC must meet one of three conditions: (1) The loss of tax was due to the taxpayer's careless or deliberate behaviour. (2) The taxpayer failed to disclose relevant information during the enquiry. (3) The return was not made in accordance with the relevant practice at the time. If none are met, the assessment is invalid. Even if the time limit has not expired, HMRC can only issue a discovery assessment if one of three conditions is met (TMA 1970, Section 29, subsections (3)-(5)): (1) Careless or deliberate behaviour (Section 29(4)) — the loss of tax was brought about by the taxpayer's careless or deliberate behaviour. 'Careless' means the taxpayer did not take reasonable care to complete the return correctly. 'Deliberate' means the taxpayer knowingly understated their tax. If the taxpayer's behaviour was careless or deliberate, HMRC can issue a discovery assessment within the 6-year or 20-year time limit. (2) Failure to disclose (Section 29(5)) — the taxpayer failed to disclose relevant information during the enquiry window. This means that the taxpayer had information that would have alerted HMRC to the issue, but did not provide it. If the taxpayer failed to disclose, HMRC can issue a discovery assessment (the time limit depends on the behaviour — 6 years for careless, 20 years for deliberate). (3) Change in practice (Section 29(3)) — the return was not made in accordance with the relevant practice at the time. This means that HMRC's interpretation of the law has changed since the return was filed, and the return was not prepared in accordance with the current practice. If the return was not in accordance with the relevant practice, HMRC can issue a discovery assessment within the 4-year time limit (even if the taxpayer took reasonable care). If none of the conditions are met (the taxpayer took reasonable care, disclosed all relevant information, and the return was in accordance with the relevant practice), HMRC cannot issue a discovery assessment, even if tax is due. Relevant legislation: TMA 1970, Section 29(3)-(5) (conditions for discovery assessments); TMA 1970, Section 29(1) (discovery requirement). Example: A taxpayer claims a relief on their return that HMRC later determines was not available. If the taxpayer took reasonable care and disclosed all relevant information, and the return was in accordance with HMRC's practice at the time, HMRC cannot issue a discovery assessment (none of the conditions are met). If HMRC's interpretation of the law has changed (change in practice), HMRC can issue a discovery assessment within 4 years. Common mistake: Assuming that HMRC can issue a discovery assessment whenever tax is due. The conditions are strict, and if none are met, the assessment is invalid. The taxpayer should check the conditions carefully and challenge the assessment if the conditions are not met.

Can I challenge a discovery assessment?

Yes. You can challenge a discovery assessment on the grounds that: (1) The time limit has expired. (2) The conditions are not met (no careless/deliberate behaviour, no failure to disclose, no change in practice). (3) The discovery was not genuine (HMRC had the information during the enquiry window). Appeal within 30 days. A discovery assessment can be challenged on several grounds: (1) Time limit expired — if the discovery assessment is issued outside the applicable time limit (4, 6, or 20 years), it is invalid. The taxpayer should check the time limit carefully, considering the behaviour categorisation (innocent, careless, or deliberate). (2) Conditions not met — if none of the three conditions are met (no careless/deliberate behaviour, no failure to disclose, no change in practice), the assessment is invalid. The taxpayer should check whether the conditions are met and challenge the assessment if they are not. (3) Not a genuine discovery — if HMRC had the information during the enquiry window but did not act on it, it is not a genuine discovery. The assessment is invalid if HMRC could have discovered the issue during the enquiry window with the information it had. (4) Incorrect behaviour categorisation — if HMRC categorises the behaviour as careless or deliberate (to extend the time limit), but the taxpayer believes the behaviour was innocent, the taxpayer can challenge the categorisation. (5) Appeal process — to challenge a discovery assessment: (a) Appeal to HMRC within 30 days of the assessment, stating the grounds for the appeal. (b) HMRC reviews the appeal and either accepts, rejects, or offers a compromise. (c) If HMRC rejects the appeal, the taxpayer can appeal to the First-tier Tribunal within 30 days. (d) The Tribunal reviews the case and determines whether the discovery assessment is valid. Specialist advice is essential for challenging a discovery assessment, as the legal and factual issues are complex. Relevant legislation: TMA 1970, Section 29 (discovery assessments — challenge grounds); TMA 1970, Section 31 (appeals); TMA 1970, Section 49B (statutory review). Example: HMRC issues a discovery assessment for the 2020/21 tax year (6-year time limit for careless behaviour). The taxpayer challenges the assessment on the grounds that: (a) the behaviour was innocent (4-year limit, which expired on 5 April 2025), and (b) the conditions are not met (the taxpayer took reasonable care and disclosed all relevant information). The taxpayer appeals to HMRC within 30 days. If HMRC rejects the appeal, the taxpayer can appeal to the Tribunal. Common mistake: Not challenging a discovery assessment because the taxpayer believes it is valid. The conditions for a discovery assessment are strict, and many assessments can be successfully challenged on the grounds that the conditions are not met or the time limit has expired.

How does a discovery assessment differ from an enquiry?

An enquiry is opened within 12 months of the filing deadline and allows HMRC to investigate the return. A discovery assessment is issued after the enquiry window closes, when HMRC discovers that tax was under-assessed. Discovery assessments have longer time limits (4-20 years) but require specific conditions. Enquiries and discovery assessments are different HMRC powers: (1) Enquiry — an enquiry is opened within 12 months of the filing deadline (for returns filed on time). During the enquiry, HMRC can request information and documents, and make adjustments to the return. The enquiry is closed with a closure notice. (2) Discovery assessment — a discovery assessment is issued after the enquiry window has closed, when HMRC discovers that tax was under-assessed. HMRC can issue a discovery assessment within 4 years (innocent), 6 years (careless), or 20 years (deliberate) of the end of the tax year. (3) Key differences: (a) Timing — enquiries are within 12 months of filing; discovery assessments can be issued years later. (b) Scope — enquiries can cover any aspect of the return; discovery assessments are limited to the specific issue that was discovered. (c) Conditions — enquiries can be opened without any specific reason (HMRC does not need to give a reason); discovery assessments require a genuine discovery and one of three conditions (careless/deliberate behaviour, failure to disclose, or change in practice). (d) Time limits — enquiries have a 12-month window; discovery assessments have 4, 6, or 20-year time limits. (e) Challenge — enquiry adjustments can be appealed on the merits; discovery assessments can be challenged on the conditions, the time limit, and whether it was a genuine discovery. Both enquiries and discovery assessments can result in additional tax, interest, and penalties, but the legal framework and the taxpayer's rights differ. Relevant legislation: TMA 1970, Section 9A (enquiries); TMA 1970, Section 29 (discovery assessments); TMA 1970, Section 31 (appeals for both). Example: A taxpayer files their 2022/23 return on 31 January 2023. HMRC opens an enquiry in March 2023 (within the 12-month window) and investigates the return. The enquiry is closed in December 2023 with no adjustments. In 2026, HMRC discovers that the taxpayer omitted £50,000 of income from the return. HMRC cannot open a new enquiry (the enquiry window has closed), but it can issue a discovery assessment (if the conditions are met and the time limit has not expired). Common mistake: Confusing an enquiry with a discovery assessment. The two powers have different rules, time limits, and conditions. The taxpayer's response and appeal strategy should be tailored to the specific power being used.

Tax Disputes › Assessments

HMRC Discovery Assessments

HMRC can issue discovery assessments to recover tax after the normal enquiry window closes. Understand the conditions, time limits, and how to challenge a discovery assessment.

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A discovery assessment is HMRC's power to recover tax after the normal enquiry window has closed. HMRC can issue a discovery assessment if it 'discovers' that income or chargeable gains have not been assessed, or have been under-assessed. The discovery assessment power is subject to conditions and time limits, which depend on the taxpayer's behaviour (careless, deliberate) and whether the return was made in accordance with the relevant practice. Understanding when HMRC can issue a discovery assessment and how to challenge it is essential for any taxpayer facing a post-enquiry assessment.

When a Discovery Assessment Applies

A discovery assessment can be issued when HMRC discovers that: (1) Income or chargeable gains have not been assessed. (2) An assessment is or has become insufficient. (3) Relief has been given that is excessive. The discovery must be a genuine 'discovery' — new information that HMRC did not have during the enquiry window. If HMRC had the information during the enquiry window but did not act on it, it is not a discovery.

Time Limits

The time limits for discovery assessments depend on the taxpayer's behaviour: (1) Innocent error — 4 years from the end of the tax year. (2) Careless behaviour — 6 years from the end of the tax year. (3) Deliberate behaviour — 20 years from the end of the tax year. The time limits are strict, and HMRC cannot issue a discovery assessment outside the relevant limit (unless the taxpayer has made a deliberate error and the return was not made in accordance with the relevant practice).

The Conditions

HMRC can only issue a discovery assessment if one of the following conditions is met: (1) The loss of tax was brought about by the taxpayer's careless or deliberate behaviour. (2) The loss of tax was brought about by a failure to disclose relevant information during the enquiry window (i.e., the taxpayer did not provide information that would have alerted HMRC to the issue). (3) The return was not made in accordance with the relevant practice at the time (i.e., HMRC's interpretation of the law has changed since the return was filed). If none of the conditions are met, HMRC cannot issue a discovery assessment, even if tax is due.

Challenging a Discovery Assessment

To challenge a discovery assessment: (1) Check the time limit — verify that the assessment is within the applicable time limit (4, 6, or 20 years). (2) Check the conditions — verify that one of the conditions is met (careless/deliberate behaviour, failure to disclose, or change in practice). (3) Appeal — if the time limit or conditions are not met, appeal to HMRC within 30 days. (4) Tribunal — if HMRC rejects the appeal, appeal to the First-tier Tribunal. (5) Specialist advice — discovery assessments are complex, and specialist advice is essential.

Key Points

What You Need to Know

A discovery assessment allows HMRC to recover tax after the normal enquiry window closes
Time limits: 4 years (innocent), 6 years (careless), 20 years (deliberate)
HMRC must meet one of three conditions: careless/deliberate behaviour, failure to disclose, or change in practice
The discovery must be genuine — new information that HMRC did not have during the enquiry window
Appeals must be made within 30 days of the assessment

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