6 February 2022    |    Taxation

Increased HMRC discovery powers

The very latest version of the Finance Bill, published on 11 January 2022, confirms that HMRC will be allowed to issue discovery assessments to collect tax where it believes a person has failed to report a liability. In 2008 there was an update in the “discovery” powera. The new law will close a loophole exposed in a recent court case.

The case was HMRC v Jason Wilkes 2021 and related to the high income child benefit charge (HICBC). A HICBC liability must be notified to HMRC via self-assessment or in writing if you’re not within self-assessment. If you do not inform HMRC then they can start an enquiry or issue a discovery assessment.

In the Wilkes case, the courts ruled that a discovery assessment can only be made for an undeclared tax liability on income. Because HICBC isn’t an income tax. It is a recovery of child benefit via the tax system, and the discovery rules are not applicable

The law starts in summer 2022. The new legislation will remove the loophole which prevents HMRC from looking back as far as 2013.  This is when the HICBC was introduced.  HMRC can issue discovery assessments if it thinks you ought to have reported the charge but failed to do so for one or more years.

Discovery loophole

The loophole in respect of HMRC discovery assessments also related to pension charges and gift aid. The new legislation closes these too and the change will apply retrospectively.

The retrospective effect of legislation doesn’t apply to an existing discovery assessment if you have already appealed against it. However, there are a number of conditions relating to this get-out clause.

If you think you are affected by this, please contact Angus Nicolson.


The information provided is for general information purposes only.

Legislation and details may have changed since this was written.  The text may not include all matters that are relevant to your individual situation.

You should not make decisions, or refrain from making decisions, without taking further professional advice about your specific circumstances.

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