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Tax Insider Tip: Normal Time Limits For Assessing Tax

4th Nov 2015
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There are numerous time limits governing how long after the end of a tax year (or a company’s period of account, or the end of a VAT quarter, etc.) HMRC can take steps to recover any underpaid tax – known as assessing time limits.

These time limits depend on the reason for the tax being due.

Bear in mind that all these time limits only come into effect if HMRC have made a ‘discovery’ as described previously (Tip 16). In the absence of a ‘discovery’ the time limit remains the first anniversary of the filing of the return.

The ‘normal’ time limit is four years from the end of the relevant period, and this one works both ways – it is the time limit for HMRC to claim tax for an earlier year, and it is also the time limit for the taxpayer to make a claim if he or she realises that he or she has paid too much tax.

Note – the time limit for a taxpayer to make an ‘overpayment’ claim is four years, but be careful – if the overpayment relates to a claim that is normally made in a tax return, then the shorter time limit for amending the return may apply – this is outside the scope of the present book.

If HMRC can show that the tax is unpaid because of the taxpayer failing to take ‘reasonable care’, then the time limit is extended to six years from the end of the period in question.

Normal Time Limit And Six-Year Time Limit
The self assessment return for the tax year 2007/08 had to be filed by 31 January 2009. Assuming the return was actually filed on that day HMRC have until 31 January 2010 to enquire into the return.

If, however, they can show they have made a ‘discovery’ that tax has not been paid, they have until 5 April 2012 (four years after the end of the 2007/08 tax year) to make an assessment to collect the tax.

If they can show that the tax is unpaid because the taxpayer did not take ‘reasonable care’ with his or her 2007/08 return, however, they have until 5 April 2014 to make an assessment.

 

This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed.

Click here to receive a free copy of this tax saving guide today!

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