Assessments: Taxpayers to wait 12 years for certainty

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HMRC is asking for up to 12 years in which to raise tax assessments relating to offshore income, gains or chargeable transfers. Phil Manley explains why this is unfair for taxpayers.


HMRC has issued a consultation document on extending the assessment time limit for cases concerning offshore income, gains or chargeable transfers. The new maximum time limit for HMRC to issue an assessment will be 12 years, which replaces the previous limits of four (ordinarily) and six years (where careless behaviour has been proven). In cases of deliberate behaviour, the current limit of 20 years will remain in place.

The reasoning provided for the requirement of the new time limits is stated by HMRC as: “This extension of time limits for offshore cases reflects the fact that it can take much longer for HMRC to establish the facts concerning offshore transactions, particularly when a complex offshore structure is involved”.

HMRC further states: “(the information needed in)…cases involving offshore jurisdictions can take longer to obtain compared to domestic cases”.

Taxes in scope

The extended time limit is to apply to all taxes within the scope for the Requirement to Correct, so IT, CGT and IHT will be impacted by the new legislation. Furthermore, HMRC will welcome views on applying the proposal to CT.

The intended commencement dates for the extension of the offshore time limits are from 1 April 2019 for IHT, and 6 April 2019 for IT and CGT. The extension will apply to any year that is still in date for assessment when the new legislation comes into effect.

The impact to the exchequer is negligible until 2021-22 when it becomes £5m, increasing to £10m in 2022-23 (Assessment of impacts in section 5 of consultation).

Reduced certainty

The obvious concern is that one of the most fundamental principles of the UK tax system is that taxpayers are entitled to certainty over their tax affairs, and any extension to an assessment time limit unquestionably reduces that certainty. At the introduction of the self assessment regime in 1996-97, parliament saw fit to include the safeguard of time limits for enquiries and assessments to provide this certainty.

Twelve years

The most worrying aspect of this consultation isn’t just that the assessment time limit has been extended, but the fact that it is now being set at 12 years.

To put that into perspective, HMRC is stating that to enable them to ‘gather the information needed to understand the tax at risk….’ it may take them up to the length of time it will take my three-year-old daughter to start primary school, complete her entire primary and higher education, complete her GCSEs and start looking for a college or enter work.

Now I’m certainly not disagreeing with the statement HMRC issued alongside this consultation document when they say: “it is right and fair that everyone pays all the tax they owe, including on offshore income, gains and chargeable transfer.” I, like most people, strongly agree with this comment.

My concern, however, lies with the thought that, if the reasoning for this new time limit is to be accepted and it is due to offshore matters taking longer to gather, then surely the correct and more useful approach would be to address the processes used to gather this information?

This is somewhat amplified by HMRC’s rather contradictory claim within the consultation document that: “The UK has long been leading the way in tackling these issues in collaboration with other jurisdictions”.

Non-deliberate errors

Keeping in mind that these new assessment time limits will only apply to cases where non-deliberate errors may have arisen, then is it fair to shift this burden of uncertainty onto the taxpayer? There is nothing in HMRC’s consultation document about the time limit for a taxpayer to make a claim being extended in line with the new proposals, which seems unequal in terms of fairness.

Impact on taxpayers

I hope that HMRC will reconsider the detrimental impact that such uncertainty can bring to taxpayers’ lives. You only need to speak to the people that have recently discovered they are to unexpectedly receive a 2019 Loan charge in respect of income going back to 1999 to realise just what effect this can have on their mental health.

For that reason alone, I must hope that this isn’t the beginning of the end with regards to time limits for tax assessments. 


As this is a consultation on the draft law, HMRC is open to comments. You can send your comments by email to [email protected] or post them below, and AccountingWEB will make a response on your behalf. 

About Phil Manley

Phil Manley

Phil Manley spent 14 years at HMRC as an inspector in large business before being a senior technical specialist in the counter avoidance team dealing with the APN regime.

After spending a couple of years in the Big Four he has, in partnership with ex-partners from other Big Four firms, established DSW Tax Resolution, to offer a leading tax investigations service.


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13th Mar 2018 11:51

You can of course expect the usual supine response on this from our professional bodies, who are supposed to support the taxpayer, not HMRC and at least it's nice to see an ex Inspector telling us all how it really is these days with HMRC.

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By gordo
13th Mar 2018 13:15

Is HMRC just trying to get in its excuses now for why it has failed to raise assessment on Employers now caught by the Rangers tax case, a case HMRC has been arguing for many years, but where HMRC have failed to issue in time assessment and also its excuses for failing to take action on Contractor cases that it has been investigating for a decade and where HMRC now hopes to cover its mistakes with a retrospective 2019 Loan Charge. By getting in their pre-emptive excuses now, when the backlash comes and people are being made bankrupt and hit with a retrospective tax charge, HMRC can then argue that they should always have had 12 years anyway and this new law will be shown to support them in that claim.

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14th Mar 2018 11:11

HMRC are getting increasingly slap dash and desperate. Allowing a 12 year assessment period just means that they will be even more slap dash and desperate.

The suggested tax take for 2022-23 is just unbelieveable. HMRC and the treasury can't get it nearly right one year ahead so this looks like a pure guess.

What concerns me most is that instead of sorting out the current mess HMRC are just trying to justify having an even longer period to make a mess.

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14th Mar 2018 12:20

HMRC are increasingly relying on the fact, that the burden of disproving an assessment they have raised, lies with the taxpayer. The further back you go, the less likely the information to demonstrate HMRC got it wrong, made it up or just had a wild guess, will be available.

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14th Mar 2018 13:03

As I understand it the Data Protection Regulations state that we should keep records for no more than five years, unless there is good reason to keep them longer (and we have client permission), thus making it even more difficult for us to deal with enquiries from HMRC.

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14th Mar 2018 13:07

On another forum, I posted this when the consultation came out in February about 3 weeks ago. And I received no reply from forum members :S

What do you guys think of this?

In any event, HMRC is able to raise protective assessments up to last 6 tax years from the year in which they inquire into any tax return or when a disclosure is made.

Do you buy their reason below?! I think they are either trying to cover their inefficiency and incompetence or obviously trying to get away with the fact that they are not happy with 6 year limit for offshore matters. :roll_eyes:

HMRC is extending the time limit because it can take much longer to establish the facts about offshore transactions, particularly if they involve complex offshore structures. More time is needed to address situations where the current assessment time limits of 4 and 6 years for offshore non-compliance are not long enough to establish the facts, and determine and assess the amount of tax due.

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14th Mar 2018 13:42

I think these proposed measures are to cover the inefficient investigation processes and lack of sufficient wide ranging and competent tax expertise in HMRC. As with comments in above about Rangers case and Loans, HMRC can't even assess a case where all the evidence and calculations are presented to it where tax underpaid was deliberate and concealed.

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By Char
14th Mar 2018 14:31

What would be best all round is simplification of the tax system! HMRC would no longer need the time they have stated and taxpayers aren't at risk. Pretty simple!

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14th Mar 2018 15:00

They off course will take 11 years and 11 months to then ask you to respond within 30 days.

Why do they think it takes 12 years to get a response from overseas or other Institutions. Even 6 years is a bit much.

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By raycad
14th Mar 2018 23:01

This is nothing whatsoever to do with the length of time these things take. It is quite simply just a further signal to "offshore tax avoiders/evaders" that HMRC are going to treat them as a special class of offender. It's entirely on all fours with the introduction of a maximum 200% penalty for tax due where there has been pretty well any offshore element. To keep the analogy going: "Bad dog! Very bad dog!!"

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15th Mar 2018 16:25

To keep the tax scales balanced, will HMRC also extend the time limits for overpayment relief? Don't hold your breath!

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