No returns filed

[shotokan]

A friend has recently died and had not filed tax returns since 2003-04. A determination was made for 04-05 and this cannot now be displaced. However, no determination was made for 05-06 (the amount charged was simply the payments on account based on the 04-05 determination) nor for 06-07. As both these years are out of time for displacing a determination, given that none were made, can the Revenue assess my deceased friend based on his actual returns for both years?

In short, if they didn't bother to make determinations for the two later years, which are now out of time for amending, is that HMRCs problem? Surely, if a determination cannot now be displaced, can they use actual figures in the same way?

All comments are appreciated.

[mullet]

CH54200
Any assessment of the deceased’s liability for periods up to and including the date of death must be made within 4 years of the end of the year of assessment in which the person died.

Any assessment on the personal representatives to recover any tax lost as a result of (a) the careless or deliberate behaviour of the deceased (or another person acting on behalf of the deceased whilst they were alive), or (b) the failure of the deceased to notify chargeability to income tax and capital gains tax may only be made for a year of assessment that ended not earlier than 6 years prior to the date of death.

So in your case the following applies based on a late 2011 date of death:

HMRC must make any assessments by 5 April 2016.
Assessments for tax lost because of careless/deliberate behaviour or failure to notify chargeability can be made back to the year 2005-06. So if either condition is satisfied HMRC can assess income or gains for 2005-06 and 2006-07, as long as such assessments are made (not necessarily made or finalised in agreed figures) by 5 April 2016.

[wamstax]

But of course there would also have to be a discovery that profits had been underassessed in the first place. If returns had not been filed and HMRC did not have any information beyond that available when they made the determination then there would be no discovery

[mullet]

But of course there would also have to be a discovery that profits had been underassessed in the first place. If returns had not been filed and HMRC did not have any information beyond that available when they made the determination then there would be no discovery

The information within the returns (which appear to have been completed/submitted but not processed through being out of time) could lead the Inspector to make a discovery. The legislation then dictates whether or not the Inspector can act on that discovery. The word "discovery" is interpreted as "finds out, satisfies oneself, has reason to believe".

The OP's question was "can the Revenue assess my deceased friend based on his actual returns for both years?" If the FA 2008 rules are satisfied to enable the Inspector to act on the discovery (assuming that the returns do indeed show either unassessed income or excessive relief) then yes, HMRC can assess.