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Can HMRC make an Assessment if no tax to pay?

hombre contento
Posts: 6
Joined: Tue Oct 03, 2017 10:22 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby hombre contento » Sun Oct 08, 2017 10:02 pm

Thank you very much to all who have commented so far and in particular to SteLacca and bd6759 for their helpful conversation.

Firstly, to answer SteLacca's question, I am reluctant to change the tax return for exactly the reasons given by bd6759. Firstly, I'm not sure I either can or am obliged to. Secondly, in my opinion, PPR relief should be due but is being contested by HMRC and I don't have the time or resources to go to Tribunal, but that doesn't mean i agree with their view. Thirdly, although no tax is due now, the carried forward losses are valuable and I'm sure I will use them in the next few years, plus the sum involved is material so not something to be given up lightly.

The point I would like to pick up is bg6579's which states that, although its too late for an Enquiry, an Assessment could be raised. You state: "HMRC can make an assessment under s29. They will assess the gain without giving any losses. On appeal, either the gain will be nil (if PPR is due), or losses will be utlised to reduce the gain to nil. If there is a gain, the PLR will be 10% of the losses that were utilised."

This is the key point i want to test. I was told they can't make an Assessment if no tax is due IN THAT SPECIFIC YEAR. But the wording above suggests it is your view that the absence of tax due in that specific year does not prevent an Assessment from being made. And presumably, that Assessment WOULD give them the right to change my tax return, which they can't do now because of having missed the deadline for an Enquiry? Am I reading that correctly?

Also, to bg6579, you suggest later on writing to them to ask them to follow the correct procedure. Could you elaborate on what you think that would be based on the facts as stated?

Many thanks indeed for your much appreciated contributions.
Hombre Contento.

SteLacca
Posts: 253
Joined: Fri Aug 07, 2015 2:17 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby SteLacca » Tue Oct 10, 2017 1:45 pm

The problem that you meet is, even if you are denying HMRC the opportunity to assess now, they are aware of the situation and their own view.

If they let it go now, the first time that you try to utilise those losses is likely to result in an enquiry, and since you will, at that point, gain a tax advantage, and since HMRC will be aware that you are aware there is a dispute, the inaccuracy (assuming that you don't successfully appeal their position) will be deemed to be deliberate, with all the attached penalties that brings. If the behaviour is deliberate, suspension of penalties will not be an option.

You will simply defer the inevitable and, probably, invite penalties that would not otherwise be payable.

At least agreeing with them now there is no immediate cost and you eliminate the future risk.

bd6759
Posts: 2284
Joined: Sat Feb 01, 2014 3:26 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby bd6759 » Tue Oct 10, 2017 6:50 pm

hombre contento wrote:Also, to bg6579, you suggest later on writing to them to ask them to follow the correct procedure. Could you elaborate on what you think that would be based on the facts as stated?

An assessment doesn't change a tax return. As previously stated, your tax return and self-assessment (they go hand in hand) are final and cannot be amended by anyone. An assessment creates a tax charge that is in addition to the amount self-assessed.

I really do not know the correct answer to your question. I suggested earlier that HMRC could raise an assessment without giving relief for the losses brought forward. That would leave you to appeal the assessment and then, if PPR is not due and a gain does in fact arise, use your losses to reduce the gain. However, I am not wholly persuaded that would be correct.

As I suggested before, I'd simply tell HMRC that you are able to amend the return because the time limit for doing so has passed (s9ZA TMA 1970) meaning any such amendment would be invalid, and they are unable to amend the return under s28A because they have not given notice of enquiry under s9A. Ask them to tell you what they consider the correct procedure to be. It puts the ball firmly in their court to set out the correct position as they see it.

hombre contento
Posts: 6
Joined: Tue Oct 03, 2017 10:22 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby hombre contento » Wed Oct 11, 2017 7:46 pm

Thank you very much to both of you for your most helpful views. It seems clear that the first issue that needs to be clarified is whether this is a valid Enquiry or not, as everything else follows from the answer to that question. From your answers, it does seem a somewhat grey area as to how an assessment could be made, although in both cases it seems you are of the view that it would be, somehow or other. Regarding how to respond, as per bd6759's suggestion, it seems there is little to be lost and it is entirely appropriate to start by clarifying the correct procedure to follow. We can get onto the technicalities of what next once we hear their response. Unless you have any thoughts to the contrary, I will do that and let you know when I hear back. Once again, many thanks for your help.

robbob
Posts: 2419
Joined: Wed Aug 06, 2008 4:01 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby robbob » Wed Oct 11, 2017 8:22 pm

hombre contento - Here is a link with further information (normal caveats apply with random weblinks !!!) with regard to hmrc's ability to raise discovery assessments - probably worth a read to see how relevant the various examples/comments are to your circumstance.


http://www.rossmartin.co.uk/penalties-a-compliance/compliance/1880-discovery-assessment-time-limits

hombre contento
Posts: 6
Joined: Tue Oct 03, 2017 10:22 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby hombre contento » Thu Oct 12, 2017 8:57 am

One further question to bd6579. Let's assume HMRC accepts they were too late to challenge this tax return. However, when I fill in next year's tax return, I will need to put on the CGT section the losses that I am taking forward. So, if i submit my return with the higher level of losses, could HMRC issue an Enquiry and challenge that figure within the timescale for that tax return, and thereby effectively end up in the same place? Maybe we are missing the point about whether or not an assessment can be issued this year if the simpler option is just to wait till next year and raise the issue then via the Self-Assessment process. The argument against that approach would go back to what you said about the tax return being final once closed. Interested to hear your views.

SteLacca
Posts: 253
Joined: Fri Aug 07, 2015 2:17 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby SteLacca » Thu Oct 12, 2017 9:54 am

That is exactly the point that I have been trying to make. Not that your actions now leave you exposed to penalties, but that HMRC will enquire when you utilise those losses, and that is the Return that will contain deliberate inaccuracies.

hombre contento
Posts: 6
Joined: Tue Oct 03, 2017 10:22 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby hombre contento » Thu Oct 12, 2017 3:24 pm

Thanks SteLacca, your point is well made. One small clarification: do you think they will enquire only when i actually utilise those losses (which could be a few years away) or next year when I carry forward a larger loss than they would agree with?

bd6759
Posts: 2284
Joined: Sat Feb 01, 2014 3:26 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby bd6759 » Thu Oct 12, 2017 10:34 pm

SteLacca wrote:That is exactly the point that I have been trying to make. Not that your actions now leave you exposed to penalties, but that HMRC will enquire when you utilise those losses, and that is the Return that will contain deliberate inaccuracies.
Sorry, but that is simply wrong. If the losses have not been previously used, there will not be an inaccuracy, let alone a delibnerate one. It is for HMRC to show that a gain has been made and the losses have been used. If they fail to do this before the next return is submitted, the return will be correct and the point that is submitted.

bd6759
Posts: 2284
Joined: Sat Feb 01, 2014 3:26 pm

Re: Can HMRC make an Assessment if no tax to pay?

Postby bd6759 » Thu Oct 12, 2017 10:35 pm

hombre contento wrote:One further question to bd6579. Let's assume HMRC accepts they were too late to challenge this tax return. However, when I fill in next year's tax return, I will need to put on the CGT section the losses that I am taking forward. So, if i submit my return with the higher level of losses, could HMRC issue an Enquiry and challenge that figure within the timescale for that tax return, and thereby effectively end up in the same place? Maybe we are missing the point about whether or not an assessment can be issued this year if the simpler option is just to wait till next year and raise the issue then via the Self-Assessment process. The argument against that approach would go back to what you said about the tax return being final once closed. Interested to hear your views.

Have you previously notified these losses to HMRC? Are they aware of them?


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