Bill
I don't think HMRC are bending over at all. I think that the officer here doesn't have a clue. If there were an open enquiry, why would the Officer ask the OP to amend the return, when that Officer should know the return cannot be amended during an enquiry. Indeed, if this was the crux of the enquiry, then why not simply issue a closure notice.
As for discovery, the Officer can only make an asessment to make good a loss of tax. s29(1) TMA 1970 is clear about this.
...the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.
There is no amount to assess and no loss of tax here. The gain, if there is a gain, is covered by losses. Losses do not need be claimed in order to be used - there is no option other than to use them if gain araises. HMRC are aware of the losses, therefore they cannot make an assessment to make good a loss of tax. The assessment would be invalid regardless of the technicalities as to whether there was a gain or not.
This is a case where HMRC had to open an enquiry within the time allowed. It seems that they did so, but HMRC have subsequently confused matters, first by saying that this was not an enquiry and then by asking the OP to amend his return. HMRCs remedy here is to issue a closure notice under s28A TMA.