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Hi

First post - bit of a theoretical point that intrigues me -

HMRC guidance states that for a Person carrying on a trade, profession or business they should keep their records for at the latest 6 years after the return was made.

Given this fact - if they were to raise a discovery request for longer than 6 years ago (say 8 years ago) by its definition the taxpayer would not need to have kept records for that year - I.e they would not be required to have the info/records to answer the discovery request made by HMRC.

What happens in this sort of situation?

Taxpayers not obliged to have records so would not nor could not be expected to provide evidence for the discovery. Are HMRC asking for details they know the taxpayer may not have?

Any thoughts/comments much appreciated.

Requests for documents etc more than 6 years old are restricted to situations where fraud is suspected. When you get your request please give me a call for specialist advice

Thanks for the reply wamstax

I guess any deliberate omission would be classed as fraud. So if a self employed plumber didn't declare a £2k cash in hand job he did 8 years ago that is a fraud as he deliberately didn't declare an income he received.

Would that type of action constitute fraud and warrant discovery beyond 6 years or is there a deminimus that hmrc would need to justify the time/resource in going back beyond 6 years?

Thanks

HMRC do have access to a substantial amount of information and therefore were they to challenge outside of the enquiry window (12 months from the month end of the date of filing a tax return) or within or outside the four year discovery window, it is probable that they have information in support of any omissions. HMRC have powers to impose penalties (of up to 200% of the tax at stake) should they be successful.

There is no de-minimis.

If there has been an omission, immediate full disclosure should be made to HMRC with a payment on account to cover any unpaid tax and late payment interest and late payment surcharges. On the basis that HMRC seek to impose penalties, you should seek to mitigate these as far as possible by negotiating these with HMRC.