Self-Assessment & Income Tax Dispute Solicitors — Enquiries, Discovery Assessments, and Closure Notices

An aspect enquiry (TMA 1970 s.9A(4)) is limited to one or more specific aspects of the return — for example, a particular income source, a deduction, or a capital gain. HMRC must specify the aspect under enquiry, and the enquiry is restricted to that aspect unless HMRC issues a notice widening the enquiry to a full enquiry. A full enquiry covers the entire return. In practice, an aspect enquiry may widen into a full enquiry if HMRC's investigation of the specified aspect raises further questions. A solicitor ensures that HMRC's enquiry is kept within its proper scope — and challenges any attempt to widen the enquiry without proper grounds.

A taxpayer can apply to the First-tier Tribunal (Tax Chamber) for a direction requiring HMRC to issue a closure notice (TMA 1970 s.28A(4)). The Tribunal must give the direction unless it is satisfied that HMRC has reasonable grounds for not issuing a closure notice. In practice, HMRC must show that it is actively pursuing the enquiry and has a reasonable justification for keeping it open. A closure notice application is a powerful tool where HMRC has been sitting on an enquiry without progress — it forces HMRC to either close the enquiry or explain its continuing justification to the Tribunal. A solicitor prepares and files the application and manages the Tribunal hearing.

A discovery assessment (TMA 1970 s.29) is raised after the 12-month enquiry window closes and allows HMRC to assess additional tax where it "discovers" an underpayment. For the assessment to be valid: (1) an officer must have made a discovery — i.e. formed the view that there is an insufficient assessment; (2) the officer could not have been expected to be aware of the loss of tax from the information available when the enquiry period ended; and (3) the assessment must be raised within the applicable time limit (4 years — non-deliberate; 6 years — careless; 20 years — deliberate or offshore). The second condition is a significant protection: if the return disclosed sufficient facts, a discovery assessment may be invalid — a solicitor advises on this specific issue.

Inaccuracies on a self-assessment return can attract penalties under FA 2007 Sch 24. Where the error was made by an agent (accountant), it is treated as the taxpayer's own error for penalty purposes — the taxpayer is responsible for the accuracy of their return even when it is prepared by an agent. However, the fact that the error was the agent's rather than the taxpayer's may mean it is "careless" rather than "deliberate" — attracting a lower penalty rate (0–30% rather than 20–70%). HMRC may also reduce the penalty for prompted disclosure. A solicitor advises on whether a reasonable excuse exists, challenges the penalty rate, and pursues a claim against the negligent accountant separately.

Once the 12-month enquiry window has closed, HMRC cannot open a formal s.9A enquiry into that return. HMRC can only raise a discovery assessment under s.29, subject to the time limits: 4 years from the end of the tax year for non-deliberate underpayment; 6 years for careless conduct; and 20 years for deliberate conduct or offshore non-compliance. HMRC frequently attempts to raise discovery assessments in the 6-year or 20-year window — a solicitor analyses whether the conditions for a valid discovery assessment are met, and challenges assessments that are outside the applicable time limit or that do not satisfy the statutory conditions.