Mark McLaughlin highlights a strange anomaly involving the difference between ‘careless’ and ‘deliberate’ behaviour in taxpayer errors.
Mistakes by taxpayers in tax returns are common but might go undetected until it is too late for HM Revenue and Customs (HMRC) to open an enquiry into the return within normal time limits.
However, HMRC may make a discovery assessment outside the normal enquiry ‘window’ broadly if HMRC can demonstrate that the taxpayer’s mistake was careless or deliberate (TMA 1970, s 29(4)) (N.B. there is an alternative condition, which is not considered in this article).
If a tax loss was careless, the normal time limit for HMRC to raise a discovery assessment is extended from four years to six years after the end of the tax year to which it relates. On the other hand, if the tax loss was deliberate, the discovery assessment time limit is