Anthony Greenwood explains the process of disclosing tax errors in relation to a deceased taxpayer
Where a taxpayer has died leaving unresolved errors in their tax affairs, different rules dictate the way in which they should be corrected, the periods that require correction, and the time limits under which HMRC must issue assessments. These rules are outlined below.
You may be familiar with the method by which historical errors in a taxpayer’s affairs should be corrected and the time limits that will apply, but many people are unaware of the differences where the taxpayer concerned is deceased.
Standard rules
The standard time limits for HMRC raising assessments (and consequently the years that require disclosure) where tax returns have been filed incorrectly are four tax years (s.34 Taxes Management Act ‘TMA’ 1970) where an individual has taken reasonable care, six tax years where the individual has failed to take reasonable care, and 20 tax years where they have acted deliberately (s.36 TMA 1970).
Where the errors concern an offshore matter, these time limits are extended to 12 years (s.36A TMA 1970), although currently they are limited to tax year 2015/16 for reasonable care and 2013/14 for a failure to take reasonable care.
Where an individual has failed to notify HMRC of chargeability (essentially failed to file a tax return) the time limit is four tax years if the individual has a reasonable excuse for the failure, or 20 tax years if they do not, regardless of behaviour (although this can be limited to tax year 2009/10 onwards if the individual has not been negligent).
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