Mark McLauglin looks at the time limits for HMRC to collect inheritance tax underpayments.
Taxpayers generally seek finality in their tax affairs as soon as possible, so that they need not worry about unwelcome HMRC enquiries and the possibility of unexpected tax liabilities.
The tax system provides some degree of finality, including time limits for HMRC to issue tax assessments. For example, for income tax and capital gains tax (CGT) purposes, there are four main time limits for HMRC to issue assessments:
• a normal time limit of four years after the end of the tax year to which it relates (TMA 1970, 34(1));
• a six-year time limit where a loss of tax has been brought about carelessly;
• a 12-year time limit where the lost tax involves an offshore matter or an offshore transfer which makes the lost tax significantly harder to identify (TMA 1970, s 36A); and
• a 20-year time limit where the taxpayer brought about the loss of tax deliberately (TMA 1970, s 36(1), (1A)).
There are also four, six and 20-year assessment time limits for corporation tax purposes (FA 1998, Sch 18, para 46).
Aside from discovery, it is sometimes overlooked that where a taxpayer fails to notify HMRC of chargeability to income tax or CGT, the time limit is 20 years after the end of the relevant tax year; the normal four and six-year time limits do not apply (TMA 1970, s 36(1A)(b)).
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