HMRC Tax Assessment Time Limits and Discovery Assessments

HMRC can normally go back four years from the end of a tax year to assess underpaid income tax or capital gains tax. That window extends to six years where the underpayment was caused by careless behaviour, twelve years where it involves an offshore matter, and twenty years where the loss of tax was deliberate or where you failed to notify HMRC of a liability at all. These HMRC tax assessment time limits are set by the Taxes Management Act 1970 and sit alongside a separate power, the discovery assessment, that lets HMRC reopen years after the standard enquiry window has closed.¹

The Four-Year Baseline

Section 34 of the Taxes Management Act 1970 gives HMRC four years from the end of a tax year to assess income tax or capital gains tax it considers underpaid.² The clock starts on 5 April, when the UK tax year ends, not on the date you filed your return. For the 2024/25 tax year, which ends on 5 April 2025, the standard deadline for HMRC to raise an assessment is 5 April 2029.

Once that window closes, HMRC is generally barred from issuing a new assessment for that year. The four-year figure assumes you took reasonable care with your return and that nothing about your affairs pulls you into one of the extended windows below.

Six Years for Careless Behaviour

Where an underpayment was brought about carelessly by you or someone acting on your behalf, HMRC has six years from the end of the tax year to assess.¹ Carelessness means failing to take the care a reasonable person would take in similar circumstances. In practice it covers things like forgetting to include a source of income you knew about, failing to keep adequate records, or ignoring instructions in HMRC’s guidance notes.

The burden of proof sits with HMRC. If HMRC wants the six-year window, it has to show your behaviour actually was careless rather than simply asserting it.³

Twelve Years for Offshore Matters

Since the 2015/16 tax year, a twelve-year window applies where underpaid income tax or capital gains tax involves an offshore matter or offshore transfer that makes the lost tax significantly harder for HMRC to identify.⁴ The point that catches people out is that carelessness is not required. If you held offshore investments and simply failed to report the income through an honest mistake, HMRC still gets twelve years instead of four.

Two exceptions narrow the reach. If HMRC had already received overseas information before the normal four- or six-year limit expired that should have alerted it to the lost tax, the twelve-year extension does not apply. And if the behaviour was deliberate rather than careless or innocent, the twenty-year limit takes over. Inheritance tax involving offshore matters also carries a twelve-year limit, calculated from the later of the date the last payment was accepted or the date the tax became due.⁵

Twenty Years for Deliberate Loss and Failure to Notify

Four situations open a twenty-year window, measured from the end of the tax year in question:¹

Deliberate tax loss, where you or someone acting on your behalf made a conscious choice to understate income, overstate deductions, or hide taxable amounts.
Failure to notify, where you became liable for tax (for example, you started a business or received taxable income) and never told HMRC.
Failure to disclose a tax avoidance scheme that should have been reported under the Disclosure of Tax Avoidance Schemes (DOTAS) rules.
Failure to notify a promoter reference number under the Finance Act 2014.

All four carry the same twenty-year window. As with the six-year limit, HMRC has to produce evidence that your behaviour meets the required standard before it can rely on this extension.

Inheritance Tax Runs on a Different Clock

Inheritance tax time limits do not run from the end of a tax year. They run from the date of payment or the date the tax became due.

Where an account has been delivered and the tax paid in full, HMRC has four years to raise an assessment, extending to six years for careless behaviour and twenty years for deliberate behaviour.⁵ Where no account was delivered, or where a chargeable asset was left out of the account entirely, HMRC gets twenty years from the date of the chargeable transfer. If the omission was deliberate, there is no time limit at all. Inheritance tax is one of the few areas where HMRC’s power to assess can genuinely be unlimited, and executors and personal representatives should treat it that way.

Corporation Tax and VAT

Companies face the same four-year baseline under Schedule 18 of the Finance Act 1998, but the period runs from the end of the accounting period rather than the tax year.⁶ The six-year and twenty-year extensions for careless and deliberate behaviour apply to companies in the same way they apply to individuals.

VAT is on separate legislation. Under the Value Added Tax Act 1994, HMRC must generally issue a VAT assessment within four years of the end of the relevant accounting period.⁷ A separate provision allows HMRC to issue an assessment up to one year after it obtains evidence sufficient to justify one, even where that falls after the two-year mark referenced in Section 73(6). Experience with income tax time limits does not translate cleanly to VAT.

Discovery Assessments: How HMRC Reopens Closed Years

HMRC has two distinct ways to challenge the figures on your return. The first is a formal enquiry, which HMRC must open within twelve months of receiving your return if it was filed on time.⁸ If HMRC does not open an enquiry in that window, the return becomes final for enquiry purposes.

The discovery assessment is the fallback. It lets HMRC raise a new assessment after the enquiry window has closed, provided it can point to a valid “discovery” and the assessment falls within the applicable time limit set out above. Under the Taxes Management Act 1970, a discovery arises when an officer forms the view that tax has been under-assessed, income has gone unassessed entirely, or a relief was given that should not have been. The trigger is the officer’s new awareness, not a tip-off or a smoking gun. An officer reviewing existing papers and realising for the first time that the figures do not add up can qualify.

The threshold is lower than many taxpayers expect. The officer does not need certainty about the shortfall or a precise figure. A reasonable belief that an insufficiency exists is enough. A fresh officer looking at the same file and reaching a different conclusion from a predecessor can also constitute a new discovery, provided the conclusion is genuinely new rather than a change of mind about something already understood.

When a Discovery Assessment Is Blocked

Where you filed a return and the enquiry window has passed, HMRC can only raise a discovery assessment if one of two conditions is met. Either the loss of tax was caused by your careless or deliberate behaviour, or a hypothetical officer reviewing the information you made available could not reasonably have been expected to spot the underpayment at the time.

The hypothetical officer test is the main safeguard for taxpayers who were transparent in their filings. It assumes a competent officer with general tax knowledge but no niche expertise. If the information in your return and supporting documents was detailed enough for such an officer to identify the issue, the discovery assessment is barred. The Court of Appeal confirmed in Langham v Veltema [2004] EWCA Civ 193 that this is an objective test: what matters is whether the information you provided was sufficient, not whether anyone at HMRC actually looked at it.

Information counts as “made available” if it appeared in your return for the relevant period, in any claims you filed for that period, in documents produced during an enquiry, or if a competent officer could reasonably have inferred the relevant facts from what you did provide. Written notifications you sent to HMRC also count. The practical takeaway is simple. The more disclosure you include in your return and its supporting documents, the harder it becomes for HMRC to reach back with a discovery assessment years later.

How Long to Keep Your Records

The time limits above only matter if you can defend the figures on your return when HMRC comes back to them. Self-employed individuals must keep records for at least five years after the 31 January filing deadline for the relevant tax year.⁹ If you file more than four years after the deadline, the retention period extends to fifteen months after you actually submit.

These minimum periods assume everything on your return is accurate and that HMRC does not suspect carelessness or deliberate error. Five years will not cover you if your situation falls into the six-year, twelve-year, or twenty-year windows. For most taxpayers, six years of records is a sensible minimum. For anyone with offshore income, complex tax planning, or a history of late or amended returns, keeping records for at least as long as the longest time limit that could apply is the only reliable defence.

1
Legislation.gov.uk. Taxes Management Act 1970 – Section 36
2
Legislation.gov.uk. Taxes Management Act 1970 – Section 34
3
HM Revenue & Customs. Compliance Handbook – CH54300 – Assessing Time Limits: Onus of Proof and Level of Proof
4
HM Revenue & Customs. Compliance Handbook – CH53510 – Assessing Time Limits: 12 Year Time Limit for Offshore Matters and Offshore Transfers
5
HM Revenue & Customs. Compliance Handbook – CH56800 – Assessing Time Limits: Tables of Time Limits
6
Legislation.gov.uk. Finance Act 1998 – Schedule 18
7
Legislation.gov.uk. Value Added Tax Act 1994 – Section 73
8
HM Revenue & Customs. Self Assessment Manual – SAM31100 – Enquiry Window
9
GOV.UK. Business Records If You’re Self-Employed – How Long to Keep Your Records