HMRC Raising Tax Assessments Out of Time
HMRC Raising Tax Assessments Out of Time
HMRC have strict time limits for raising tax assessments. Understanding these limits – and the exceptions to them – is essential for any taxpayer facing an unexpected assessment.
The Time Limits
- VAT assessments: HMRC have 2 years to raise a VAT assessment.
- Corporation Tax assessments: HMRC have 3 years to raise a Corporation Tax assessment.
These time limits apply unless HMRC can demonstrate that the taxpayer’s behaviour was deliberate. Where deliberate behaviour is established, extended time limits apply, giving HMRC significantly longer to issue assessments.
A Strategic Approach
A sound strategy is to challenge the penalty classification before contesting the assessment itself. This is because HMRC officers may be willing to reduce penalties from “deliberate” to “careless” if they believe the underlying assessment will stand regardless. By securing a reduction in the penalty classification, the taxpayer may simultaneously bring the assessment outside HMRC’s permitted time limits.
The Risk
Be aware that some HMRC officers raise deliberate penalties specifically to avoid time limit issues. If the behaviour is classified as merely careless, the normal time limits apply, and the assessment may be out of time. By classifying the behaviour as deliberate, the officer extends the window and protects the assessment.
This is why professional advice is critical when facing HMRC assessments that appear to have been issued outside the normal time limits. The classification of the taxpayer’s behaviour is often the key battleground.
Frequently asked questions
How long does HMRC have to raise a VAT or Corporation Tax assessment?
HMRC have 2 years to raise a VAT assessment and 3 years to raise a Corporation Tax assessment. These time limits apply unless HMRC can demonstrate that the taxpayer's behaviour was deliberate, in which case extended time limits apply and HMRC has significantly longer to issue assessments.
Can HMRC raise an assessment outside the normal time limits?
Yes, if HMRC can demonstrate that the taxpayer's behaviour was deliberate, as extended time limits then apply. If the behaviour is classified as merely careless, the normal time limits apply and the assessment may be out of time. The classification of behaviour is therefore often decisive.
Why might HMRC classify behaviour as deliberate?
Some HMRC officers raise deliberate penalties specifically to avoid time limit issues. By classifying the behaviour as deliberate rather than careless, the officer extends the window for raising the assessment and protects it. This is why the classification of the taxpayer's behaviour is often the key battleground.
Should the penalty or the assessment be challenged first?
A sound strategy is to challenge the penalty classification before contesting the assessment itself. HMRC officers may be willing to reduce penalties from deliberate to careless if they believe the underlying assessment will stand regardless, and that reduction may simultaneously bring the assessment outside HMRC's permitted time limits.
