Tax Credits: Discovery
This section of the website provides information about HMRC’s powers of discovery. The material in this part of the website was written by the Low Incomes Tax Reform Group.
Discovery powers are set out in Section 20 Tax Credits Act 2002. They allow HMRC to get a second bite of the cherry after the period allowed for opening an enquiry has expired. The circumstances within which this can occur are very limited.
HMRC may re-open a tax credits award if the claimant's income tax liability is 'revised', but must do so within one year of the income tax revision, and can only do so if the enquiry window has passed. This process is known as 'discovery'.
An income tax decision is revised if a SA return is amended, whether by the taxpayer or by HMRC, and whether during or following an enquiry or independently of any enquiry; or if HMRC raises an assessment to make good a loss of tax; or vacates an assessment or return; or grants error or mistake relief; or an appeal is settled following any of the above.
Alternatively, if HMRC have grounds for believing that a tax credits decision is wrong owing to fraud or negligence by the claimant or any person acting for the claimant, they can re-open an award within five years after the end of the year to which it relates.
More information about Discovery can be found in the HMRC compliance manual.
Published 24 March 2011