Lee Sharpe notes that when HMRC states it has discovered that tax has been underpaid, HMRC is often quite wrong.
Under the self-assessment regime, HMRC is supposed to get just one opportunity to enquire into a tax return, and a limited timeframe in which to do so (e.g., TMA 1970, s 9A).
However, HMRC has been granted wide powers to ‘discover’ that tax has been underpaid, and assess accordingly outside the enquiry regime. To summarise TMA 1970, ss 29-36 for brevity:
An inspector must discover an insufficiency of tax assessed that is caused by either:
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the taxpayer’s having in turn either –
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acted carelessly (in which case the inspector has up to six years to raise an assessment); or
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has deliberately brought about a loss of tax (in which case the inspector has up to 20
