Old PAYE records

Thanks - so the same as other business records.

They are business records.....

"Simon" wrote

But 6 years from when? Eg details of April 2002 pay is now over 6 years old, but less than six years from the end of the 2002-03 tax year.

Also, I've never been too sure -- how many years can HMRC go back with self-assessment returns? The latest may be those which were due by 31/1/08, for tax year 2006-07; if HMRC opened an investigation into those (say) at the end of this (calendar) year, and went back a further 5 years (6 in total?), then they'd be looking at tax year 2001-02. That means you'd need to keep details of April 2001 income until after January 2009, a total of nearly EIGHT years!

It's three years from the start of the current tax year.

An enquiry must be started within a set timescale - the general rule being that Revenue and Customs have 12 months from the submission date of the return in question in which to commence an enquiry. (For returns for tax years up to 2006/07, the 12 month window ran from the filing due date.) However, by exception if the return is either:

- filed late; or

- amended (including the making of a claim after the tax return has been filed),

then the deadline is extended to the quarter day following the anniversary of the date the return (or amendment) was filed - the quarter days being 31 January, 30 April, 31 July and 31 October.

The normal time limit for making a discovery assessment is 5 years from 31 January following the end of the tax year to which it relates. This is extended to 20 years in respect of fraudulent or negligent conduct.

Time limits are likely to change at the next Finance Act.

They can raise an assessment up to 20 years from the 31 January following the tax year.

HMRC normally go back 6 closed years when looking into underpayments arising from negligence. However, they can go back 20 years if they can demonstrate willful neglect or fraud.

Simon, he was asking about SA.

Simon, S29 says they can go back 6 years full stop. Negligence or fraud is all that is needed for 20 years. Nothing willful needed.

From the enquiry manual:

Normal Time Limits Where there has been incomplete disclosure without fraudulent or negligent conduct, the time limit for making a discovery assessment on an individual is five years from 31 January next following the tax year to which it relates

Extended Time Limits Where there has been fraudulent or negligent conduct the time limit for making a discovery assessment is extended for an individual to 20 years from 31 January next following the tax year to which it relates. See EM3340+ for operational procedures.

It is a big mistake that people make that they think the revenue only goes back 6 years unless fraud is proven. This is not the case

I disagree with "nothing wilful is needed". See below.

Yes it is - pretty well. There is not an awful lot of difference between fraud and fraudulent conduct, and so the only sticking point lies in "negligent conduct". In any case, "fraudulent or negligent conduct" would need to be established (proven) before the time limits could be extended.

The phrase "incomplete disclosure without fraudulent or negligent conduct" clearly admits that it is possible to have made incomplete disclosure without having conducted oneself either fraudulently or negligently, yet clearly one would have failed to make complete disclosure. That indicates that "negligent" can only be interpreted to mean intentional failure to disclose, whilst unintentional failure would be insufficient to warrant going back further than 6 years. How do you prove intent?

"PeterSaxton" wrote

Thanks for that. What is the difference between an "enquiry" and a "discovery assessment"?

Negligent is defined as not doing something which a reasonable person would be expected to do.

So if for example somebody took professional advise on a specific transaction and on that advice completed his return. If it was later found that advice was wrong and he could not reasonably be expected to know it was wrong, then clearly there is no negligence, he acted as a reasonable person would.#

However, if he signs a return completed by his accountant where the turnover lower than he expected and did not question this, he would be negligent.

Sadly it is up to the TP to show he acted reasonably when signing the return.

Defined by whom? It's not an entirely satisfactory definition because it fails to make adequately clear whether intent is involved.

Well, that seems to go along with the notion that wilfulness would have to be involved, insofar as the person has to decide whether to act as a reasonable person would. It also seems to clarify that because a reasonable person is capable of making honest mistakes, then if you make an honest mistake (such as failing to disclose something, but with the failure being inadvertent rather than deliberate), this would not be considered negligent.

I don't understand the point of substance on which you consider these examples to differ. If he gets his return completed by his accountant, it seems to me that that falls under the heading of "taking advice", specifically, based on all the raw information the person has supplied to his accountant, the accountant's advice is "here's what you should put in your tax return".

Accordingly the examples are equivalent, and there has been negligence in neither of them.

That can't be right. If HMRC wish to accuse the TP of acting unlawfully, the onus is on them to prove it, not on the taxpayer to prove the opposite.

HMRC?s view is that there is no statutory definition of ?negligence?. HMRC therefore test negligence against what a ?prudent and reasonable man? would do when submitting a return (Blyth v Birmingham Waterworks Co (Ex D 1856, 11 781)).

Intent can never be known unless the TP willingly discloses it. It is based on his actions.

I clearly stated that the TP was aware the turnover had been understated. Just because he took advice does not remove the fact he should not have signed a return with a turnover lower than it should be.

Where has acting unlawfully come into this. I do not believe yet that anybody has successfully argued that the penalties are criminal rather than civil in nature.

It isn't "illegal" but it is "unlawful" in properly spoken English.

Enquiry is an old term now, it changed to an intervention in line with C&E but even that is now a thing of the past following the Varney Report. However, this is where an officer believes tha there is a a risk of an underpayment and opens an enquiry into a return or returns.

A Discover Assessment is ITSA or CTSA and where the discovery rules are used to make a formal assessment of an underpayment.

This is a failing of the HMRC manuals. The EM manual originally referred solely to IT and CT enquiries and there was seperate guidance in the AUD and NAG manuals. These were rewritten as the ECH and as it was expected that all enquiries should be run the same way, they made references to the EM in the ECH but never bothered to update the EM to take account of the different legislation.

S29 has absolutely nothing to do with PAYE records. They are the responsibility of the employer and are covered by the PAYE regulations.

"Simon" wrote

Which one (or is it both?) is done randomly, on the off-chance of finding an underpayment?