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HM Revenue and Customs Brief 16/10


HM Revenue and Customs -Tax Authorities

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Issued 19 March 2010

Changes to time limits for assessments and claims


The compliance checks legislation introduced a new normal four year time limit for assessments and claims, from 1 April 2010, in schedule 39 of the Finance Act 2008.

Initially this affects:

  • Capital Gains Tax
  • Corporation Tax
  • Income Tax
  • PAYE
  • VAT

Aligning these time limits where possible reduces compliance costs for customers and makes our compliance checks easier.

The new time limits come into effect on 1 April 2010 for direct taxes. The normal time limits for these taxes are decreasing from six years, or five years from the 31 January immediately following the tax year, to four years.

The new time limits came into effect on 1 April 2009 for VAT because the normal time limits for VAT are increasing from three to four years. There are transitional provisions for VAT. These provisions prevent out of time periods from coming back in time by disregarding a prescribed accounting period that ends on or before 31 March 2006. This means that by 1 April 2010 the four year time limit for VAT assessments will apply in full.

The new time limits apply to assessments and claims for the above taxes that are made after these dates regardless of the period the assessment or claim relates to.

Repayment claims Ė Self Assessment and PAYE

We don't want our customers to miss out on claiming back any money that they are entitled to. Self Assessment or PAYE taxpayers need to be aware that the deadlines to send in their claims are changing from six to four years.

Most people claim what they are entitled to in the year they make their Self Assessment tax return. However, if their circumstances change they may be entitled to claim back tax they paid in earlier years.

The deadlines are particularly urgent for Self Assessment taxpayers who sent us a Self Assessment tax return for the 2004-05 or 2005-06 years, and need to make a claim for these years. These claims need to be with us by 31 March and 5 April 2010 respectively.

For people outside of Self Assessment, the new time limits for repayment claims donít take effect until 1 April 2012. Their claims for 2004-05 and 2005-06 can still be made up to 31 January 2011 and 31 January 2012 respectively.

See more information for PAYE and SA taxpayers.

Changes to assessment time limits

The new limits from 1 April 2010 for Capital Gains Tax, Corporation Tax, Income Tax, and PAYE are:

  • Normal time limit - four years
  • Careless behaviour - six years
  • Deliberate behaviour - 20 years

from the end of the relevant tax period.

The new limits from 01 April 2010 for VAT assessments and claims are:

  • Normal time limit - four years
  • Careless behaviour - four years
  • Deliberate behaviour - 20 years

from the end of the relevant tax period.

In particular, HMRC will no longer have 20 years to assess where a tax loss was attributable to negligent conduct which now equates to careless behaviour. However the 20 year time limit will still apply to cases of failure to notify, and certain failures in respect of tax avoidance schemes.

The new time limits do not affect:

  • periods already out of date under the old time limits
  • the time limits for making enquiries into SA or CTSA returns
  • the time limits for making penalty determinations for direct tax
  • the time limits for assessing Class 1, 1A and 2 National Insurance Contributions, or
  • the two-year rule and the evidence of facts rules for VAT assessments

While the normal time limit for most assessments and determinations will be four years from the end of the relevant tax period, there are however many variations from this norm. The tables of time limits in the appendices of the Compliance Handbook give a full summary

For more information see the Compliance Handbook chapter 50000.

Further indirect tax changes

For Indirect Tax the Finance Act 2009 schedule 51 introduced a new normal four-year time limit for assessments and claims, from 1 April 2010.This affects:

  • Aggregates Levy
  • Climate Change Levy
  • Insurance Premium Tax
  • Landfill Tax

The new limits from 1 April 2010 for the above taxes are:

  • Normal time limit - four years
  • Careless behaviour - four years
  • Deliberate behaviour - 20 years

from the end of the relevant tax period.

The time limit for assessments and making claims was therefore increased with effect from 1 April 2010 from three years to four. However, in order to ensure that accounting periods that were out of time on 31 March 2010 are not brought back in time by the change, transitional arrangements have been put in place.

The technical guidance in the Compliance Handbook will be updated in due course to cover these further changes.

About the Author

© Crown Copyright 2010.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2010-06-14 12:01:34 in Tax Articles

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