Free UK HMRC Discovery Assessment Appeal Letter Template

HMRC Discovery Assessment Appeal

TMA 1970 Section 29 Appeal  ·  20 May 2026

Dear Sir or Madam,

I write as an individual Self Assessment taxpayer to appeal against the discovery assessment issued under section 29 of the Taxes Management Act 1970 by letter dated 2 May 2026 (HMRC reference DA-2026-118-994-CAM). The assessment relates to the tax year 2021/22 and HMRC has applied the 6-year time limit under section 36(1) of the Taxes Management Act 1970 (careless behaviour by the taxpayer or a person acting on the taxpayer's behalf). This appeal is made within the 30-day window prescribed by section 31A of the Taxes Management Act 1970 (the prescribed deadline is 1 June 2026). Where this appeal is not allowed, I reserve the right to request an internal review under section 49A and to lodge a Notice of Appeal to the First-tier Tribunal (Tax Chamber) under form T240 within the further 30-day window from the date of the review conclusion.

Taxpayer: Marcus Edward Larkin
Capacity: an individual Self Assessment taxpayer
Unique Taxpayer Reference (UTR): 5547810032
National Insurance number: PL 87 21 04 D
Correspondence address: 11 Eastfield Lane, Cambridge CB4 1XW
Telephone: 07842 116903
Email: marcus.larkin@email.co.uk

Date of discovery assessment letter: 2 May 2026
HMRC reference: DA-2026-118-994-CAM
Tax year covered: 2021/22
Time limit applied by HMRC: the 6-year time limit under section 36(1) of the Taxes Management Act 1970 (careless behaviour by the taxpayer or a person acting on the taxpayer's behalf)
Amount of tax in dispute: GBP 8,925
Statutory framework: Taxes Management Act 1970 s.29 (discovery power); s.29(4) Condition A (careless or deliberate); s.29(5) Condition B (hypothetical-officer test); s.34 (4-year ordinary); s.36 (6-year careless / 20-year deliberate)
Appeal deadline: 1 June 2026 (30 days from the date of the discovery assessment letter)

HMRC has raised a discovery assessment of £8,925 for the 2021/22 tax year, alleging careless under-declaration of property rental income from a let portfolio. The 2021/22 return was filed on 24 January 2023 with a white-space note setting out the rental income on each of the three properties, the agent management fees, the mortgage interest restriction calculation under section 272A ITTOIA 2005 and the reasoned basis for the apportionment of allowable expenses. HMRC's allegation of carelessness misreads the white-space note and ignores the supporting schedule that was attached with the return. The 2021/22 return was filed with reasonable care and the alleged insufficiency was, on the face of the return, available to a hypothetical reasonable officer reviewing the return at the time the enquiry window closed.

The Taxes Management Act 1970 sets three time limits for a discovery assessment, increasing in length according to the seriousness of the alleged taxpayer behaviour:

4-year ordinary time limit (s.34): the default — applies where the loss of tax was not brought about by careless or deliberate behaviour.
6-year careless time limit (s.36(1)): applies where the loss of tax was brought about carelessly by the taxpayer or a person acting on the taxpayer's behalf.
20-year deliberate time limit (s.36(1A)): applies where the loss of tax was brought about deliberately by the taxpayer. Per Tooth v HMRC [2021] UKSC 17 — deliberate requires an intention to mislead HMRC, the highest threshold the Act imposes; the burden is on HMRC to prove deliberate behaviour.

HMRC has applied: the 6-year time limit under section 36(1) of the Taxes Management Act 1970 (careless behaviour by the taxpayer or a person acting on the taxpayer's behalf).

Appellant's categorisation challenge:
HMRC has applied the 6-year careless time limit under section 36(1) of the Taxes Management Act 1970. The appellant contends that the correct categorisation is the 4-year ordinary time limit under section 34 — the return was filed with reasonable care, supported by a contemporaneous white-space narrative, a property-by-property schedule and the agent's management statement for each property. The 2021/22 tax year ended on 5 April 2022; the 4-year ordinary time limit therefore expired on 5 April 2026. The discovery assessment was issued on 2 May 2026, which is outside the section 34 window. Where the correct categorisation is the 4-year ordinary limit, the assessment is out of time and must be vacated in full. The careless test under section 36(1) is not made out — the return contains a full white-space explanation, a property-by-property schedule and a reasoned mortgage interest restriction calculation; reasonable care was taken at every stage of preparation and filing.

Where the correct categorisation is the 4-year ordinary time limit under section 34 and the tax year in question is now outside that 4-year window from the end of the year of assessment, the discovery assessment is out of time and must be vacated. Where the correct categorisation is the 6-year careless limit but HMRC has incorrectly applied the 20-year deliberate limit on an assessment more than 6 years old, the same result follows.

Where the taxpayer has filed a return (and the enquiry window under section 9A has closed without an enquiry being opened), HMRC cannot raise a discovery assessment unless one of two threshold conditions is satisfied:

Condition A — section 29(4): the loss of tax was brought about carelessly or deliberately by the taxpayer (or by a person acting on the taxpayer's behalf).
Condition B — section 29(5): at the time the enquiry window closed (or would have closed), the officer of HMRC could not reasonably have been expected, on the basis of the information made available to him before that time, to be aware of the insufficiency.

The information "made available" is defined in section 29(6) — it includes the return itself, accompanying documents, anything provided in response to an enquiry, and certain wider HMRC files. The hypothetical officer is reasonable and competent; what they could reasonably have been expected to be aware of is an objective question (Charlton v HMRC [2012] UKUT 770 (TCC)).

Condition A position: denied in full — the condition is not made out on the documented facts.
<strong>Condition A (section 29(4)) — carelessness denied:</strong> the appellant denies that the loss of tax (if any) was brought about carelessly. The 2021/22 return was prepared with reasonable care: (i) the rental income figures were taken directly from the lettings agent's end-of-year statements for each of the three properties; (ii) the property-by-property allowable expenses were reconciled against the agent's management statements and verified against the appellant's bank statements; (iii) the mortgage interest restriction under section 272A ITTOIA 2005 was calculated using the HMRC online residential property finance cost tool and the result was recorded in the white-space narrative; (iv) the return was reviewed by the appellant's spouse (a chartered accountant) before submission. Reasonable care is the standard of a reasonable taxpayer in the appellant's circumstances; the documented preparation process meets that standard comfortably.

Condition B position: denied in full — the condition is not made out on the documented facts.
<strong>Condition B (section 29(5)) — hypothetical-officer awareness denied:</strong> the appellant denies that Condition B is made out. The 2021/22 return was submitted on 24 January 2023 with the following information "made available" to HMRC within the meaning of section 29(6): (i) the return itself, including the property income pages SA105; (ii) a 240-word white-space narrative setting out the rental income on each property, the agent management fees, the mortgage interest restriction calculation and the basis of the apportionment of allowable expenses; (iii) a 4-page schedule attached to the return showing the per-property reconciliation. The enquiry window under section 9A closed on 31 January 2024. A hypothetical reasonable officer reviewing the return between 24 January 2023 and 31 January 2024 — armed with the white-space narrative, the per-property schedule and the basic ITTOIA 2005 framework for property income — could reasonably have been expected to be aware of the alleged insufficiency. The Charlton UKUT 770 (TCC) hypothetical-officer test is satisfied; Condition B is not made out.

Where neither Condition A nor Condition B is made out, HMRC has no power to raise a discovery assessment and the assessment must be vacated in full.

The Court of Appeal in Langham (Inspector of Taxes) v Veltema [2004] EWCA Civ 193 established the leading authority on what information is sufficient to alert HMRC to an insufficiency for the purposes of section 29(5). Auld LJ held that an inspector is shut out from raising a discovery assessment only where the taxpayer, in making an honest and accurate return (or in responding to a section 9A enquiry), has clearly alerted the inspector to the insufficiency — not where the inspector may have had some other information, outside the normal checks, that might put the sufficiency in question. The test is objective. The sources of information referred to in section 29(6) are the only sources to be taken into account when deciding whether an officer ought reasonably to have been aware of the actual insufficiency.

Application in this appeal:
Applying the Court of Appeal's test in <em>Langham (Inspector of Taxes) v Veltema</em> [2004] EWCA Civ 193 — the inspector is shut out from raising a discovery assessment where the taxpayer, in making an honest and accurate return, has clearly alerted the inspector to the alleged insufficiency. The 2021/22 return clearly alerted HMRC to the rental income position by reference to (a) the SA105 property income pages, (b) the white-space narrative quantifying each property's contribution and (c) the attached per-property schedule. The information was the right information, presented honestly, and the alleged insufficiency was on the face of the return. The reasonable inspector, applying the normal checks to a Self Assessment return with property income, would have been aware of the rental position; if HMRC now contends otherwise, the appropriate course was to open a section 9A enquiry before 31 January 2024 — which HMRC did not do. The Langham test is satisfied in the appellant's favour.

The appellant respectfully requests that HMRC (a) vacate the discovery assessment of GBP 8,925 for the tax year 2021/22 on the basis that the correct time-limit category does not support the assessment; (c) accept that neither Condition A nor Condition B under section 29 is made out; and (d) acknowledge receipt of this appeal in writing within 14 days. Where this appeal is not allowed, I request an internal review under section 49A of the Taxes Management Act 1970 and reserve the right to lodge a Notice of Appeal with the First-tier Tribunal (Tax Chamber) using form T240 within the further 30-day window from the date of the review conclusion letter.

YOURS FAITHFULLY,