Home › Forums › Patrick Cannon › How can you avoid an SDLT discovery assessment? › Reply To: How can you avoid an SDLT discovery assessment?
Kai, as long as a return has been filed and a suitable disclosure letter has been submitted then HMRC only have the nine month enquiry window to initiate an enquiry, The disclosure will prevent a subsequent discovery assessment in the four year period following the transaction. Hence the insurance being limited to enquiries commenced in the initial nine month period. The drafting of the disclosure letter will be important and requires care and attention to detail. I am sometimes surprised at how even leading firms seem to develop a blind spot when drafting what should be a clearly worded letter focussed on the potential insufficiency of tax. I listened to some one from one of the Big Four recently saying how they couldn’t understand how you could draw HMRC’s attention to an insufficiency of tax paid in the disclosure letter but also file the return saying no tax was due. There is actually no difficulty at all. This is because the technical basis for the position adopted in the tax return that no tax is payable will be explained in the letter. This is then followed by an explanation of the possible potential counter-arguments which might lead to HMRC disagreeing with the return and concluding that tax was payable. The letter will say that while HMRC may decide on the basis of the counter arguments that insufficient tax has been paid the taxpayer has nevertheless been advised that on balance the position it has adopted is the correct one and that HMRC may decide if they wish to enquire into the transaction. The taxpayer has therefore expalined its filing position but at the same time has drawn HMRC’s attention to any counter arguments but said that on balance it believes that the position adopted in the return is the correct one so there is actually no inconsistency between the return and the disclosure letter.