Trustees sold a property lived in by the life tenant 8 years ago and purchased a replacement which the life tenant now resides in. No advice was sought so no claim to PPR made under s225.
Can HMRC issue a discovery assessment as it is over 6 years and if so does s36 (1B) TMA allow the trustees then to claim the PPR?
Not really my scene but my understanding is as follows.
“Discovery” assessments arise where there has not been full disclosure (as appears here) and the loss of tax has been brought about “carelessly or deliberately” [TMA 1970 s. 29(4)]; see also TMA 1970 s. 29(5).
TCGA 1992 explicitly requires the trustees (alone) to make a claim for PPR under
TCGA 1992 s 225(1)(c).
Prima facie, it would seem a discovery assessment could be validly made by HMRC.
Wrt claims, s36(3) TMA 1970 provides “If the person on whom the assessment is made so requires, in determining the amount of the tax to be charged for any chargeable period in any assessment made in a case mentioned in subsection (1) or (1A) above, effect shall be given to any relief or allowance to which he would have been entitled for that chargeable period on a claim or application made within the time allowed by the Taxes Acts”.
I agree with Malcolm and would just add that this error often happens because the trustees are not required to file an in year return under Sch 2 FA 2019 where they are entitled to full exemption as a claim in due course is to be assumed; and have not either received a return or been obliged to notify under s.7
So s29 (5)(a) and (6) will not assist.
s7 obliges a person to notify that he is chargeable to CGT including trustees under s7(9). If he/they have no chargeable gains (or income in subsections (4)-(7)) for the year they need not notify:s7(3). S223 (1) TCGA says: “No part of a gain to which section 222 applies shall be a chargeable gain…” PRR is not deducted from a chargeable gain like losses and the AE. If full relief is due no chargeable gain arises.
The argument might be that if no s8A notice has been received before 5 October in the next tax year s222(1) does not apply because no mandatory claim under s225 (1) TCGA has by then been made. No statement here that it can be assumed.
Any penalty under s7 (depending on tariff and any reduction) seems chargeable subject to being accepted as non-deliberate or with reasonable excuse. And see CH73360 and 73520.
If a discovery assessment is made then a PRR claim can be made. Or a s12D voluntary return can be made or other notification to ensure credit for unprompted. But it does not mean in either case that there is no potential losr revenue or penalty. There can be PLR even if no actual loss of revenue because the tax is ultimately paid with interest.
s36 TMA governs time limits. 6 years if careless. 20 years if deliberate OR failure to notify under s7
s36A deals with offshore matter or transfer. 12 years unless 20 years as above