Tax investigation time limits

New time limits for tax claims and enquiries came into force for Corporation Tax, Employers’ PAYE, the Construction Industry Scheme, income tax and Capital Gains Tax with effect from April this year.

The previous six-year window has been cut to just four years and other HM Revenue and Customs (HMRC) powers have been reduced.

Under the new rules for enquiries, HMRC can only go back 4 years unless they can prove the taxpayer has been negliglent (when they can go back 6 years). The old right to go back 20 years can only be applied when it is proved that the taxpayer deliberately set out to evade paying tax.

Of course, the rules also mean that a taxpayer can only go back 4 years if he discovers a mistake in previous years which meant he overpaid tax.