Taxes Management Act 1970 section 37A

Effect of assessment where allowances transferred

Section 37A protects a spouse or civil partner from losing transferred allowances when HMRC raises a discovery assessment against the person who transferred them, due to careless or deliberate behaviour or offshore matters.

• When HMRC raises a discovery assessment (under sections 36 or 36A) because of careless or deliberate conduct, or offshore matters, the taxpayer's liability may increase beyond what was originally understood.
• Any allowances already transferred to the taxpayer's spouse or civil partner — specifically blind person's allowance (section 39 ITA 2007), unused married couple's allowance (section 51 ITA 2007), or transferred-back married couple's allowance (section 52 ITA 2007) — remain valid and are not disturbed.
• Instead, the taxpayer's own entitlement to those deductions from net income or tax reductions for the year in question is reduced correspondingly.
• The practical effect is that HMRC cannot claw back relief already given to the spouse or civil partner; the cost of the increased assessment falls entirely on the person whose behaviour triggered it.