What is the extended time limit under section 36A of the Taxes Management Act 1970?

Section 36A allows HMRC up to 12 years after the end of the relevant tax year to raise an assessment where income tax or capital gains tax has been lost and the loss involves an offshore matter or an offshore transfer. This replaces the normal shorter time limits, giving HMRC a significantly extended window for recovering lost tax connected with overseas elements.

What constitutes an offshore matter for the purposes of section 36A TMA 1970?

Lost tax involves an offshore matter where it is charged on or by reference to income arising from a source outside the United Kingdom, assets situated or held outside the United Kingdom, activities carried on wholly or mainly outside the United Kingdom, or income and assets received outside the United Kingdom. Essentially, the underlying source or activity giving rise to the tax must be based overseas.

How does an offshore transfer differ from an offshore matter under section 36A?

An offshore transfer arises where the lost tax does not involve an offshore matter, but the income or disposal proceeds are transferred to a territory outside the United Kingdom before the relevant filing date. Crucially, the transfer must make the lost tax significantly harder for HMRC to identify, such as making it significantly less likely HMRC would discover the untaxed income.

When can HMRC not rely on the 12-year extended assessment time limit?

HMRC cannot use the extended time limit if it received relevant overseas information before the normal time limit expired on the basis of which it could reasonably have identified the lost tax and made the assessment. The restriction also applies where the lost tax arises from transfer pricing adjustments under Part 4 of the Taxation (International and Other Provisions) Act 2010.

Taxes Management Act 1970 section 36A

Loss of tax involving offshore matter or offshore transfer

Section 36A extends the time limit for HMRC to raise assessments to 12 years where income tax or capital gains tax has been lost in connection with offshore matters or offshore transfers.

HMRC has up to 12 years after the end of the relevant tax year to make an assessment where lost tax involves an offshore matter or an offshore transfer that makes the lost tax significantly harder to identify.
Tax involves an offshore matter where it relates to income, assets, or activities in a territory outside the United Kingdom, and involves an offshore transfer where income or disposal proceeds are moved offshore before the relevant filing date.
The extended 12-year time limit does not apply if HMRC received relevant overseas information in time to make the assessment within the normal time limit and it was reasonable to expect them to have done so.
The extended time limit also does not apply to the extent that the lost tax arises from transfer pricing adjustments under Part 4 of TIOPA 2010.

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