Receiving an HMRC discovery assessment does not mean you must accept it. There is a right of appeal, a strict 30-day deadline and a structured process, from initial HMRC review through to the First-Tier Tribunal if necessary. This guide explains every stage.
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The 30-day appeal window: s31A TMA 1970
Section 31A TMA 1970 provides that an appeal against a discovery assessment must be made within 30 days of the date of the assessment notice. This deadline is strict.
The appeal must be made in writing to HMRC. It should identify the assessment being appealed (including the tax year and amount), state that the taxpayer appeals against it and, critically, set out at least the broad grounds of appeal.
A detailed statement of grounds is not required at the initial appeal stage, but specifying the main arguments (for example: “the assessment is outside the applicable time limit” or “the officer had no valid discovery”) is good practice and helps prevent HMRC from asserting later that certain grounds were raised too late.
Where the assessment arrives without warning and the 30-day window has expired before the taxpayer is aware of the assessment (for example, if it was sent to an old address), it may be possible to apply for late admission. See the FAQs section below.
Grounds of appeal to include
A discovery assessment appeal should address as many of the following grounds as are applicable on the facts:
(a) No valid discovery
Challenge whether HMRC’s officer genuinely formed a new subjective belief that tax was underpaid, as required by Langham v Veltema [2004] EWCA Civ 193. This requires evidence about what triggered the assessment and when the officer first formed the relevant view.
(b) Assessment out of time
Verify the date of the assessment notice against the applicable time limit under s34 or s36 TMA 1970. If HMRC relies on the 6-year careless window, challenge whether carelessness has actually been established. See our full time limits guide for the calculation methodology.
(c) Staleness
Even within the statutory window, the discovery may have gone stale if HMRC had the relevant information at an earlier stage and unreasonably delayed. See our guide to the staleness defence.
(d) Sufficient disclosure (s29(3) TMA 1970)
Where a return was filed, HMRC cannot rely on discovery if the return and accompanying documents gave a hypothetical reasonable officer sufficient information to identify the insufficiency. Review the original return and any accompanying documents or white-space explanations for relevant disclosures.
(e) Quantum
Even where the assessment is valid in principle, the amount assessed is frequently wrong. HMRC will often use a best judgment figure or an assumption-based calculation. The taxpayer should challenge any inaccurate figures with actual evidence of the correct amount.
(f) Penalty challenge
Penalties issued alongside the assessment can be challenged separately. Common grounds include incorrect behaviour categorisation (e.g., HMRC asserts “deliberate” when the conduct was at most careless), inadequate credit for disclosure quality or the existence of a reasonable excuse.
Postponement of tax: s55 TMA 1970
Filing an appeal does not automatically prevent HMRC from collecting the disputed tax. Under normal rules, tax remains payable even pending appeal. However, section 55 TMA 1970 allows the taxpayer to apply for postponement of payment of the whole or part of the tax pending the outcome of the appeal.
To obtain postponement, the taxpayer must show “reasonable grounds” for the appeal. This is not a high bar, the application is made to HMRC in the first instance and where substantive grounds exist (as they invariably will if an appeal is being pursued), postponement is usually agreed.
If HMRC refuses to agree postponement, the taxpayer can apply to the First-Tier Tribunal to determine the matter. Postponement means no immediate cash flow crisis while the appeal proceeds, a critical practical protection.
It is important to make the postponement application promptly alongside or immediately after the appeal. Interest continues to run on the disputed tax during the postponement period, but enforcement action is stayed.
The HMRC internal review process
Once an appeal has been notified to HMRC, the taxpayer has two procedural options:
- Request an internal review. HMRC must complete the review within 45 days (or longer by agreement). An HMRC review officer, separate from the one who issued the assessment, considers the grounds of appeal and issues a review conclusion letter upholding, varying or cancelling the assessment.
- Notify the appeal direct to the First-Tier Tribunal. The taxpayer may bypass HMRC’s internal review entirely and proceed straight to the Tribunal. This may be preferable where the legal issues are clear-cut or where there is no realistic prospect of HMRC conceding at review stage.
If HMRC’s review upholds the assessment, the taxpayer has 30 days from the review conclusion to notify the appeal to the Tribunal. If the review varies the assessment, the taxpayer may accept the revised position or continue to the Tribunal.
Alternative Dispute Resolution (ADR)
HMRC operates an Alternative Dispute Resolution service that can resolve tax disputes faster and more cheaply than full Tribunal proceedings. ADR involves a trained mediator (from HMRC’s ADR team) who facilitates discussions between the parties but does not make binding decisions.
ADR is available at any stage before a Tribunal hearing. Key advantages include:
- Faster resolution, typically 3–6 months compared to 12–24 months for a Tribunal hearing
- Lower costs, no Tribunal fees, shorter hearing preparation
- Without-prejudice discussions that allow positions to be explored candidly
- HMRC will frequently make commercial concessions in ADR that it would not make in formal correspondence
ADR is not appropriate in every case. Where the legal issues are clear and the taxpayer’s position is strong, proceeding directly to the Tribunal may achieve a cleaner outcome. An experienced specialist can advise on the better route for a particular case.
The First-Tier Tribunal (Tax Chamber)
Where ADR or HMRC review does not resolve the dispute, the appeal proceeds to the First-Tier Tribunal (Tax Chamber). The Tribunal is an independent judicial body and has the power to uphold, vary or cancel the assessment and any associated penalty.
Notifying the appeal: Form T240
The appeal is notified to the Tribunal using Form T240 (available from the Tribunal Service website). The form requires the taxpayer to identify the assessment, the grounds of appeal and their preferred category of hearing.
Standard vs Complex category
Discovery assessment appeals are categorised as either:
- Standard: The majority of appeals. Dealt with by a single judge. Costs orders are not normally made (each party bears their own costs), except in cases of unreasonable conduct.
- Complex: Cases involving a large amount of tax (generally over £200,000), novel legal questions or complex facts. Complex cases may be heard by a panel of three judges. Costs can be awarded against the losing party unless the taxpayer opts out of the costs regime at the outset.
The hearing
Discovery assessment appeals are typically heard over one to three days (longer for complex cases). HMRC presents its case first, calling the relevant officer as a witness. The taxpayer then presents their case, giving evidence and calling any witnesses. Both sides may submit skeleton arguments and bundles of documents in advance.
The Tribunal applies the civil standard of proof (balance of probabilities). HMRC bears the burden of establishing the factual basis for the assessment, including any claim that behaviour was careless or deliberate.
What happens if you win
If the Tribunal allows the appeal:
- The assessment is vacated, it ceases to exist as a liability
- Any tax paid in respect of the assessment is refunded with statutory interest (calculated from the date of payment)
- Any penalty associated with the assessment falls away
- The taxpayer may apply for a costs order (in Complex cases or where HMRC’s conduct was unreasonable in Standard cases)
If HMRC wishes to appeal a First-Tier Tribunal decision, it must obtain permission to appeal to the Upper Tribunal on a point of law. Further escalation beyond the Upper Tribunal requires permission from the Court of Appeal.
Challenging the penalty separately
Penalties accompanying a discovery assessment are issued under Finance Act 2007 Schedule 24 and are separate decisions from the assessment itself. They can be and should be, challenged separately where grounds exist. A successful challenge to the underlying assessment will ordinarily extinguish the penalty too, but where the assessment survives, the penalty may be reduced by:
- Establishing that the behaviour was less serious than HMRC contends (careless rather than deliberate)
- Demonstrating a higher quality of disclosure than HMRC has credited
- Arguing reasonable excuse (applicable to some penalty provisions)
- Challenging the “prompted vs unprompted” categorisation where HMRC received the relevant information from a third party rather than as a result of its own investigation
Frequently asked questions
What if I missed the 30-day appeal deadline?
A late appeal requires either HMRC’s agreement or permission from the First-Tier Tribunal. The Tribunal applies the three-stage test from Martland v HMRC [2018] UKUT 178: length of delay, reason for delay and overall circumstances. Short delays with reasonable explanations are generally accepted. Act as quickly as possible, further delay only makes the application harder.
How long does a First-Tier Tribunal appeal take?
Standard category cases typically take 12–24 months from notice of appeal to a substantive hearing. Complex category cases can take 2–4 years. Many cases settle through negotiation or ADR before a hearing. Postponement of tax under s55 TMA 1970 means the disputed sum does not need to be paid during this period.
Do I need a tax barrister for the First-Tier Tribunal?
There is no requirement for legal representation. In practice, specialist tax investigation advisers represent most Standard category discovery assessment appeals. For Complex category cases involving novel legal issues, counsel is frequently instructed alongside the specialist adviser. The key is to have someone with experience of the Tribunal procedure and the specific legal framework.
Can I challenge the penalty as well as the assessment?
Yes. Penalties issued alongside a discovery assessment can be appealed independently. Common grounds include incorrect behaviour categorisation, inadequate disclosure quality credit, reasonable excuse or arithmetical errors. Penalty appeals follow the same procedural route and can be consolidated into a single Tribunal proceeding alongside the main assessment challenge.