Tax Collection and Management (Wales) Act 2016 tax returns, enquiries and assessments: technical guidance

The ‘filing date’ is the date by which a tax return needs to be submitted to the WRA. For tax returns completed online, the return is filed on the day it is submitted. If a paper return is posted, the return is filed on the date it is received by the WRA.

The taxpayer may amend their tax return within 12 months of the filing date by notifying the WRA. 

An amendment made when the tax return in question is under enquiry does not take effect until the WRA issues a closure notice completing the enquiry. However, the amendment does not take effect where the WRA closure notice states it has either taken the amendment into account in reaching its conclusions, or that the WRA has concluded the amendment to be incorrect.

The WRA may amend a tax return to correct an obvious error or omission. This could be an arithmetical mistake or an ‘error of principle’ such as entering a forename and surname the wrong way around. 

The WRA will issue a notice to the taxpayer giving effect to any such corrections. The WRA cannot make a correction more than 9 months after receiving a tax return. 

The taxpayer may reject corrections made by the WRA by notifying the WRA within 3 months of the correction being issued, or by amending the tax return within 12 months of the filing date.

If, as a result of a correction, an additional amount of tax is payable, the taxpayer must pay this within 30 days of the notice of correction being issued.

The WRA must notify the taxpayer if it intends to open an enquiry into a tax return (a ‘notice of enquiry’) within 12 months of the date on which a return was due to have been filed, or, if later, the day on which WRA actually it received the return (an ‘enquiry period’). If a return has been amended by the taxpayer, the enquiry period will instead be within 12 months of the date of the amendment.

The WRA may open an enquiry after the enquiry period if the following conditions are met:

• it is a tax return in relation to a land transaction
• a further tax return has been made in respect of the same land transaction
• WRA has opened an enquiry into the further tax return
• WRA believes it necessary to enquire into the earlier tax return

An enquiry cannot be opened if the return has already been the subject of a previous enquiry. However, if the WRA closes the enquiry and the taxpayer subsequently amends the return, the WRA may issue a further notice of enquiry but this enquiry will be limited to matters relating to or affected by the amendment.

An enquiry can be in relation to anything contained, or required to be contained in a tax return, that relates to:

• whether the taxpayer is liable to pay the tax, and
• the amount of tax payable

If a notice of enquiry has been issued following an amendment to a tax return, if the WRA has previously closed an enquiry into the return, the new enquiry is limited to matters related to the amendment or matters affected by the amendment.

If an enquiry into a tax return is in progress and the WRA forms the opinion that:

• the amount of tax payable as stated in a self-assessed tax return is lower than it should be, and
• unless the deficit is paid immediately, there could be a loss of devolved tax

the WRA may issue a notice to the taxpayer amending the tax return to bring the additional tax into charge.

If the scope of an enquiry is limited to matters arising from a taxpayer amendment because a previous enquiry into the original return has been completed, then any amendment by the WRA in these circumstances can only be made if the tax deficit mentioned above is as a result of the amendment made by the taxpayer.

The taxpayer must pay any amount or additional amount of tax (and, where applicable, interest) chargeable as a result of a WRA amendment of a return during an enquiry within 30 days beginning with the day on which the WRA issued the notice of amendment.

When an enquiry is in progress, any questions arising from the tax return can be referred to an appropriate tribunal for determination, providing that the WRA and the taxpayer agree. More than one referral can be made in relation to an enquiry and the taxpayer may withdraw a referral at any time.

While proceedings on a referral are in progress (that is, before a determination is made or a referral has been made and not withdrawn), the WRA cannot issue a closure notice and the taxpayer cannot make an application to give a closure notice.

A determination of a referred matter by the tribunal is binding on the taxpayer and the WRA in the same way and to the same extent as a decision on a preliminary plea in an appeal. A preliminary plea is a plea-in-law that raises a legal issue that does not relate to the merits of the proceedings but if sustained, could result in the proceedings (or part of them) being dismissed.

The WRA must take the determination into account both in reaching its conclusions on the enquiry and in formulating any amendments to the tax return that may be required to give effect to these conclusions.

The question that has been determined may not be reopened on an appeal unless it had been determined as a preliminary plea (see above) in that appeal.

An enquiry is completed when the WRA issues the taxpayer with a ‘closure notice’ stating that the enquiry is complete and the conclusions from the enquiry.

The closure notice must either state that:

• in WRA’s opinion, no amendments are required to the tax return; or
• in WRA’s opinion an amendment is required and it will make the necessary amendments to the tax return to give effect to its conclusions

If the closure notice issued by the WRA amends a tax return, the taxpayer cannot then make their own amendments, even if the time limit for normally being able to do so has not expired. If the taxpayer disagrees with the conclusions in the closure notice, they may request a review of the decision by the WRA or appeal to the tribunal. Full guidance on reviews and appeals is available at TCMA/5000.

The taxpayer must pay any amount or additional amount of tax (and, where applicable, interest) payable as a result of a WRA amendment within 30 days, beginning with the date on which the notice of the amendment was issued.

The taxpayer can apply to the tribunal for a direction that the WRA must give a closure notice within a specified period (for example, if it is felt the WRA is taking too long to complete the enquiry). The tribunal must give this direction unless it is satisfied that the WRA has reasonable grounds for not issuing the closure notice within that period.

If the WRA believes that the taxpayer is liable to pay tax and they have not filed a tax return by the relevant filing date (see TCMA/1010) a ‘WRA determination’ may be made of the amount of tax it believes is chargeable.

The WRA must notify the taxpayer of the determination and they must pay the tax within 30 days of the notice being issued.

The WRA may not make a determination more than 4 years after the relevant filing date. The relevant filing date is the date by which the WRA believes the return was required to be made.

WRA determination superseded by tax return

If the taxpayer submits a tax return after receiving notice of a WRA determination, the return supersedes the determination.

This must be submitted by the later of either:

• 4 years after the WRA’s powers to make a determination became exercisable (that is, the relevant filing date), or
• 12 months beginning with the date the WRA determination was issued

If the taxpayer’s return is submitted whilst proceedings are underway (but are not concluded) to recover any tax charged by the WRA’s determination, then the proceedings may continue as if they were proceedings for the recovery of any tax calculated by the self-assessment which is due and payable and has not been paid.

If the WRA believes that any of the following situations may apply:

• an amount of devolved tax that ought to have been assessed has not been assessed
• an assessment is or has become insufficient (that is, the WRA is of the view that the taxpayer is liable to more tax than it previously thought), or
• any relief claimed by the taxpayer or which has been given, is or has become excessive

then the WRA may make an assessment of the amount, or additional amount of tax that in its view the taxpayer should be charged.

The WRA can also make an assessment (also known as a ‘WRA assessment’) against any amount of tax and associated interest which has (but should not have) been repaid to the taxpayer. The WRA can recover this amount in the same manner as if it were unpaid tax.

A WRA assessment may only be made in the following circumstances:

• when any of the situations described in TCMA/1100 were brought about carelessly or deliberately by the taxpayer, a person acting on the taxpayer’s behalf, or a partner in the same partnership as the taxpayer
• the WRA is no longer entitled to issue an enquiry notice or it has completed an enquiry into a tax return and it could not have reasonably been expected to have been aware that one of the situations outlined in TCMA/1100 had arisen based on the information available to it at the time
• the WRA makes an adjustment under the general anti-avoidance rule

However, the WRA is not able to make a WRA assessment if:

• any of the situations described in TCMA/1100 are attributable to a mistake in a return as to the basis on which the tax liability ought to have been calculated; and
• the return was made on the basis of practice generally prevailing at the time the return was made

Situations brought about carelessly or deliberately

A situation is brought about ‘carelessly’ by the taxpayer failing to take reasonable care to avoid bringing about that situation. The taxpayer (or the person who provided the information on their behalf) will also be treated as having brought about a situation carelessly if they:

• discover some time later that the information provided was inaccurate, and
• failed to take reasonable steps to inform the WRA

‘Deliberately’ means a situation is brought about through a deliberate action by the taxpayer, a person acting on their behalf, or a partner in the same partnership as the taxpayer. This includes situations arising as a result of a deliberate inaccuracy in a document given to the WRA by either the taxpayer or someone on their behalf.

The general rule is that the WRA can only make a WRA assessment up to 4 years after the relevant date (see TCMA/1010). The relevant date generally means the filing date, unless:

• a return is made if this is after the filing date, in which case it is the date the return was made, or 
• no tax return has been made, in which case it is the date by which the WRA believes the return should have been made

However, if the WRA believes a situation described in TCMA/1100 is brought about carelessly by the taxpayer, a person acting on their behalf or another partner in the same partnership, it can make an assessment up to 6 years after the relevant date.

If the WRA believes a situation described in TCMA/1100 is brought about deliberately by the taxpayer, a person acting on their behalf or another partner in the same partnership, it can make an assessment up to 20 years after the relevant date.

If WRA believes the taxpayer has been repaid tax that they should not have been, it may make an assessment as long as it is within 12 months of the day on which the repayment was made to the taxpayer.

If the taxpayer has died, a WRA assessment must be made on the personal representatives within 4 years of the date of the death, and an assessment cannot be made in respect of a relevant date more than 6 years before the death.

If the taxpayer wishes to object to the making of a WRA assessment on the ground that the time limit that it has to make it has expired, they must do this by giving a notice of review or appealing against the assessment. Guidance on reviews and appeals against WRA decisions can be found at TCMA/5000.

The WRA will issue a notice to the taxpayer (or, in the case of a WRA assessment concerning excessive repayment of tax, the person who the repayment was made to) when it makes a WRA assessment.

The taxpayer must pay the amount payable (including any penalties and interest) within 30 days beginning with the day on which the WRA assessment notice is issued.

When the taxpayer is required to make a tax return they must keep and preserve records to demonstrate that the tax return is correct and complete. Records include both paper or digital records, and supporting documentation such as accounts, books, deeds, contracts, vouchers and receipts.

The taxpayer must keep these records until the later of the relevant date and the day on which either an enquiry into that tax return is completed or the enquiry period ends (see TCMA/1080).

The ‘relevant date’ is the later of 6 years from the filing date or 6 years from the date  a taxpayer amendment to the return was made (see TCMA/1020). Alternatively, the ‘relevant date’ may be an earlier date specified by the WRA.

Further guidance on specific record-keeping requirements under the Landfill Disposals Tax and Land Transaction Tax is available under the relevant guidance sections.
 

If a land transaction does not require a tax return (for example when the transaction is not a notifiable transaction), the buyer must keep and preserve records until the end of the ‘relevant date’ to demonstrate that no tax return was required.

The relevant date is the sixth year anniversary of the date of the transaction, unless WRA specifies an earlier date.