ACCA Applied Skills · Taxation (UK)

The procedures relating to compliance checks, appeals and disputes: formula sheet

Full chapter guide

Key formulas

Enquiry window: company return (on time or late): Deadline = actual filing date + 12 months; Counts from the date the return was actually filed, not the filing deadline. A late company return is not extended to a quarter day.
Enquiry window: individual or partnership return filed on time: Deadline = actual filing date + 12 months; Counts from the date the return was actually filed, not the filing deadline. Early filing therefore brings the end of the window forward.
Enquiry window: individual or partnership return filed late: Deadline = the quarter day (31 Jan, 30 Apr, 31 Jul, 31 Oct) following the first anniversary of the actual filing date; Applies to income tax self-assessment returns only, not to companies. If the first anniversary falls on a quarter day, that quarter day is the deadline.
Opening an enquiry: Written notice of enquiry to the taxpayer within the window; HMRC need not give a reason, so a random check is as valid as a risk-based one.
Concluding an enquiry: Closure notice = conclusions + any amendments to the return; The taxpayer can ask the tribunal to direct HMRC to issue it, and can appeal against the amendments.
Interest on unpaid tax (assumed rates): Underpaid tax 8·50%; overpaid tax 3·50%; Rates from ACCA's tax rates table. Interest runs on unpaid tax at the assumed underpaid rate from the due date. Use the rate given in the table and do not invent other rates.
Determination: No return filed → HMRC estimates tax due → replaced when the taxpayer files the return; For individuals, the determination must be made within 4 years of the end of the tax year. It is a stop-gap, not a final liability.
Discovery assessment conditions: Loss of tax + (careless or deliberate behaviour OR HMRC could not reasonably have been aware); Both parts are needed. Full and fair disclosure that HMRC overlooked does not qualify.
Time limit: ordinary: 4 years from the end of the tax year; Applies where there is no careless or deliberate behaviour.
Time limit: careless: 6 years from the end of the tax year; Count from the end of the tax year, 5 April, not from the filing date.
Time limit: deliberate: 20 years from the end of the tax year; Applies to deliberate understatement, whether or not concealed.
Maximum error penalties: Deliberate and concealed 100%; deliberate not concealed 70%; careless 30%; Minimums: careless 0% if unprompted and 15% if prompted. Deliberate not concealed 20% unprompted, 35% prompted. Deliberate and concealed 30% unprompted, 50% prompted.
Individual with business or rental income: Keep records until the 31 January filing deadline for the tax year + 5 years; This is five years after the filing deadline. For 2025/26 the deadline is 31 January 2027, so the date is 31 January 2032. That is about 5 years 10 months after the end of the tax year (5 April 2026). The five years run from the 31 January deadline, whatever the actual filing date.
Other individuals: Keep records until the first anniversary of the 31 January filing deadline for the tax year; For example, employees and investors with no business or rental income. For 2025/26 the deadline is 31 January 2027, so the date is 31 January 2028.
Companies: Keep records for 6 years from the end of the accounting period; Counted from the period end, not from the filing date.
VAT records: Keep VAT records for 6 years; Applies to registered traders.
Penalty for failure to keep records: Maximum £3,000 for each tax year or accounting period; This is a maximum. It applies where records are inadequate or not preserved.
Time limit to appeal to HMRC: Written appeal within 30 days of the date of the HMRC decision; A late appeal needs HMRC's agreement or the tribunal's permission.
Options after appealing: Internal review OR First-tier Tribunal (or ADR if both sides agree); The reviewing officer is someone not involved in the original decision.
Time limit after a review: Notify the tribunal within 30 days of the review conclusion; Applies if you disagree with the review outcome.
Tribunal categories: Default paper → Basic → Standard → Complex; Costs can be awarded only in complex cases, unless the taxpayer opts out.
Upper Tribunal: Appeal from First-tier Tribunal on a point of law only; Permission is normally needed. Findings of fact are not re-heard.
Time limit to appeal: Written appeal within 30 days of the date of HMRC's decision; Applies to assessments and amendments. If you miss it, you need HMRC's or the tribunal's agreement to a late appeal.
Postponement application: Apply in writing, stating the amount you believe is overcharged and your grounds; Only the disputed amount can be postponed. The undisputed tax is payable on the normal due date.
Review and tribunal choice: Internal review OR First-tier Tribunal for the same decision; the tribunal remains open after an unfavourable review; ADR is an extra, voluntary route that does not remove either right.
Interest on underpaid tax: Interest = tax paid late × 8·50% × months late ÷ 12; 8·50% is the assumed rate in the ACCA tax rates table. Interest runs from the original due date even when the tax was postponed.
ADR features: Voluntary + independent mediator + agreement needed from both sides; Not a replacement for the right to appeal.

Quick revision

HMRC can open an enquiry into a return without giving a reason, including random checks.
An enquiry notice must normally be given within 12 months of the filing date, with a longer window for late returns.
An enquiry ends with a closure notice, and the taxpayer can ask the tribunal to direct HMRC to close it.
A determination is HMRC's estimate of tax due where no return has been filed, and filing the return replaces it.
A discovery assessment applies when HMRC finds tax lost and the return did not give enough information.
Discovery time limits depend on behaviour: 4 years normally, 6 years if careless, 20 years if deliberate.
Business records for individuals are kept 5 years after the 31 January filing date; non-business records 1 year after it.
Company records are kept for 6 years from the end of the accounting period.
An appeal to HMRC must normally be made within 30 days of the decision.
After an appeal, you can ask for an HMRC review or go to the First-tier Tribunal, then the Upper Tribunal on a point of law.
Mediation is a form of alternative dispute resolution that can settle a dispute without a tribunal.
You can apply to postpone payment of disputed tax, and interest still runs on postponed tax that ends up payable.

Common mistakes

Counting the 12 months from the filing deadline instead of the actual filing date. Fix: Always use the date the return was actually delivered to HMRC.
Forgetting the quarter day rule for a late individual or partnership return, or applying it to a company return. Fix: If an individual or partnership return is late, take the first anniversary and then move to the next quarter day. For a company, stop at 12 months after the actual filing date.
Counting the time limit from the filing date or the date of the error Fix: Always start from the end of the tax year, 5 April. For a company, start from the end of the accounting period.
Saying a discovery assessment is allowed whenever HMRC finds extra tax Fix: State both tests: a loss of tax, and either careless or deliberate behaviour or HMRC being unable to reasonably know about it.
Counting five years from the end of the tax year instead of from 31 January after it Fix: Always go to the next 31 January first, then add the years.
Applying the five-year rule to all individuals Fix: Check for business or rental income. Without it, the period is one year after 31 January.
Saying the appeal is made directly to the tribunal with no appeal to HMRC first. Fix: Remember the order: written appeal to HMRC within 30 days, then review or tribunal.
Saying the internal review is carried out by the same officer who made the decision. Fix: State that the review is by an HMRC officer not involved in the original decision.
Saying ADR is compulsory or that it replaces the right to appeal. Fix: Say ADR is voluntary, needs both sides to agree and sits alongside your review and tribunal rights.
Postponing the whole assessment when only part is disputed. Fix: Postpone only the amount you believe is overcharged. Pay the rest on the normal due date.

Exam tips

Always write down the actual filing date first. The date in the question decides the deadline.
Check the taxpayer before you use the quarter day rule. It applies to late individual and partnership returns only, not to companies. State the rule explicitly to earn the method mark.
Use the words notice of enquiry, closure notice and amendments in written answers.
For random check questions, say HMRC does not need to give a reason.
If the enquiry window has passed, mention discovery assessments as the alternative.
Always state which power applies first. Many students lose marks by naming the wrong one.
In scenarios, underline the behaviour words: careless, deliberate, reasonable care, innocent. They decide the time limit.
Write the date calculation out: tax year end, plus the years, then the conclusion. This earns method marks.