How to handle transfer pricing discovery assessments

HMRC has the power to issue discovery assessments when a loss of tax is discovered after the standard enquiry window has closed. Statute prescribes that discovery assessments can only be raised when certain conditions are met reflecting the fact that discovery assessments are at risk of providing a second bite of the cherry for HMRC. Despite HMRC updating its guidance to put beyond doubt that ‘protective’ discovery assessments should not be raised in practice we see the continued use of what appear to be ‘protective’ discovery assessments in relation to transfer pricing matters; particularly in the days or weeks approaching the end of a financial year.

In this article we outline what a discovery assessment is what it is not and...