CH279600 - How to do a compliance check: partial closure notices
What you must do before issuing a PCN
Preparing the approval form PCN101
The Finance (No.2) Act 2017 made changes to the legislation relating to the completion of compliance checks that were:
- already open at 17 November 2017, or
- opened on or after that date.
and were opened under:
- section 9A of the Taxes Management Act 1970 (TMA 1970) - for individuals or trusts
- section 12AC of the TMA 1970 - for partnerships
- paragraph 24 of Schedule 18 to the Finance Act 1998 - for companies.
The changes allow us to complete one or more of the matters we are checking before we complete the compliance check itself. We do this by issuing a partial closure notice (PCN) for one or more of the things we have finished checking. The legislation describes the things completed by a partial closure notice as ‘matters’
We can issue more than one PCN during a compliance check. The check will remain open until we issue a final closure notice (FCN) or we settle the check by contract.
HMRC’s policy on issuing PCNs is that we should use them selectively, and not routinely, especially if there is the likelihood of an appeal.
Before issuing a PCN you must obtain the approval of an independent approving officer - unless the tribunal has directed us to issue one. See 'Approval to issue a PCN'
Customer agrees with our view about the matter(s) and won't be appealing
If we have the customer’s agreement to our view about the matter(s), we can complete the matter(s) by issuing a PCN. Having the customer’s agreement means that we would not expect the customer to appeal the PCN.
Customer does not agree with our view about the matter(s)
If we do not have the customer’s agreement to our view about the matter(s), we should only issue a PCN if one of the following applies:
- we have been given a direction by the tribunal
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the compliance check involves one or more of the following:
- tax avoidance
- multiple complex issues
- -a large amount of tax at risk (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
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Customer wants us to complete one or more matters using a PCN
If the customer wants us to complete one or more matters using a PCN but we disagree, the customer may apply to the tribunal for a direction requiring us to issue a PCN. See EM2163
If the tribunal directs us to issue a PCN, follow the guidance at EM1990
What you must do before issuing a PCN
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Partnerships and partners
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Tax avoidance cases
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Likelihood of an appeal
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The amount due for a PCN is the additional tax due after amending the return for the matter(s) you are completing by that PCN. You will need to consider the effects of any previous PCNs or contract settlements for the year or period you are checking.
When calculating the amount due, do not take into account the possible outcome of any other matter(s) we are still checking – this will be dealt with in any future PCNs or the FCN.
Calculating penalties
Where the PCN corrects an error or inaccuracy in a return, we may charge the appropriate penalty. See EM2168 for guidance on calculating penalties when one or more PCNs have been issued for a check.
Before issuing a PCN, you must obtain the approval of an independent approving officer - unless the tribunal has directed us to issue one. There is additional guidance for approving officers, see CH279610
Requests for approval to issue a PCN must be made using form PCN101, ‘Approval for issue of partial closure notice’, which is in SEES. You should email the form, along with ‘before and after’ tax calculations, to the relevant approving officer. They will complete the form and send it back to you to let you know whether you can issue a PCN. Keep a copy of the completed form in the compliance check records.
Preparing the approval form PCN101
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You should use the appropriate version of the PCN on SEES for your type of case. You must only use the versions that are available in SEES forms and letters. These have been approved by the Specialist Technical Team and Compliance Operational Process and Guidance (COPS).
If there is no appropriate version of the PCN available on SEES for your case, please contact the COPS mailbox. Please enter ‘Closure notice’ in the subject field and attach a copy of the approval form PCN101. You don’t need to work in Counter Avoidance (C-A) to use this mailbox.
Customers have the same appeal rights against a PCN as they do against an FCN. The normal procedures for appeals and postponements apply. See ARTG2210+
If no appeal is made against a PCN within the 30-day time limit, we can only make changes to a matter that has been completed by that PCN if we have made a discovery for that matter. See EM3250+
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Issuing an FCN
Once you have finished checking all matters included in your compliance check, you should issue an FCN - unless we are completing the case by contract settlement.
You should follow the normal authorisation process for completing cases in your business area.
In compliance check cases for Company Tax Returns under paragraph 24 of Schedule 18 to the Finance Act 1998, the FCN will be issued by the COTAX system.