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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Reopening Earlier Years: Discovery in Pre-SA Years: Outline

The guidance below applies to income tax and CGT assessments for pre-SA periods only.

TMA70/S29(1) (Old)

For pre-SA years an Inspector, if satisfied that any return under the Taxes Acts affords correct and complete information, must make an assessment according to the figures returned.

However, if it appears to the Inspector that there are profits, in respect of which tax is chargeable, not included in the return, or he or she is not satisfied with the return, the Inspector may make an assessment to the best of his or her judgement.

The statute talks of being dissatisfied with the return, but it can be useful to consider this from the other angle: are you satisfied? The Taxes Management Act does not give any guidance how you should go about satisfying yourself. A common sense interpretation is that you may make reasonable and relevant enquiries, and take into account any other information which is available. Where necessary any available statutory powers to obtain information may be used. In making enquiries you should be careful at all stages to be seen to be acting reasonably and with good cause. This does not mean you must have definitive proof of omissions from a return or accounts before embarking on the investigation. It is sufficient to be able to show some cause for dissatisfaction.

Providing you are acting reasonably and following the guidelines in this Manual, you should not be deterred by difficulties put in your way by the taxpayer or his or her agent. Until you are satisfied you do not have to make an assessment according to the figures in the return or accounts. It has been accepted by the Courts and the Parliamentary Commissioner for Administration (the Ombudsman) that it is the right of the individual Inspector to be satisfied. If you are being reasonable in your approach then you have the right to make enquiries and if necessary a best of judgement assessment.

There is useful dicta in the case of Bi-Flex Caribbean Ltd v Board of Inland Revenue (Trinidad and Tobago) 63TC515 EM3314 on whether a decision to assess was made to the best of the Auditor’s judgement