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HMRC internal manual

Enquiry Manual

Concluding the Enquiry: SA Legislation: CTSA - Consequential Amendments to Returns for Other Periods

FA98/SCH18/PARA 34(2A)

An enquiry into the return for one period may give rise to consequential amendments to the return(s) for other periods. Your partial or final closure notice should include your conclusions about the effect on those other returns. The partial or final closure notice should not make the amendments of those other returns. You do that separately, using the Revenue Amendment function in COTAX.

For example, the company may have returned a loss for the year. After your enquiry it is agreed there is no loss or a profit. The company may have claimed to have carried forward the original loss for set off against the profits of a subsequent period. Clearly, if the result of the enquiry is that there is no loss, the return for the subsequent period would need to be amended. If the return for that subsequent period had become final, amendments to that return might be time-barred, were it not for paragraph 34(2A). This paragraph overrides the time limits which would otherwise apply to company and taxpayer amendments to returns for other periods.

But you should not rely on paragraph 34(2A) to make Revenue amendments which are not a direct result of the conclusions stated in the partial or final closure notice.

For example, you may have agreed that a proportion of promotional expenditure should be disallowed on the grounds that there is an element of entertaining involved. You may also have concluded that this element is a recurring feature, so that an annual disallowance is appropriate. Amendments to other years’ returns in these circumstances would not be consequential amendments, and you should not attempt to use paragraph 34(2A). You should make a discovery assessment, EM8135, if you do not have an open enquiry into that other period.

Or, in a full enquiry you conclude that profits have been understated not only for the year under enquiry, but also for other years. You cannot use paragraph 34(2A) to increase the amounts of the self assessments for years other than the one under enquiry. The appropriate course of action in circumstances such as these is to make discovery assessments or determinations where the relevant conditions are satisfied.