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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Concluding the Enquiry: Calculation of Duty Lost: Introduction

Whether your enquiry is settled by contract letter EM6000+ or along the formal route EM3950+, settlement must be based on a firm statement of duty lost.

This can be arrived at by agreement or by determination by the tribunal. See ARTG2010 for an overview of the review and appeal process.

The figures should be unambiguous, contain no hidden penalties and give effect to the true legal position.

The allowances, deductions and basis periods should be those which would have applied if

  • assessments in the correct figures had been made at the proper time
  • the taxpayer had made full and timely returns
  • the taxpayer had claimed all the reliefs to which he was entitled. EM3905.

The taxpayer should be given the benefit of any concession or favourable legal decisions which have modified HMRC practice or official interpretation of the law since the time when the assessments should properly have been made. Any such benefit should be brought to the taxpayer’s attention and shown in the computations.

Figures for duty lost recoverable by assessment should be clearly agreed by the taxpayer (or, where they dispute the figures, determined on appeal) before you begin to discuss settlement. It should be made equally clear that computational points and concessions in reaching agreement will not affect the penalty abatement (or where the penalty is under FA07/SCH24, the reduction for type and quality of disclosure, see CH82400+).

Where there are open appeals you should ensure that mere agreement of figures incidental to the ascertainment of the duty underpaid, or agreement of the duty underpaid itself, cannot be represented as a final determination of liability for the purposes of TMA70/S54.

Any letter submitting a computation of income or duty for the taxpayer’s agreement or any letter agreeing such a computation put in by or on behalf of the taxpayer should clearly state in terms that agreement of the computation is not to be binding for the purposes of TMA70/S54 unless, exceptionally, it is the enquiry officer’s intention that the agreement shall be so binding (when the letter should equally clearly state that the Section is to apply).

Similarly you should ensure that your computations are not interpreted as closure notices for years where there are open SA enquiries EM3836.