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HMRC internal manual

Enquiry Manual

Penalties: Incorrect Returns, Accounts etc: Partnership - Pre-SA Years

This guidance applies to returns with a filing date on or before 31 March 2009.

Guidance for returns and other documents with a filing date on or after 1 April 2009, where the return relates to a tax period beginning on or after 1 April 2008, is contained in CH80000+.


TMA70/S95 (old)


Where there have been omissions from, or understatements in, the partnership accounts, there will normally have been fraud or negligence by or on behalf of the partnership and the several persons comprising it.

Each partner is regarded as responsible for the whole of the partnership liability.

It is considered that penalty determinations could be made against each of the partners together comprising the partnership in respect of the following offences.

  • A false claim by a partnership (as distinct from a false claim by an individual partner, such as a loss claim under ICTA88/S380) which does not rest on an entry in a form 1.
  • Submitting incorrect partnership accounts involving fraud or negligence. In practice, partnership accounts take the place of, or supplement a return on, form 1. There is no legal obligation which requires them to be submitted.

In so far as statutory returns (forms 1) of partnership income are concerned, a determination imposing a penalty under TMA70/S95 (1)(a) for fraud or negligence in making an incorrect return, must be made against the precedent acting partner as the person responsible under TMA70/S9 (1), for making the return; and no penalty action lies against the partnership as such. However, under TMA70/S9(3)(old) any partner may be required to make a partnership return.

If the person who was the precedent acting partner at the time the offence in relation to the partnership return was committed dies, the action survives against his personal representatives under TMA70/S100A (1), but they are subject to the limitations which operate in the case of a deceased person.

In practice, when negotiating a pecuniary settlement in respect of tax or NIC lost on partnership income, attention should be directed primarily to the culpability of the individual partners. Each of them is required, to include his share of the partnership profits in his own return of total income. This applies whether or not a return of partnership income is made on form 1 or partnership accounts are submitted.

An offence has been committed in the partner’s personal return in relation to their share of the partnership income where there is

  • no specific figure of partnership profits in the personal return, and
  • merely a reference to a partnership return or partnership accounts which prove to be incorrect by reason of fraud or negligence.

The partner is thus brought within the penalty provisions of TMA70/S95 (1)(a) (and, possibly, TMA70/S95 (1)(b)).

In computing the amount of a penalty in respect of an offence in relation to the personal return of an individual partner tax and NIC lost charged in the partnership name is to be taken into account in Scotland, as well as elsewhere in the United Kingdom.

In the case of a deceased partner, the tax and NIC lost will normally be recoverable by assessment on the partnership, within the time limits applicable to the partnership. Penalties in relation to the tax and NIC on the share of the deceased partner for years outside the normal time limits for assessment are, however, in practice, to be regarded as time-barred for the purpose of computing the amount of the expected offer, even if they could be founded on a partnership offence such as incorrect accounts.