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HMRC internal manual

Enquiry Manual

Penalties: Culpability - Defences: Failure to Make a Return - Information Supplied Elsewhere

A common contention is that HMRC has been supplied with the required information, or sufficient information. We do not accept that we

  • should exchange information for the purpose of relieving the taxpayer of the obligation to make a return
  • have a duty to exchange information for this purpose
  • owe a duty to the individual taxpayer to make estimated assessments for pre-SA periods based on extraneous information in time to avoid interest and penalty charges for the taxpayer.

In Nicholson v Morris, 51TC95, the taxpayer, a barrister’s clerk appearing in person, contended that it would be a simple matter for the Revenue to examine the accounts of all the barristers in his chambers and determine his income from that source. Walton J, commented that

It is idle for any taxpayer to say to the Revenue, ‘Hidden somewhere in your vaults are the right answers: go thou and dig them out of the vaults’. That is not a duty on the Revenue. If it were it would be very onerous, very costly and a very expensive operation…..

This is a very useful dictum, used in the proper context.

For example, a taxpayer who shows in his return taxed income from a family trust is not thereby notifying the chargeability of that trust - nor is a person who returns the rent from his half-share interest in a property either notifying the chargeability or making a return of the income of his co-owner.

Nevertheless, discretion is required. It is not unreasonable for an agent acting for two or three partners in a firm to send in, on partnership file, a computation of their joint property income. Nor would it be unreasonable for co-directors of a company to send in a joint computation, possibly in the course of correspondence on the company’s file, of a shared capital gain. In each case the correspondence should of course indicate that the particulars are being supplied on behalf of all participants and each personal return should refer to the particulars supplied separately.