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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
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Partnerships: Discovery Provisions: Practical Approach

Where partnership returns have been submitted, discovery will be dealt with by discovery amendments, followed by consequential amendments to the partners’ self assessments. However, once matters are finalised at partnership level, there will still be times when you will need to make discovery assessments on partners.

Also where individuals have shared undisclosed profits but do not acknowledge that the profits came from a partnership business, it will often be better to make discovery assessments on the individuals rather than wait to establish whether the business was in fact carried on in partnership.

Enquiries into the affairs of partners and partnerships covering years for which there is no open enquiry window will mean that you have to consider the need to make discovery assessments, where non-partnership matters are being reviewed.

The time limits for assessments apply to discovery assessments made on the partners.

S29 applies to all income in a partner’s personal return. It will cover the partnership income but only comes into play if that partner committed fraudulent or negligent conduct. Thus S29 is not effective where a partner had no knowledge of the understated partnership profits and simply enters what he believes is his share. S30B covers this situation.

If you do include the partnership discovery in the S29 assessment this gives an appeal right to individual partners for their share while the legislation envisages one appeal by the nominated partner against the full amount of the discovery.

You will need to keep discovery amendments and discovery assessments separate and distinct.

You may well extend an enquiry into earlier years without the formality of actually making a discovery amendment if co-operation from the partnership and their agent is good. But in some circumstances you may need to consider making a discovery amendment, as a means to move the case forward.