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HMRC internal manual

Enquiry Manual

Partnerships: Discovery Provisions: Discovery Investigations Unavoidable

You should normally adhere to using the dedicated SA powers for enquiries, but as with individuals, EM1545, situations will arise where this is not possible.

With partnerships an added complication is that you will need to review the affairs of the partnership and the partners, when weighing up the approach to take and the timing of your opening. You will sometimes need to judge whether to open your partnership enquiry when you have some, but not all of the returns for the partnership and the partners for a given year. In these cases the enquiry windows for some returns may be closing before other returns are received.

For example, the returns for a partnership and the three partners have been received for year 1, but no enquiry has been opened to date. Third party information is then received in respect of a second business of one of the partners for the following year for which he or she has already made his or her personal return. This prompts you to consider the need to open an enquiry into the partnership return.

If enquiries were undertaken into year 1, the enquiry could be opened immediately, but information relating to the later year may be difficult to use. The alternative would be to await submission of the year 2 returns, including that for the partnership, but if the enquiry windows for year 1 were allowed to close the only way back into that year would be through use of the discovery legislation.

Care should be taken in cases not involving careless or deliberate behaviour. The conditions in Section 30B(6) and/or Section 29(5) would prevent the reopening of the year if HMRC should have been aware from the information made available by the taxpayer that the return was incorrect at the time the enquiry windows closed, or a partial or final closure notice was issued to the nominated partner, but took no action.

Section 29(7)(a)(ii) requires that you infer knowledge of the information supplied in relation to the partnership return under Section 12AA when considering whether information is made available in relation to the individual partners’ returns. But the converse is not the case. There is no corresponding provision that information supplied in relation to the individual partners’ returns was made available in respect of the partnership return.

The best approach in any particular case will depend upon the facts. You should discuss complications with your team leader.