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HMRC internal manual

Enquiry Manual

Partnerships: Concluding Enquiries: Example

The statutory framework supporting the enquiry officer’s actions at each stage is set out in the table at the end of this example.


The following example shows how the SA rules for enquiries apply to partnerships and partners. Although it is not intended to be totally realistic, it does show how various aspects of the legislation can interact and the approach to take when they do.

Hazel, John and Stephen have carried on a printing business in partnership for a number of years. They make up accounts each year to 31 December and share profits in the ratio 30:25:45.

Stephen is the nominated partner. On 24 January 2011 he filed the 2009/10 partnership return, which includes information from the 12 month period of account ended 31 December 2009. Each partner filed their personal return shortly afterwards.

The trading profit shown in the partnership return was £80,000. The partnership statement showed the profit allocated as follows

  • Hazel - £24,000
  • John - £20,000
  • Stephen - £36,000

The partnership had no other source of income.

In addition to their shares of the partnership profit, the personal returns of each partner include the following

  • Hazel - UK Dividends £200
  • John - Income from property £4,000
  • Stephen - No other income

The tax charged in each partner’s self assessment was

  • Hazel - £4,900
  • John - £4640
  • Stephen - £8300

The case was selected for enquiry.

The Enquiry Opening

We issued a notice of enquiry into the partnership return under TMA/S12AC (1) to Stephen as nominated partner on 15 March 2011. Because of the additional risks in the case we also issued Section 9A notices to Hazel and John in respect of their personal returns at the same time. We notified all three partners that the deeming provision applied.

Note - Section 12AC(6) applies to each partner, effectively delaying finality to allow the tax consequences of the partnership enquiry to be reflected in amendments to their individual self assessments.


Stephen, the nominated partner, does not comply with the initial request for the partnership books and records within the period specified in the opening letter. We now need to use our information powers. We must issue a combined first party and third party notice under Schedule 36 Para 1) and (2) FA08, giving the nominated partner 30 days, in this example, to comply with the notice.

Note a combined first party taxpayer and a third party notice is required because we are checking the tax position of Stephen as the first party and Hazel and John as the third parties. We are asking Stephen, the partner receiving the notice, for information and documents to check

  • his tax position (the first party taxpayer notice)
  • the tax position of one or more of the other taxpayers in their capacity as partners (the third party notice).

See CH23720 for further guidance.

Stephen then provides us with the books and records within the time limit.

Hazel also provides all the information we requested to support the personal income figures in her own return. John fails to provide the information we need so we will have to send him a first party taxpayer notice for the records relating to his income from property. He then complies with this notice.

Payments Made

As the enquiry progresses we establish understatements in the partnership return of at least £15,000. We also find that John has overstated the expenses claimed against his income from property by about £1,200.

We then ask the partners to make payments on account for the further liability that will need to be reflected in their self assessments. Hazel makes a payment of £1,000, and Stephen £1,500, but John refuses to make a payment.

We believe that we are justified in making a jeopardy amendment to John’s self assessment. We make an amendment to John’s self assessment to bring a further £1,000 into charge (based on the additional tax due at 20 percent on the total of his 25 percent share of the £15,000 additions plus the understatement of £1,200).

Note - if Stephen had refused to make a payment on account, we cannot make a jeopardy amendment to his return because we have not yet opened a Section 9A enquiry into his return (the deemed notice will not do). We will have to issue a separate Section 9A notice to Stephen first.

John appeals against the jeopardy amendment and applies for full postponement of the additional tax. The hearing of the appeal must wait however until we have closed the enquiry into his personal return.

At the hearing of the postponement application the tribunal determines that the full amount of the tax is due and payable as a result of the amendment.

At this stage we also need to consider whether to reopen earlier settled years. If we decide to do this we will have to rely on the discovery legislation at Section 30B to make discovery amendments to earlier year’s partnership returns for SA years. In this example, the position for earlier years has been ignored as it is only concerned with the processes underlying the Section 9A/Section 12AC enquiry framework.

Concluding the Enquiry

At no time has a partial closure notice been issued with respect to either the partnership or Hazel and John.

Once we complete our enquiries in full we must issue a final closure notice for the partnership enquiry to Stephen, the nominated partner, under Section 28B(1B). The notice amends the figure of profit to what we consider should have been returned in the partnership statement (£65,000). We also enclose a letter showing how this is allocated between the partners, in proportion to the normal sharing arrangements as follows

  • Hazel - £28,500
  • John - £23,750
  • Stephen - £42,750

We must also issue final closure notices under Section 28A(1B) to Hazel and John, whose personal returns are under enquiry, showing the amount of tax which we consider is actually due in each partner’s self assessment.

Tax is now due on:

Hazel Revised share of partnership profit, plus unadjusted personal income £6,200
John Revised share of partnership profit, plus revised income from property £5,930

We must also make amendments to each of the partners’ self assessments to take account of the final figures in the partnership statement.

Stephen then appeals against the amendment.

Following discussions about how we will deal with earlier years we reach an agreement and Stephen withdraws the amendment to the partnership return. This finalises the partnership position and we can make the following amendments to the partners’ self assessments.

Hazel Amended self assessment   £6,200
  Original self assessment £4,900  
  Amendment to tax on partnership share £1,300  


John Amended self assessment   £5,930
  Original self assessment £4,640  
  Amendment to tax on personal income £240*  
  Amendment to tax on partnership share £1,050  
  * jeopardy amendment £1,000 under appeal    


Stephen Amended self assessment   £10,200
  Original self assessment £8,300  
  Amendment to tax on partnership share £1,900  

John agrees the additions in respect of his self assessment and the appeal against the jeopardy amendment under Section 9C(2) is determined by agreement under Section 54, at £240. The Section 28A and Schedule 28B amendments to his self assessment now combine to bring the final assessment up to the agreed figure.

The interaction of the two appeals affecting John’s self assessment (against the Section 9C(2) amendment, directly, and the Section 28B(2) amendments, indirectly) will depend on the order in which the appeals are dealt with, whether by agreement or otherwise. In this example the partnership amendment is finalised first, and the determination of the Section 9C appeal is made such that this final adjustment to the self assessment gives rise to the correct final tax liability.

If the Section 9C(2) appeal had been settled before the Section 28B(4) amendment was made, the Section 28B(2) figure would have needed to reflect both the settlement of the appeal against the Section 9C(2) amendment and the final figure in the partnership statement, in order that the amended self assessment stood at the correct figure.

Table (Word 73KB) - statutory framework for Concluding Partnership Enquiries.

  Hazel Partnership  Hazel Personal John Partnership John Personal Stephen Partnership Stephen Personal Stephen as Nominated Partner 
Enquiry Notice Deemed S12AC(6) TMA70 S9A(1) TMA70 Deemed S12AC(6) TMA70 S9A(1) TMA70 Deemed S12AC(6) TMA70   S12AC(1) TMA70
Information Power   Para 1 Schedule 36 FA08   Para 1 Schedule 36 FA08     Paras 1 & 2 Schedule 36 FA08
Jeopardy Amendment       S9C TMA70      
Appeal       S31(1)(a) TMA70      
Final Closure Notice   Section 28A(1B) TMA70   Section 28A(1B) TMA70     Section 28B(1B) TMA70
Appeal             S31(1)(b) TMA70
Determination of Appeals       S54(1) TMA70     S54(4) TMA70
Amendments to Self Assessment Section 28B(4) TMA70 28A(1B) TMA70 Section 28B(4) TMA70 28A(1B) TMA70 Section 28B(4) TMA70