EM7555 - Partnerships: enquiries: effect of opening a partnership enquiry on the partners returns
S12AC(6)
When notice of intention to enquire is given into the partnership return under s.12AC, it is deemed to include the giving of a notice of intention to enquire into each of the partners returns under s.12AC(6).
The deeming provision exists mainly for the purpose of delaying finality on the partners’ self-assessment returns (so far as needed), pending the outcome of the partnership enquiries.
The enquiry which is deemed to be opened into the partners returns under s.12AC(6) does not open an enquiry into the partners entire return – it’s limited to checking matters which relate to the partnership. If you have identified a risk on the partners return which is unrelated to the partnership, then you should give notice of intention to enquire into the partners personal return under s.9A TMA (individuals) or Para 24 Sch18 FA98 (companies).
It’s always good practice to open separate enquiries into each of the partners personal returns either under s.9A TMA (for individuals) or Para 24 Sch18 FA98 (for companies). This is because the s.12AC(6) enquiry which is deemed to have been opened only relates to partnership aspects of the partners’ returns. If you want to enquire into other aspects of the partners’ returns, then you must give separate notice of intention to enquire into their personal returns.
If it’s not possible to open separate enquiries into each of the partners returns, for example if there are too many partners, then you could decide to open enquiries based on the risks identified. If you do not consider the risks involved, and open enquiries as appropriate, then you may be limited to relying on discovery provisions.
A separate enquiry into a partner’s own return is subject to the normal time limits in its own right.
Examples
1) When an enquiry into the partnership return is needed
An enquiry into the partnership return would be needed where a risk has been identified which affects only the partnership return. For example – a risk which involves the partnerships overall income, profits or losses (including how profits have been split between the partners on the partnership statement).
2) When an enquiry into the partners personal returns is needed
An enquiry into the partners personal return would be needed where a risk is identified which is unrelated to the partnership. For example - if the partner has omitted other income or capital gains.
3) When an enquiry is needed into the partnership return and the partners’ returns
Separate enquiries into the partnership and the partners returns would be preferred when a risk is identified which could affect either the partnership return, or the partners return. For example - in ‘mismatch’ cases where the amount of profits returned by the partner in their personal return does not match the amount of profits allocated to them in the partnership statement
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