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HMRC internal manual

Enquiry Manual

Companies: General Approach and Legal Background

A company is a legal entity separate from its shareholders and directors, or grouped or associated companies. During a company enquiry, tax liability for directors or other companies could be uncovered or the enquiry may be based on the personal financial affairs of its participators but the separate legal identity of each must be recognised and maintained.

Dependant on its nature, a company enquiry may embrace with affairs of the participators and directors, and a review of its duties as an employer, involving whole case working by a team, but each part of the enquiry should be conducted in accordance with the legislation, guidance and codes of practice applicable to that part of the enquiry or review. This will, where necessary, require establishing, as part of the company enquiry, the link between the company and the financial affairs of its participators and directors.

Where you have information of omissions by directors or participators whose returns do not include any profit-earning source other than the company, an enquiry into the tax returns of the company should be made. Guidance on company enquiries with linked enquiries into the tax affairs of directors and participators is at EM8500+.

The returns made by a company as an employer and contractor are not SA returns. Employer compliance activity relating to these returns does not affect the CTSA enquiry position but it is important to distinguish between employer compliance enquiries and SA enquiries. Employer Compliance officers make it clear in writing that their review is directed at the employer’s/contractor’s return. If an Employer Compliance review is extended care should be exercised to ensure no SA enquiry problems ensue with the company or its directors EM8250.