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HMRC internal manual

Enquiry Manual

Companies: Enquiries into Directors and Participators: General

To check that a company tax return is complete and correct, information about the directors’ personal financial and tax affairs is often needed and you should consider extending enquiries into the directors’ returns when a company tax return is taken up for full enquiry. Guidance on enquiries into close companies is at EM8500+.

SA legislation provides no direct link between the CT return of a company and the returns of its directors, and non-director participators of a close company. A notice of enquiry into a company tax return does not automatically put the directors’ returns under enquiry. If enquiries into a director’s returns are to be made a Section 9A notice must be issued. Where enquiries into a company tax return and directors’ returns are linked, the company and the individual directors could apply separately to the tribunal for a direction to complete the enquiry into their own return EM1975+.

The absence in the SA legislation of a direct link increases the need for co-ordinating compliance activities in respect of companies and their directors/participators. The case owner responsible for the company tax return is responsible for co-ordinating the compliance activity. Where no company enquiry will be opened or only an aspect enquiry with no implications for the directors’ returns, authority should be given to undertake a separate enquiry into the directors’ returns. In other cases consideration should be given to opening linked director enquiries.

There will be situations where enquiries do not necessarily need to be linked but information is obtained during a company enquiry that will be relevant in risk assessing the returns of directors or other employees. An example might be entertaining expenditure of a non close company. Such information should be passed on by the officer dealing with the company enquiry.