MTT55150 - Administration: Compliance: Compliance checks: Jeopardy amendments

A jeopardy amendment may be made to the self-assessment return while a compliance check is open, if HMRC believes that:

  • the self-assessment understates the group’s tax liability, and
  • there is likely to be a loss of tax to the Crown unless the assessment is amended immediately.

HMRC will amend the assessment to address the understatement of tax by issuing a written notice to the filing member.

This is not a routine procedure. The guidance in the Enquiry Manual at EM1951 to EM1955 should be read before making a jeopardy amendment.

HMRC should only make a jeopardy amendment where there is a real risk of the loss of substantial amounts of tax. For example, where the amount of MTT payable by a member of the group has been established, but the group has refused to make payment and HMRC has information suggesting that liable companies are about to go into liquidation or move assets abroad.

This is set out in part 6, schedule 14 to Finance (No.2) Act 2023.

Compliance checks on amended returns

If the scope of the compliance check is limited to the amended part of a return (see MTT55140), the jeopardy amendment may only be made if the understatement of the liability can be attributed to the amendment.

Appeals

The filing member may appeal against a jeopardy assessment.

Where the filing member has appealed against a jeopardy amendment, the appeal (and any related postponement application) will still be open legally when HMRC issues the closure notice with revenue amendment, as legislation prohibits determination or hearing of the appeal before that date.

The appeal against the jeopardy amendment can be determined either:

  • by agreement between HMRC and the filing member taking effect under Para 61,  Sch 14, Finance (No.2) Act 2023,
  • by the filing member withdrawing the appeal in circumstances where HMRC do not object to the withdrawal (see Para 61(4), Sch 4, Finance (No.2) Act 2023), or
  • by the Tribunal.

Once the filing member has sent an appeal to HMRC, it has the right to request a review by HMRC and the right to notify the appeal to the Tribunal.

It is advisable to ask the filing member, during the negotiations leading up to the issue of the closure notice, to give HMRC written agreement that any appeal against the jeopardy amendment can be withdrawn or settled by agreement under Para 61, Schedule 14, Finance (No.2) Act 2023 at the same time that the revenue amendment is recorded.

HMRC will not release any tax postponed for recovery as a result of an appeal against the jeopardy amendment until the appeal has been formally determined.

See MTT55500+ for guidance on appeals.

Closure notice following a jeopardy amendment

HMRC does not conclude a compliance check into a group’s MTT return by issuing a jeopardy amendment, even if the figures subsequently stated in the closure notice are identical to those in the jeopardy amendment. To complete the compliance check, HMRC must issue a closure notice.

Whether or not the jeopardy amendment is under appeal, the closure notice should follow the standard format.

HMRC does not need to make any special reference to the jeopardy amendment as the closure notice states the amount of tax which should be included in the return.

Jeopardy amendment under appeal – closure notice amendment not appealed

If the filing member does not appeal an amendment made by a closure notice within 30 days of the date of the closure notice, HMRC still has to dispose of the appeal against the jeopardy amendment.

If the filing member agrees to withdraw the appeal against the jeopardy amendment, it can be treated as determined by agreement under Para14 Sch14 of Finance (No.2) Act 2023.

If the filing member does not agree to withdraw the appeal, and refers the appeal to the Tribunal, then the general guidance in the ARTG manual should be consulted.

HMRC will not release any tax postponed for recovery as a result of an appeal against the jeopardy amendment until the appeal has been formally determined.

Jeopardy amendment under appeal - revenue amendment appealed

If the filing member appeals a closure notice, HMRC has to dispose of the appeals against both the jeopardy amendment and the closure notice. If agreement cannot be reached, the decision maker should follow the advice in the ARTG Manual.

HMRC will not release any tax postponed for recovery as a result of an appeal against the jeopardy amendment until the appeal has been formally determined.

If the group, through its filing member, refers the appeal to the Tribunal, the officer (or review team) should ask the Tribunal to:

  • first, determine the appeal against the closure notice,
  • then, determine the appeal against the jeopardy amendment in the same figures.

If necessary, the officer (or review team) may need to explain that this is essentially an administrative procedure to dispose of the appeal against the jeopardy amendment and to give the group finality for the return period.