PM151000 - Interaction of disputes mechanism and enquiry processes

When a dispute is referred to the tribunal HMRC have the option to open an enquiry into the partnership return. In addition HMRC may already have an open enquiry into the partnership return, or enquiries open into one or more of the partners’ returns.

Ongoing enquiries

Where existing enquiries are open into the partnership or partners’ returns and HMRC are notified by the disputing partner that a referral has been made you should continue to undertake the enquiry as you would otherwise, but with the following additional actions.

As a party to the dispute you should inform the tribunal of the existing enquiry and any relevant areas that are not final because of the enquiry. The most likely example is where the enquiry is addressing the overall partnership profit figure; the tribunal needs to be informed that this is under enquiry so that if the tribunal determine the allocation of profit between the partners they can include in their decision the fact that the final profit figure is yet to be established.

Opening an enquiry

HMRC may decide to open an enquiry after a dispute over the allocation has been referred to the Tribunal. The time limit for opening an enquiry is extended up to and including the quarter day next following the first anniversary of the day on which HMRC received notification of the referral.

The decision to open an enquiry should only be made where information indicates sufficient risk to aspects of the partnership return NOT related to the allocation of the partnership profit. This is because the tribunal dispute resolution process will resolve the allocation of partnership profit aspect. You should open a partnership enquiry when the information indicates a risk that the overall partnership profit figure is understated.

As with an ongoing enquiry, as a party to the dispute you should inform the tribunal of your enquiry and any relevant areas that are not final because of the enquiry.

If the tribunal has given its decision before you have concluded your enquiry then this decision will take account of the fact that some of the issues are still not final due to the ongoing enquiry. When you close your enquiry you should then issue a final closure notice and decision letter that include HMRC conclusions and the conclusions of the tribunal relating to the allocation of profit.

If you are in a position to close your enquiry and the tribunal process is still ongoing then you should issue a final closure notice. You should also notify the Tribunal that the enquiry is closed and advise of any amendment to the quantum of partnership profits. Any subsequent amendments to the partnership and partner returns as a result of the tribunal decision should be made by virtue of section 12ABZB(8) TMA 1970.