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HMRC internal manual

Self Assessment Claims Manual

Who can claim: Partnerships

If an overpayment relief claim arises from a mistake in a partnership self-assessment return all the relevant partners must agree to the claim whether or not they themselves have overpaid or been over-assessed as a result of the mistake.

A relevant partner is anyone who was a member of the partnership during the period to which the incorrect partnership return relates. If that person has died it includes their personal representative.

The relevant partners must nominate one of themselves to make the overpayment relief claim. This does not need to be the partner for whom the relief is claimed but all of the partners must agree to the nomination.

If in exceptional circumstances individual partners do not agree the profits allocated to them in the partnership statement, they may include the figure they consider correct in their tax return, see EM7025.  If they have used the amount in the partnership statement, they will only be able to claim overpayment relief with the agreement of all the relevant partners.

Where there is a dispute between partners you should check that all the partners have agreed to the claim. On the other hand, if the claim is made by the person usually responsible for dealing with HMRC and the claim affects all partners equally then it’s unlikely that you will need to make further checks concerning this requirement.

The claim

The amount claimed by each partner should be clear and can either be expressed in terms of tax or profits.

For example, if the claim advised that the partnership profits were to be reduced by £15000 equally between three partners, we would accept that the claim has been quantified.

In practice, therefore

  • We would accept single claims included in one document submitted by the nominated partner on behalf of all those affected.
  • It is expected that a single document affecting several claims should be submitted by the nominated partner on behalf of those affected by the claims.
  • There should be a full explanation of the circumstances that gave rise to the claims.
  • It should confirm that all relevant partners agree to the claim(s) being made by the partner nominated.
  • The claim(s) should include details of the relief claimed either in terms of profits or tax.

Example

A, B and C are in partnership as ABC.

On 10 January 2012, A submits the 2010-11 partnership return for ABC showing profits of £140,000 for the year ended 5 April 2011. The split between the partners is

Partner Profit to each partner
A £60,000
B £50,000
C £30,000

There is no enquiry into the return.

In June 2013, B realises that he failed to charge travel expenses of £15,000 to the partnership and that the partnership profits should have been £125,000 divided

Partner Profit to each partner
A £60,000
B £40,000
C £25,000

A, B and C are relevant partners and must agree who should make the claims in respect of the excessive assessments on B and C.

Enquiry Notice

If you have concerns regarding either the validity of the overpayment relief claim or the quantum of the claim you should consider opening an enquiry into all of the claims affected. The notice of the enquiry must be in writing and must be given to the person making the claim, that is the partner nominated to make the claim. It is also good practice to copy any correspondence to all of the partners affected by the claim. If individual claims have been made enquiry notices should be issued to each.

Partnership statement

An overpayment relief claim does not amend the partnership return. However, if an overpayment relief claim means any other partner’s income or gains are understated for the same tax year or partnership income or gains are understated for any other tax year, you may be able to make a partnership discovery amendment.

Giving effect to relief following enquiry

Relief is given either by the repayment of tax or by discharge on each of the affected partner’s SA record. Relief must be given within 30 days of the issue of the closure notice. Where you make discovery amendments ensure that these are done in advance and certainly no later than the date the closure notice was issued.

Para 5 Schedule 1AB TMA 1970

Para 51D Schedule 18 FA 1998