Enquiries into Tax Returns: settlement of an enquiry
An officer of the Board issues a formal closure notice stating that an enquiry is complete
Any formal enquiry made under Section 9A is treated as completed when an officer of the Board issues the taxpayer with a notice to that effect. The notice states the officer’s conclusions and makes any amendments that are required to the tax return that had been under enquiry. If no amendment is needed the notice must say so.
Where the enquiry related only to an amendment the closure notice must be restricted to that amendment.
Any amendment that the taxpayer has made during the enquiry is given effect in the closure notice. If the officer included the amendment in the scope of the enquiry the closure notice should include the officer’s conclusions about, and any amendments to, the taxpayer’s amendment.
HMRC amendments during the course of an enquiry
It may be that during the course of an enquiry an officer of the Board has reason to believe that there is likely to be a loss of tax unless the self assessment is increased immediately. For example, omissions of taxable items may have been established, but the taxpayer has refused to make a payment on account of the final settlement, or the officer may have information to suggest that the taxpayer is planning to remove assets abroad. In any such case the officer of the Board may issue a notice amending the self assessment accordingly.
Application for direction that the enquiry is complete
Section 28A(4) (5) & (6)
During the course of an enquiry the taxpayer may consider that the officer of the Board has no reasonable grounds for continuing the enquiry, and that therefore the enquiry should be concluded.
In any such case the taxpayer may apply to the tribunal for a direction requiring an officer of Board to issue a closure notice. This application will be determined as if it were an appeal.
This right to apply to the tribunal does not restrict HMRC’s right to make an enquiry into any tax return, but if the taxpayer has provided HMRC with all the information reasonably required to determine the accuracy or completeness of the tax return, it allows the taxpayer to ensure that the enquiry is not unreasonably prolonged.
Appeals against HMRC amendments
Sections 31(1)(b) & 31A
The taxpayer has the right of appeal against any conclusion or amendment made by HMRC under Section 28A(1) and (2). Any appeal must be made in writing within 30 days of the date on which the amendment was issued, and the normal procedures for appeals, and postponement applications, apply.
Section 31(1)(a) and 31(2)
The taxpayer has the right of appeal against an amendment made under S9C, but the appeal will not be heard or determined until the officer has completed the enquiries.
Settlement of enquiries by agreement, including contract settlements
The formal procedures for settling enquiries (SALF406 and above) ensure that the taxpayer and HMRC have equal rights to put their case, if necessary, before the tribunal. HMRC’s aim is that the vast majority of cases are settled by agreement and by an amendment to the self assessment to reflect any adjustments agreed. The adjustments are those in the taxpayer’s favour as well as those in favour of HMRC.
There is facility to agree a contract settlement for all outstanding items.
Before issuing a closure notice or reaching a contract settlement HMRC should discuss with the taxpayer whether he or she now wants to make a claim for relief, up to the amount of any additions, along the lines of sections 36 and 43A (late claims following discovery assessments). Where the notice amending the return was issued after 10 July 2003 section 43C may apply - see section 407A.