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HMRC internal manual

Self Assessment: the legal framework

Self Assessment for partnerships: settlement of an enquiry

Section 28B

The rules for the conduct of an enquiry and for amending a partnership tax return following an enquiry, mirror those for amending an individual’s return. They also provide for the corresponding amendments to each partner’s tax return.

Officer of the Board issues a formal enquiry closure notice

Section 28B(1) (2) & (3)

Any formal enquiry into a tax return, or an amendment of a return, under Section 12AC is treated as complete when an officer of the Board issues the nominated partner with a notice to that effect. The notice (called a ‘closure notice’) states the officer’s conclusions and makes any amendment that is required to the partnership tax return. Where no amendment is needed the notice must say so.

Where the enquiry related only to an amendment the closure notice is restricted to that amendment.

Section 12AD

Any amendment that the partnership 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 partnership’s amendment.

Right of appeal against HMRC amendment

Section 31(1)(b)

The nominated partner has the right of appeal against any amendment of the partnership tax return under Section 28B(2) or against the conclusions stated in the closure notice.

Application for direction that completion of enquiry notice be issued

Section 28B(5) to (7)

The nominated partner may apply to the tribunal to direct that a closure notice be issued. The tribunal will give the direction unless they are satisfied there are reasonable grounds for not issuing a closure notice.

Notice to amend each partner’s tax return

Section 28B(4)

Individual partners have no right of appeal to the tribunal in respect of the corresponding amendments to their tax returns. Instead those corresponding amendments are only made once the partnership tax return has been amended.

The officer of the Board is required both to notify all the individual partners of the amendments required to their individual self assessments and to make those amendments.

Discovery and partnerships

Section 30B

Although discovery assessments must be made on individual partners there are specific discovery rules in respect of the partnership return itself.

Section 30B(1)

An officer of the Board may amend a partnership tax return where the officer discovers that:

  • profits have been omitted from the statement
  • the profits included are, or have become, insufficient
  • the reliefs or allowances claimed in the statement are, or have become, excessive.

Section 31(1)(c)

The nominated partner has the right of appeal against any such amendment.

Section 30B(2)

Where a discovery amendment is made, the officer may also make the corresponding amendments to the partners’ individual tax returns to give effect to the amendments of the partnership return.

Section 29 and Section 36(1)

Alternatively individual discovery assessments may be required. If so the normal time limits for discovery assessments apply.

Section 30B(3) to (10)

The conditions under which discovery amendments may be made mirror those for discovery assessments (see SALF409). So, for example, there must have been incomplete disclosure or careless or deliberate conduct by one of the partners, or a person acting on behalf of that partner.

Similarly, there can be no discovery simply because of a change in HMRC practice at a later date.

Penalties for inaccuracies in a partnership tax return

Schedule 24 FA 2007

Where the nominated partner submits:

  • an inaccurate partnership tax return, or
  • inaccurate accounts connected with that tax return, or
  • an inaccurate statement or declaration connected with that tax return,

and the inaccuracy was careless or deliberate, then each partner will be liable to a tax geared penalty computed on an individual basis, by reference to the additional tax that each individual partner is required to pay as a result of that inaccuracy.

Schedule 24 paragraph 20(6)

Where penalties are determined on two or more partners any appeal against the determination of a penalty must be made by the nominated partner or his successor. An appeal made by the nominated partner will be a composite appeal against the determination of each penalty.