EM1609 - Opening the Enquiry: Miscellaneous: SA - Interaction with Repayments

TMA70/S59B(4A)

The normal procedure for dealing with SA returns is to process now - check later. This is equally true whether the self assessment shows tax payable or a repayment due. The payment should be processed or the repayment made. However, HMRC has the right to verify the validity and accuracy of the claim and the amount of the repayment.

In certain cases or areas of particular risk we may verify the claim before any repayment is made. It would not then be appropriate to operate the normal process now - check later procedure.

Examples of the circumstances where this may be appropriate include the following.

• You may have reason to doubt the bona fides of the claim or the claimant.
• The repayment risk assessment has identified some problem areas.
• There may be reasonable doubt that some or all of the repayment is due.
• The size of the repayment is disproportionate to the claimant’s apparent means.
• There may be some doubt that the claimant could repay some or all of the repayment if it is later found not to be due. You should avoid repaying a sum that you feel fairly sure is not due and then having to seek it back from a customer.

Where the taxpayer has used an avoidance scheme, withholding the repayment can prevent any suggestion that we have tacitly approved the scheme or encouraged the use of it by giving effect to the repayment.

If you intend to withhold all or part of a repayment, you must open an enquiry into the return. If you decide to open an enquiry to prevent a repayment being made, you should first carry out a full risk assessment of the whole return.

Your enquiry should address all the areas of risk identified by your review. There should be no undue delay between undertaking the risk assessment and opening the enquiry.

You should open the enquiry in the normal way, by writing to the taxpayer (and the agent if appropriate) and requesting the information you need EM1550+. Each case is different and your letter should be written to address the particular circumstances. It should contain wording the same, or similar, to this.

‘Your self assessment shows the amount of [£…..] repayable. Under the authority of Section 59B(4A) Taxes Management Act 1970 I do not intend to repay any of that amount/I intend making a provisional repayment of [£…..], until I have completed my enquiries’.

You should not withhold repayment of more tax than is appropriate in the light of the perceived tax at risk. And if you withhold some or all of the repayment at the beginning of your enquiry, you should make a (further) provisional repayment during the course of the enquiry if it becomes appropriate as your enquiries on particular issues are resolved.