EM3241 - Discovery: partnerships, CTSA and SDLT: partnerships
General
The principles of discovery for s29, TMA 1970 and Paragraphs 41-45, Sch 18, FA 1998 apply for s30B TMA 1970 discovery amendments. EM3220 provides additional information regarding legislation and time limits.
Notice of amendment
In order to use the discovery amendment provisions in s30B TMA 1970 there must be a partnership return. This is because a discovery amendment is not an assessment, but instead amends the return that has been filed.
When an officer makes a discovery that there is
- profit that has not been included, or
- the profit share stated on the partnership statement is incorrect,
they can issue a discovery amendment under s30B(1), TMA 1970.
HMRC must state in this letter that the partnership return has been amended and explain what is being amended. The reason for this is that s30B(1) says 'by notice to that partner so amend the partnership return', which means that the letter itself is the amendment. It is therefore not enough for the letter to state that the return will be amended, it must state that the return has been amended.
Relationship between s29 discovery assessments and s30B discovery amendments
There is a relationship between the partnership return and the partner’s individual return. The partner should include on their individual return any figure that results from the partnership’s return.
HMRC cannot challenge the amount with a s29 discovery assessment if the partner has simply entered amounts that match the partnership’s return.
If HMRC wish to challenge the partner’s individual return in regard to an entry that stems from the partnership return, for example profit from the partnership, they must do so by first enquiring into, or amending, the partnership return.
After HMRC issue a s30B(1) discovery amendment notice to the partnership the appropriate method to correct the position in the partner’s return is to issue a discovery amendment under s30B(2) TMA 1970. EM3220 stipulates the time limits for discovery amendments made under s30B(1) and consequential amendment to the partner’s return, made under s30B(2). It is not correct to issue s29 TMA 1970 assessments in order to collect the tax owed. S30B(2) amendments should automatically be issued by the officer to amend the partners returns. There is no appeal right.
In situations where there is no partnership statement to amend, it is not possible to issue a s30B(1) TMA 1970 notice. In this situation HMRC should issue s29 TMA 1970 discovery assessments to the individual partners.