EM7563 - Partnerships: enquiries: concluding an enquiry or a matter - construction of a closure notice

An enquiry into a matter is completed when an officer, by notice (partial closure notice), informs the taxpayer that they have completed their enquiry into the matter.

An enquiry into the return is completed when an officer, by notice (final closure notice), informs the taxpayer that they have completed the enquiries into the return.

A partial or final closure notice must state the officer’s conclusions and either state that no amendment of the partnership return is required or make the amendments to the partnership return required to give effect to the conclusions.

Further guidance is available at EM3831A.

Who the partial or final closure notice should be sent to

The partial or final closure notice must be addressed to the person that the notice of enquiry was sent to. This will be the nominated partner, or where appropriate, their successor.

What is an amendment

The amendment is the changes that you make to the entries in the partnership tax return or partnership statement. Both partial or final closure notices should either state that no amendment is needed, or they should make the amendments required to give effect to the conclusions stated in the notice.

Under statute, it’s the closure notice itself that amends the return. That is why the notices (available in SEEs) are written in the past tense, as the amendment is made when the notice is issued.

Amendments are expressed in monetary terms and must be unambiguous. The amendment is the result of all of the conclusions stated in the closure notice. For each closure notice, you should be able to say

• what the return showed before the amendment
• what amendment is being made by the closure notice
• what the return shows after the amendment

What is a conclusion

Your conclusions are the decisions reached about what needs to be amended in the return. The starting point for considering how you describe your conclusions will always be what return entries are being amended.

We are required to state conclusions in a closure notice. Your conclusion explains how the return is being amended. A conclusion should be clear and should explain your view on how the return is incorrect in respect of a particular issue and, where appropriate, what the correct treatment is.

Alternative conclusions

See EM3831A

In some complex cases it may not yet be clear what the correct conclusion is. It may be possible to advance alternative conclusions that lead to different amendments.

If you think that there are alternative conclusions that you could state in a closure notice, the first point to consider is whether you could obtain further information or explanations to support a particular conclusion. You could consider making a joint referral to the tribunal under s.28ZA.

If you cannot get the taxpayers agreement to make a referral and you believe that stating alternative conclusions is the best way to protect HMRCs position, you must contact TALA for advice before issuing your closure notice.

Reasons

The ‘reason’ is why you have reached a conclusion. For example, this may be the relevant legislation or tribunal decision that you are relying on.

HMRC are not required to state the reasons for our conclusions in the closure notice. It is however good customer service to explain how we have reached our conclusions and why we have made the amendments.

The templates (available in SEEs) should be used. A separate section for ‘reasons’ is included in the template to ensure that we can clearly separate the reasons from the conclusion.

A customer may appeal against any conclusion stated or amendment made by a closure notice. An appeal may not be made against the reasons.

If you have already explained your reasons in correspondence, you can either repeat those reasons in the closure notice, or make reference to the previous correspondence in the ‘reasons’ section in the closure notice template.

Where your conclusion is that no amendment of the return is required, you may still want to explain that by stating a reason in the closure notice.

Scope of the appeal

The scope of the appeal means the questions that the tribunal can consider during an appeal hearing.

The Court of Appeal has summarised the relevant principles of the scope of the appeal (Fidex Limited v HMRC [2016] EWCA Civ 385 [45])

“The scope and subject matter of an appeal are defined by the conclusions stated in the closure notice and by the amendments required to give effect to those conclusions.

What is important “are the conclusions set out in the closure notice, not the process of reasoning by which HMRC reached those conclusions.

“The closure notice must be read in context in order properly to understand its meaning. Subject always to the requirements of fairness and proper case management, HMRC can advance new arguments before the First-tier Tribunal to support the conclusions set out in the closure notice.”

When conclusions are too narrowly stated and they are rejected by the courts, HMRC may not be allowed to introduce other technical arguments. However, when we state our conclusions too widely, the courts may consider that the scope of the appeal allows the taxpayer to introduce arguments that would not otherwise be allowed by more precisely stated conclusions.

Therefore, it is important you strike a balance when stating your conclusions.

<p></p>
<p></p>