PM149300 - Opening a compliance check

The statutory provision enabling an enquiry into a partnership return is TMA1970/S12AC. The notice should be issued to the nominated partner or his/her successor. The time limit for issuing a notice under S12AC is generally:

• if the return, or amended return, was filed on or before the statutory filing date, 12 months after the date the return was delivered, or
• if the return was filed after the statutory filing date, or if the return is amended, the quarter date (31 January, 30 April, 31 July, 31 October) after the first anniversary of the day the return was delivered.
• If a voluntary return is made and delivered, 12 months after the date the return was delivered.

Where a partner, or another person, has referred a dispute over the profit or loss allocation shown on the partnership return to the tribunal the time limit for issuing a notice of enquiry is extended up to and including the quarter day next following the first anniversary of the day on which HMRC received notification of the referral. However, any notice of enquiry issued in a period extending beyond the dates above is limited to matters relating to or affected by the dispute. Further information on how disputes over profit/loss allocations are resolved is at PM150000.

The S12AC notice is also deemed to include the giving of a notice of enquiry into each of the partners’ returns who have or subsequently make and deliver a return. This applies even if the time limit for opening an enquiry into a partner’s return separately has passed. As per the guidance at EM7041, HMRC treats the deemed enquiry as only relating to the partnership aspects of the partners’ returns.

For customer service reasons, HMRC usually notifies partners that a compliance check has been opened under S12AC. This may not be practical, however, where there are a large number of partners. In such a case, it is reasonable to rely on the nominated partner to notify the other partners. You should draw the nominated partner’s attention to the fact that you have not notified the other partners separately and highlight the nominated partner’s responsibility to do so.

It is important to remember the time limits for enquiring into partners’ returns when undertaking a compliance check into the partnership return. A separate enquiry should be opened into a partner’s own tax return (e.g. under TMA1970/S9A if an individual) if non-partnership aspects are to be reviewed. You should also do this if the partner disagrees with the figures shown in the partnership statement as having been allocated to him/her.