HMRC Investigations into Partnership Tax Returns
Tax investigations into partnerships are often divided into two categories: “aspect” enquiries and “full” enquiries. Broadly speaking, the “aspect” enquiries are cases where HMRC is asking about particular entries on the partnership tax return. On the other hand, “full” enquiries look at every aspect of the partnership tax return.
Aspect enquiries are usually more straightforward to deal with, because HMRC are only interested in a limited area of the partnership tax return or partnership accounts.
When HMRC open a full tax investigation into a partnership tax return they will usually ask to see all the books and business records for the partnership. This will include any financial accounts prepared, either by the partnership or their accountant. HMRC will examine these records in detail to see if all the income and expenses have been correctly reported and claimed.
HMRC will usually want to meet with the partners face-to-face so that they can get an understanding of the way in which the partnership operates. WLH Tax recommends that partners do not attend a meeting with HMRC unrepresented, and that ideally the meeting should take place without the partners being present.
Although the primary concern of HMRC when opening a tax investigation into a partnership tax return is to establish the correct profits, WLH Tax has noted that HMRC frequently use this opportunity to look into other taxes. For example, they may review the VAT and PAYE aspects of the partnership’s operations to ascertain if there are any irregularities.
Any adjustments that arise from the investigation will affect the partnership profit or loss declared by each partner on their self-assessment tax returns.
How can WLH Tax Help
Whilst HMRC has various powers granted to them to assist them in carrying out a tax investigation there are also limits to these powers. WLH Tax is a specialist tax investigation practice and so we are aware of the limits to HMRC’s powers and know when it is appropriate to challenge the way in which HMRC is conducting the investigation. In particular, where there is a company tax investigation, we will not allow HMRC to extend their investigation into the personal tax affairs of the director unless they have established a very good reason for this.
WLH Tax will discuss with you and with HMRC any apparent discrepancies between the accounts and the records with a view to reaching an agreement. Where there are discrepancies, we will endeavour to minimise your tax liability.
If HMRC have opened an enquiry into your partnership then please contact us for a free, confidential and no obligation discussion. We are happy to have an initial free of charge meeting with prospective clients.