Concluding the compliance check

By Tolley in association with Emma Broadbent of Grant Thornton
Personal_tax_img8

The following Personal Tax guidance note by Tolley in association with Emma Broadbent of Grant Thornton provides comprehensive and up to date tax information covering:

  • Concluding the compliance check
  • Prior to closure
  • Contract settlements
  • Letter of offer
  • Letter of acceptance
  • Settlement deed
  • Payment of liabilities
  • Closure of compliance check by closure notice
  • Closure notice where no agreement reached
  • Interest

HMRC will close a compliance checkinto a tax return once it has successfully addressed the perceived risks (with or without the agreement of the taxpayer / adviser). These risks will normally have been identified before the checkbegan and as the checkprogresses.

HMRC may have found nothing wrong with the tax position being checked or may have found an inaccuracy. During the checkHMRC should normally have asked for interim payments of late paid tax and Class 4 national insurance contributions if applicable and considered the position regarding interest and penalties.

If the checkis closed without any inaccuracy being identified, HMRC must send a notice to the taxpayer that the checkis complete.

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If the compliance checkhas been carried out on the telephone, the HMRC officer should confirm closure as part of the call. It is good practice to ask for confirmation of this in writing and HMRC should always write to a taxpayer or adviser if requested. However, a formal checkshould only be concluded via a closure notice, contract settlement or settlement deed.

Where an inaccuracy has been identified, checks to self assessment returns will be closed either through an invitation to amend the tax return and a closure notice, through a contract settlement or a settlement deed. On the closure of a partnership compliance check, the tax returns of all partners will require amendment.

For other compliance checks, the closure will vary according to the nature of the check. This can include, in the case of a pre-return check, the issue of a letter summarising the action needed to be taken by the taxpayer.

In closing a compliance check, HMRC should follow its Litigation and Settlement Strategy. This means that it should not pursue weak arguments but can seek full settlement or pursue to litigation where it has a strong case. See the

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