Concluding the compliance check
Note: This guidance note uses the term compliance check in line with HMRC’s current terminology. However, the term ‘enquiry’ is still used in the legislation referenced.
HMRC will close a compliance check into 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 check began and as the check progresses. HMRC and taxpayers may resolve and close individual aspects, by way of a partial closure notice (PCN), whilst leaving other matters open. When all issues are resolved, a final closure notice is issued. Prior to 16 November 2017, it was not possible for HMRC to issue a PCN. Instead, it was only possible for HMRC to issue a final closure notice once all matters were complete.
HMRC may have found nothing wrong with the tax position being checked or may have found an inaccuracy. During the check HMRC 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 check is closed without any inaccuracy being identified, HMRC must send a final notice to the taxpayer that the check is complete.
If the compliance check has 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 check should 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 through an invitation to amend the tax return and a closure notice, or 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.