SAM31040 - Compliance: enquiry work: concluding an enquiry

The Enquiry Manual contains full details about concluding an enquiry.

The CQI Workbench provides computer support for S9A and S12AC enquiries.

More information is available for each of the following subjects

Closing an enquiry on the CQI Workbench
Enquiry status / Automatic Move status / No Repayment signal
Making a Revenue amendment
Pre 6 April 1994 partnership
Tax geared penalties
Contract settlement: closure notice
Contract settlement includes liability on SA record
Contract settlement: payments on account
Contract settlement: Student Loans and Postgraduate Loans
Making relevant electronic notes
Updating Residency screen in SA

Closing an enquiry on the CQI Workbench

The CQI Workbench function ENQUIRY DETAILS is used to register the issue of a closure notice. (A closure notice is not issued in contract settlement cases unless specifically requested by the taxpayer or his/her agent.) On completing enquiries into a return (or an amendment to the return) the function is used to

• Record the date of issue of any closure notice in the Closure Date field, which is passed overnight to the SA record

And, as required

• Amend the Enquiry type

In a S9A enquiry, you can also use the function at this stage to enter a settlement date provided there is clear evidence in the enquiry papers that the Revenue’s position will be accepted, where

• The closure notice accepts the return is correct (Class A) or there are adjustments, but no additional yield (Class B)

Or

• The Revenue amendment is based on agreed figures (Class C)

If this is not the case, a settlement date must not be entered until

• A contract settlement (SAM31060) has been accepted

Or

• A Revenue amendment (SAM21020) is made to the self assessment (or a notice is issued disallowing a claim or election in full or part) and an appeal is not made in respect of the Revenue amendment (or disallowance of the claim or election). The taxpayer can appeal within the 30 days from the issue of the Revenue amendment (or notice disallowing a claim or election). Do not enter a settlement date until the appeal is determined

Note: Exceptionally, a Revenue amendment is not required in a few cases because a jeopardy amendment (SAM21010), reflecting the final liability has already been made

Before the settlement date can be entered, the following functions on the CQI Workbench must be completed, where appropriate

• RISKS AND ADJUSTMENTS. Adjustment(s) must be recorded, except for Class A settlements. Details of Adjustments achieved are passed to InfoNet to provide management information. It is also used to determine the success of projects and future intervention strategies
• QMS. The QMS Questionnaires must be completed if the In Progress QMS field has been checked in function ENQUIRY DETAILS
• SETTLEMENT DETAILS. The details needed in this function will depend on the settlement class

The settlement class recorded on the CQI Workbench determines the information you need to enter in function SETTLEMENT DETAILS.

The settlement classes are

* A - No change to the return figure as a result of the enquiry
* B - Change to the return figures for one or more years as a result of the enquiry, but no additional yield. No penalty
* C - Change to the return figures for one or more years as a result of the enquiry, resulting in additional yield. No penalty
* 1 - Class 1A settlement (as defined in EM0100)
* 2 - Class 2 settlement (as defined in EM0100)
* 3 - Transferred to Special Compliance Office (SCO)

When the settlement date has been entered on the record, the case is removed from the Open Enquiries List and is placed on the Settled Enquiries List.

Note: The Settled Enquiries List only displays cases which have been settled in the current reporting year.

It is not necessary to enter a date of closure for contract settlement cases when you enter a date of settlement. In these cases the Closure Date field should be left blank unless it is a case where the closure notice has been requested.

In a S12AC enquiry, a closure notice is always issued when enquiries into the partnership return are completed. Its issue does not oblige you to issue a closure notice in respect of any S9A enquiries open on the partners. After issue of the S12AC closure notice, a settlement date is entered on the partnership CQI Workbench record

• At the same time as the closure date is recorded, if there is clear evidence in the enquiry papers that the return is correct or that the Revenue’s figures / position will be accepted

Otherwise

• When the Revenue amendment to the partnership statement becomes final

And

• The penalty abatement in respect of culpable additions to the partnership statement has been agreed with the nominated partner or determined following formal penalty action, when authority has been obtained from Authorising Officers within CPTT or Local Compliance

Note: The office with processing responsibility for a partner (or, if a S9A enquiry is open on the partner for the same year as the S12AC enquiry, the S9A Enquiry Officer) will deal with the partner’s additional liability on his / her revised share of partnership profits / other income and Capital Gains by

* Negotiating a contract settlement with the partner (except where the S12AC enquiry is in respect of Case I or II profits from a pre 6 April 1994 partnership for 1996-97. In this case the additional liability on understated Case I or II profits is a partnership debt)

Or

* Amending the partner’s self assessment for the year of the S12AC enquiry

If a partner is subject to a S9A enquiry, which is likely to be settled by way of a contract settlement, the partner’s additional liability from the S12AC enquiry is usually included in that contract. Where your S9A enquiries are still underway payment of the additional liability from the S12AC enquiry should be sought in advance of making the contract to stop interest accruing. For further guidance about obtaining payments and how to handle them, see EM1936 onwards.

Unless the partner is dealt with in the same office as that undertaking the S12AC enquiry, details of the partner’s revised partnership Case I or II profits / other income and Capital Gains, (identifying culpable / non-culpable additions and the penalty percentage applying to culpable additions), are notified to the office responsible for the partner who should acknowledge receipt of the notification. The S12AC enquiry officer should keep the partnership record on B/F until receipt of the acknowledgement(s) from the partner(s) responsible office(s). CQI Workbench function DIARY should be used to set the B/F date.

The following functions are used to make a Revenue amendment in respect of a S9A enquiry on a taxpayer’s SA record, (or a Revenue amendment on a partner’s SA record in respect of a S12AC enquiry provided there is an open S9A enquiry for the same year on the partner’s SA record)

• AMEND RETURN FOR ENQUIRY. This will amend the entries on the return, maintaining accurate figures for the purposes of risk assessment in the following year (where this has not already been captured). The computer will not issue a revised tax calculation and the update will appear as an enquiry amendment on the next statement
• CREATE RETURN CHARGE FOR ENQUIRY. This enables the liability to be altered without amending the return A revised tax calculation is not available in this function but the update will appear as an enquiry amendment on the next statement

Notes:

1.	Access to functions AMEND RETURN and CREATE RETURN CHARGE is not available for the year of enquiry whilst an enquiry is open
2.	Where the enquiry record was set up using CQI Workbench function CREATE ITSA DISCOVERY, refer to the Action Guide ‘Concluding an enquiry: Using ITSA Discovery records’ (SAM31046)

If a partner does not have an open S9A enquiry for the same year as the S12AC enquiry the enquiry functions will not be available on the partner’s SA record. Instead function AMEND RETURN or CREATE RETURN CHARGE is used to make the amendment in respect of the partner’s revised share of partnership Case I or II profits / other income and Capital Gains from the S12AC enquiry.

On closing an enquiry you should also consider updating compliance details on the SA record by using the following functions

• MAINTAIN COMPLIANCE SIGNALS
• ADD / AMEND ANNUAL COMPLIANCE DETAILS

Enquiry status / Automatic Move status / No Repayment signal

When the SA record is updated after you have used CQI Workbench function ENQUIRY DETAILS to enter a settlement date in respect of a S9A enquiry, the computer updates the enquiry status (SAM31080) on the SA record and, unless another enquiry is open, sets

• Automatic Move (SAM31070) status to ‘Y’

And

• No Repayment signal to ‘N’

In some cases the No Repayment signal will need to be re-set to ‘Y’.

When the SA record is updated after you have used CQI Workbench function ENQUIRY DETAILS to enter a settlement date in respect of a S12AC enquiry, the computer updates the enquiry status and sets the Automatic Move status to ‘Y’ on the partnership SA record. The computer also updates the enquiry status on the linked partners’ SA records for the relevant year unless

• The partner’s SA record is also linked to another SA partnership record on which there is a open S12AC enquiry for the same year
• The linked partner is a company

On updating the enquiry status the computer does not amend the Automatic Move status and No Repayment signal on the partners’ SA records. On opening the S12AC enquiry, the computer will have set them to ‘N’ and ‘Y’ respectively. After the S12AC enquiry is settled, these signals have to be reviewed clerically on the partners’ SA records.

Note: This does not apply where the enquiry record was set up using CQI Workbench function CREATE ITSA DISCOVERY. For these cases, you should follow the guidance in the Action Guide ‘Concluding an enquiry: Using ITSA Discovery records’ (SAM31046).

Making a Revenue amendment

A Revenue amendment must be made to the taxpayer’s self assessment (or partnership statement) at the same time as the closure notice is issued, unless the closure notice

• Accepts that no amendments are needed

And / or

• Agrees that a claim or election in the return (which does not affect the self assessment) should be accepted in full

Consequential amendments to each partner’s self assessment to give effect to the changes made to the partnership statement should only be made once the partnership statement is final.

Pre 6 April 1994 partnership

On settling a S12AC enquiry for 1996-97 into Case I or II profits of a pre 6 April 1994 partnership the partner’s return details are amended for that year to reflect their revised share of profits and notional tax / Class 4 NIC (but see the exception in the next paragraph). The amendment has no effect on the partner’s liability for 1996-97 (as it includes a revised credit for notional tax and Class 4 NIC) but it prompts the computer to set up or amend payments on account for 1997-98.

The partner’s return details are not amended where

• A contract settlement in respect of a S9A enquiry is negotiated with the partner

And

• The contract has a due date after 31/01/1999

In the above situation additional interest on payments on account for 1997-98 (attributable to the partner’s share of understated Case I or II profits) is included in the letter of offer which forms the basis for the contract settlement. If the taxpayer objects

• The additional interest is excluded from the contract settlement

And

• His / her self assessment for 1996-97 is amended to update payments on account for 1997-98

The partnership is responsible for paying tax and Class 4 NIC due on the revised partnership Case I or II profits. Additional liability on the revised partnership Case I or II profits is collected from the partnership by either

• Making a contract settlement with the partnership

Or

• Amending the CODA partnership assessment for 1996-97 and then taking normal recovery action on the partnership

Each partner is responsible for paying any additional liability arising on his / her share of other partnership income or Capital Gains from a pre 6 April 1994 partnership. Such additional liability is collected by either making a contract settlement with the partner or amending his / her self assessment.

Tax geared penalties

The enquiry settlement may include one or more of the following tax geared penalties

• Failure to notify chargeability (S7 TMA 1970)
• Late return of income (S93(5) TMA 1970)
• Fraudulent or negligent submission of an incorrect return, claim to relief or accounts (S95 & 95A TMA 1970)
• Fraudulent or negligent statements relating to a claims to reduce payments on account (S59A(6) TMA 1970)

Note: On agreeing the tax geared penalty, any surcharge imposed on liability on which the penalty is based must be cancelled, unless the surcharge has already been paid and the enquiry will be concluded by negotiating a contract settlement. Where a contract settlement is made, credit is given for the paid surcharge (together with any payment in respect of an interest charge raised on the surcharge) in the contract settlement

When you cancel a fully paid surcharge the computer will automatically cancel any interest charge raised on that surcharge

In England and Wales, at the stage of the enquiry where it appears likely that a penalty will need to be considered, you must issue a ‘Public Funding Leaflet’ in accordance with EM1370.

In non-contract settlement cases penalties for SA years are collected in the SA system by using

• Function CREATE SUNDRY CHARGE to enter the penalty on the taxpayer’s SA record

And, if necessary

• Function MAINTAIN SUNDRY CHARGE to amend the penalty

Note: Formal penalty action must not be taken until authority has been obtained from Authorising Officers within CPTT or Local Compliance.

The taxpayer has the right to appeal against tax geared penalties (as well as fixed automatic and daily penalties for failure to make a return). Such an appeal should be examined immediately on receipt. If you accept that there are grounds for reducing the penalty, it should be amended accordingly. Otherwise

• Use function CREATE APPEAL to record the appeal
• Use function MAINTAIN STANDOVERS to informally holdover collection on the penalty
• Submit the appeal for hearing by Tribunal. If appropriate, submit the case to Authorising Officers within CPTT or Local Compliance before submission for hearing

Contract settlement: closure notice

A closure notice is not issued in a potential contract settlement case unless, exceptionally, the taxpayer or agent insists on its issue. If a request is made before negotiation of the contract settlement

• A closure notice must be issued and a Revenue amendment made to the self assessment or partnership statement

In such cases use the ‘S9A: non-contract settlement’ Action Guide and, on making the contract settlement, the ‘S9A: contract settlement’ Action Guide.

Contract settlement includes liability on SA record

Except for surcharge, collection of other unpaid liabilities on the SA record is heldover informally by using function MAINTAIN STANDOVERS where they are included in a contract settlement. Unpaid surcharge is cancelled using function MAINTAIN SURCHARGE on making the contract settlement.

If a partly paid liability on the SA record is included in a contract settlement

• The part payment on the SA record is not disturbed

And, only

• The unpaid balance is heldover on the SA record
• Function CREATE INFORMAL DISCHARGE is used to discharge the unpaid balances and to clear the informal standovers

For example, on capturing an SA return for 2006-07 the computer set up a balancing charge of £700. A payment of £400 was made on 31/01/2008 leaving £300 outstanding. On 01/05/2008 a S9A enquiry is opened which results in additional tax and Class 4 NIC of £1000. The contract settlement includes the additional liability of £1000 plus the £300 unpaid on the balancing charge. Function CREATE INFORMAL DISCHARGE is used to informally discharge the £300

If the contract settlement includes an amount for Student Loans, follow the guidance below under ‘Contract settlement: Student Loans’.

Contract settlement: payments on account

In non-contract settlement cases an amendment is made to the self assessment of the final enquiry year to reflect the final position and, as a consequence, the correct payments on account are automatically set up for the post enquiry year.

In contract settlement cases the self assessment of the final enquiry year is not usually amended, so payments on account are not automatically set up for the post enquiry year. If the contract settlement has a due date

• On or before the balancing payment due date of the post enquiry year

  • Payments on account for that year are still dealt with in the SA system

  And

  • Function AMEND RETURN FOR ENQUIRY or CREATE RETURN CHARGE FOR ENQUIRY is used (Revenue amendment type) to adjust the return charge of the final enquiry year to generate the correct payments on account for the post enquiry year

  Examples are available at SAM31090 

  The adjustment is done when the contract settlement has been accepted and before entering the settlement date on CQI Workbench function ENQUIRY DETAILS, and involves

  • Checking the current payment position on the taxpayer’s statement, as unallocated credits need to be transferred to OAS before amending the return charge. The statement should be printed before making any changes to the record
  • Amending the return, or adding the total of the agreed additional income tax and Class 4 NIC for the final year of enquiry to the existing entry in the Income tax due after reliefs field of function CREATE RETURN CHARGE FOR ENQUIRY
  • Informally discharging the total of the additional income tax and Class 4 NIC using function CREATE INFORMAL DISCHARGE.

  The amount of the debits that have not been paid for the enquiry years but are included in the contract settlement, are also discharged.

  The effect of these adjustments is to update payments on account for the post enquiry year to reflect the previous years agreed income tax and Class 4 NIC without bringing additional liability into charge for the previous year

• After the balancing payment date of the post enquiry year, provided the return for that year has been received and the taxpayer agrees

  • Payments on account for the post enquiry year are not adjusted

  And, instead

  • Additional interest attributable to the increase in the payments on account is included in the contract settlement, provided the taxpayer or agent raises no objection to its inclusion in the offer

  Note: If the SA return for the post enquiry year shows that liability for that period is less than the original payments on account there will be no additional interest to include in the contract settlement

  If the taxpayer does not agree this approach, or the return for the post enquiry year has not been received, the payments on account for that year are dealt with in the SA system

No action is required in respect of the payments on account for the post enquiry year where Capital Gains is the only additional liability included in the final enquiry year.

Contract settlement: Student Loans and Postgraduate Loans

HMRC is responsible for collecting repayments of Student Loans and Postgraduate Loans (PGL) in respect of the ‘new style’ of loans, known as Income Contingent, made to borrowers after August 1998. A borrower who receives an SA return will be required to pay Student Loan and/or PGL repayments through SA if they have made insufficient payments, based on their income, during the year. The net amount, after deducting any payments made under PAYE, is due as part of the balancing payment. Student Loan and/or PGL repayments are subject to the usual SA payment rules and interest and surcharge rules apply. Amounts relating to Student Loan and/or PGL repayments should be taken into account if you are manually capping a Fixed Automatic Penalty for the tax year 2009-10 and earlier. However they are not included in the calculation of payments on account and the repayments cannot be included in a tax determination.

Full details of the Student Loan and PGL scheme can be found in the Collection of Student Loans (CSL) Manual on the Intranet.

Student Loan and/or PGL repayment information is only transferred automatically to the Student Loans Company (SLC) where a self-assessment (or an amendment) is recorded on the SA system.

There is no automatic transfer of the Student Loan and/or PGL repayments to the SLC where the S9A enquiry is settled by contract settlement, without amending the return details on the SA system.

If you are concluding an enquiry into a 2000-01 or later return by contract settlement, and the taxpayer is required to make Student Loan and/or PGL repayments through SA, the Student Loan and or PGL repayment liability arising out of the enquiry must be agreed with the taxpayer. You must also amend the SA record to make sure that the correct amount is notified to the Student Loans Company.

There are three different scenarios

• The Student Loan and/or PGL will not be repaid by the additional repayments
• The Student Loan and/or PGL has already been repaid
• The additional repayments result in the Student Loan and/or PGL being repaid

For details of the amounts of Student Loan and or PGL repayments, interest and penalties to be included in the contract settlement, and the amounts to be included in the SA record, refer to the section ‘Borrower Compliance’ in the Collection of Student Loans(CSLM8575).

Making relevant electronic notes

At the end of the enquiry, you should use function MAINTAIN SA NOTES to record where the enquiry papers are filed.

Updating Residency screen in SA

Finance Act 2007 Schedule 7 introduced new rules for taxing individuals who are not ordinarily resident and/or not domiciled in the UK and who want to claim the remittance basis of taxation. The first SA returns to reflect these changes are those for 2008-2009.

Additional Information Technology (IT) has been introduced to enable HMRC to support customer population, carry out compliance work and analyse the effects of these new rules. Part of this new IT is a new Residency screen in SA which requires updating at the conclusion of an enquiry. The purpose of this new Residency screen is to record the results of enquiries into the residence, ordinary residence and the domicile status of taxpayers. The screen can only be amended by those case workers who have a technical role within SA.

Case workers must use the new screen to record the final agreed residence/ordinary residence/domicile status of taxpayers following enquiries that involve a challenge to the originally claimed status, even if the challenge is not the main part of the enquiry and even when the outcome is unchanged from that returned by the taxpayer.

The data collected from this screen will provide information on how frequently the claimed residence/ordinary residence/domicile status is overturned by compliance activity.

From April 2010 the years displayed on this SA screen will be the current year and the previous two years. Over time this will be built up until all years CY to CY-9 are displayed.