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Where Taxpayers and Advisers Meet

Tax enquiry deadline - related company and partnership

Posts: 1
Joined: Sun Jun 01, 2014 5:48 pm

Tax enquiry deadline - related company and partnership

Postby Taxquery1 » Sun Jun 01, 2014 5:55 pm


I have a quick question about the deadline for HMRC enquiries for a related company and partnership (ie with the same people controlling both)

The limited company bought the related partnership's goodwill and is amortising it in its accounts and tax comp. Entrepenerus relief was claimed on the proceeds of the sale of the goodwill by the partners.

HMRC have launched an enquiry in to the value of the goodwill for the partnership but not for the limited company (i.e. they are saying that the value used was too high)

HMRC have not launched an enquiry in to the company. The goodwill is being written off over three years. Some of these tax comps have been filed already and have not yet been challenged (although the deadline has not yet passed).

The dilemma is that ideally the goodwill would be valued as high as possible for the limited company (to allow more to be written off in the accounts) and as low as possible in the partnership (to minimise tax due by the partners). HMRC are currently trying to reduce the value of the goodwill which would be good for the partners but bad for the limited company. Overall we would like the value to be as high as possible as this is the most beneficial overall.

My question is whether it is worth delaying the correspondence with HMRC around the partnerships tax returns (where HMRC are trying to lower the value) so that the enquiry window for the limited company passes?

Or are there rules where HMRC can do a discovery assessment / another mode of altering the company's tax returns once the partnership's enquiry is resolved?

Also, say two of the three years of which the goodwill is being written off over have passed and the enquiry windows have passed, and HMRC enquire in to the third year, can they then challenge all three years as it's part of the same transaction?

Many thanks for your help

Posts: 1896
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen

Re: Tax enquiry deadline - related company and partnership

Postby wamstax » Tue Jun 03, 2014 2:37 am

It would be feasible for them to "discover and assess" in relation to the company at any time up to 4 years from the end of the company's accounting period without there being any carelessness or deliberate tax evasion. Any smell of carelessness and/or deliberate tax evasion would enable them to discover for up to 6 years and 20 years respectively.

Delaying correspondence might only serve to give HMRC "false" suspicion that figures have been manipulated or that your are dilatory or worse (if you can see what I mean)
regards and hope this helps
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