Reasonable enquiry

HMRC enquired into the taxpayer company’s 2010/11 tax return and concluded it had understated profits for the year.

The Revenue officer issued a closure notice to amend the return and a discovery assessment for 2011/12 on the presumption the business had understated its profits for the year.

The officer could have opened an enquiry into the 2011/12 return but chose instead to issue the discovery assessment under FA 1998 Sch 18 para 43.

The company appealed against the amendment to the 2010/11 return and the discovery assessment.

An internal review by the tax department concluded that the assessment ought to be withdrawn but the amendment should stand.

HMRC then opened an enquiry into the 2011/12 return. The company applied to the First-tier Tribunal for a closure notice arguing the Revenue had no grounds to begin an enquiry into the year’s return the discovery assessment having been...