Autumn Statement 2016: Tax enquiries – closure rules

HMRC have already identified that in more complex tax avoidance and enquiry cases the tax is not collected as early as possible, as there is no facility to close that specific part of the enquiry. The original Closure Notice legislation only permits the closure of the whole enquiry.

There is often a significant delay in recovering the tax due, as other contentious issues might not be resolved for years afterwards in more extreme cases.

The Government will introduce legislation to provide HMRC and taxpayers with the ability to close an aspect of the enquiry and provide earlier certainty on individual matters in large, high risk and complex tax enquiries.

The new legislation will enable HMRC to collect taxes even though other aspects of an enquiry remain unresolved. Once HMRC have obtained settlement for a significant aspect of the enquiry (bearing the greatest amount of tax) it is not certain whether the remaining aspects will be resolved in a timely manner.

Currently where substantial amounts are involved there is more of an inducement for HMRC to close the enquiry. Under the new legislation, there is a risk that the major aspects will be resolved and the enquiry will remain open for longer.