HMRC’s powers of enquiry into self-assessment returns

The taxpayer was a member of a limited liability partnership that submitted a tax return (TMA 1970 s 12AA and s 12AB) showing a loss for 2010-11. The statement in the return showed the taxpayer’s share of the loss as £422 314. The taxpayer filed his own return (TMA 1970 s 8) and included partnership pages for the LLP. He claimed £25 000 loss relief against his other income

HMRC opened an enquiry into the taxpayer’s personal return but not into the partnership return. It disallowed his loss relief claim on the basis the LLP was not carrying on a trade or at least was not carrying on a trade commercially.

The taxpayer appealed saying it was not open to HMRC to ask about the partnership losses. The only way it could enquire into these was by enquiring into the partnership return (s 12AA).

The First-tier Tribunal said...