Finance Bill (HC Bill 116)

subject to any conditions or exceptions specified in writing by an
officer of Revenue and Customs.

(7) The Commissioners may by regulations—

(a) provide that the records required to be kept and preserved
5under this paragraph include, or do not include, records
specified in the regulations, and

(b) provide that those records include supporting documents
so specified.

(8) The regulations may make provision by reference to things
10specified in a notice published by the Commissioners in
accordance with the regulations (and not withdrawn by a
subsequent notice).

Penalty for failure to keep and preserve records

39 (1) A company which fails to comply with paragraph 38 is liable to a
15penalty not exceeding £3,000.

(2) If a company becomes liable to a penalty under this paragraph, an
officer of Revenue and Customs must—

(a) assess the penalty, and

(b) notify the company.

(3) 20The assessment must be made within the period of 12 months
beginning with the day on which an officer of Revenue and
Customs first becomes aware that the company has failed to
comply with paragraph 38.

(4) A company may, by notice, appeal against a decision of an officer
25of Revenue and Customs that a penalty is payable under this
paragraph.

(5) Notice of appeal under this paragraph must be given—

(a) within 30 days after the penalty was notified to the
company,

(b) 30to the officer of Revenue and Customs who notified the
company.

(6) A penalty under this paragraph must be paid before the end of the
period of 30 days beginning with—

(a) the day on which the company was notified of the penalty,
35or

(b) if notice of appeal against the penalty is given, the day on
which the appeal is finally determined or withdrawn.

Part 4 Enquiry into interest restriction return

40Notice of enquiry

40 (1) An officer of Revenue and Customs may enquire into an interest
restriction return submitted by a reporting company if the officer

gives notice to the company of the officer’s intention to do so
(“notice of enquiry”).

(2) The general rule is that an interest restriction return which has
been the subject of one notice of enquiry may not be the subject of
5another.

(3) If a return (“the previous return”) is superseded by an interest
restriction return submitted under paragraph 8 (“the revised
return”), notice of enquiry may be given in relation to the revised
return even though notice of enquiry has been given in relation to
10the previous return.

(4) But see paragraph 43(5) for a limitation in certain circumstances
on the scope of an enquiry into an interest restriction return
submitted under paragraph 8.

(5) The power to give notice of enquiry into an interest restriction
15return for a period of account of a worldwide group does not
restrict the power to give notice of enquiry into a company tax
return of a company that is a member of the group at any time in
that period.

(6) Accordingly, an amendment of the company’s company tax
20return may be required as a result of an enquiry into the interest
restriction return even though a closure notice has been given in
respect of an enquiry into that company tax return.

(7) But see paragraph 43(2) for a limitation on the scope of an enquiry
into an interest restriction return so far as affecting amounts in a
25company tax return.

Normal time limits for opening enquiry

41 (1) This paragraph applies where an interest restriction return is
submitted by a reporting company for a period of account.

(2) Notice of enquiry may be given at any time before whichever is the
30latest of—

(a) the end of the period of 39 months beginning with the end
of the period of account;

(b) the end of the period of 6 months beginning with the day
on which the reporting company was appointed; and

(c) 35the end of 31 January, 30 April, 31 July or 31 October next
following the first anniversary of the day on which an
officer of Revenue and Customs receives the revised
return.

(3) If—

(a) 40estimated information (or information deriving from
estimated information) is included in an interest restriction
return for a period of account in reliance on paragraph 27,
and

(b) a period of 36 months beginning with the end of that
45period of account has passed without the information
becoming final,

notice of enquiry may be given at any time up to and including the
end of the period of 12 months beginning with the end of that 36-
month period.

(4) This paragraph is subject to paragraph 42 (which allows notices of
5enquiry to be given after the time allowed by this paragraph or an
enquiry previously closed to be re-opened).

Extended time limits for opening enquiries: discovery of errors

42 (1) Notice of enquiry may be given later than the time allowed under
paragraph 41, or a closed enquiry may be re-opened, if—

(a) 10an officer of Revenue and Customs discovers that an
interest restriction return submitted to an officer of
Revenue and Customs does not, or might not, comply with
the requirements of paragraph 20(3) in any respect,

(b) there would be, or might be, an increase in tax payable by
15any company for any accounting period if the return had
complied with those requirements in that respect,

(c) the discovery is made after the time allowed under
paragraph 41 or after an enquiry into the return has been
closed, and

(d) 20the officer could not, at the relevant time and by reference
to the relevant information, have been reasonably
expected to be aware of the respects in which the return
might not comply with those requirements.

(2) For this purpose “the relevant time” means—

(a) 25in a case where no notice of enquiry has been given within
the time allowed under paragraph 41, when an officer of
Revenue and Customs ceased to be entitled to give a
notice, or

(b) in a case where an enquiry has been closed, when the
30officer gave the closure notice.

(3) For this purpose “the relevant information” means information
which—

(a) is contained in the interest restriction return in question or
either of the two returns for the immediately preceding
35periods of account of the group,

(b) is contained in any documents, financial statements or
other accounts or information produced or provided to an
officer of Revenue or Customs for the purposes of an
enquiry into the interest restriction return in question or
40either of the two returns for the immediately preceding
periods of account of the group,

(c) is information the existence of which, and the relevance of
which as regards the situation mentioned in sub-
paragraph (1)(b), could reasonably be expected to be
45inferred by an officer of Revenue and Customs from
information falling with paragraph (a) or (b) of this sub-
paragraph, or

(d) is information the existence of which, and the relevance of
which as regards the situation mentioned in sub-

paragraph (1)(b), are notified in writing to an officer of
Revenue and Customs by the reporting company for the
period of account or a person acting on its behalf.

(4) Notice of enquiry into an interest restriction return for a period of
5account may not be given, or a closed enquiry may not be re-
opened, as a result of this paragraph more than the applicable
number of years after the end of the period of account.

(5) The “applicable number of years” is—

(a) 20 years in a case involving deliberate non-compliance by
10the reporting company for the period of account or by a
qualifying person,

(b) 6 years in a case involving careless non-compliance by the
reporting company for the period of account or by a
qualifying person, and

(c) 154 years in any other case.

(6) For this purpose “qualifying person” means—

(a) a person acting on behalf of the reporting company for the
period of account, or

(b) a person who was a partner of the reporting company for
20the period of account at the relevant time.

(7) For the purposes of this paragraph an enquiry is “closed” when a
closure notice is given in relation to the enquiry.

Scope of enquiry

43 (1) An enquiry into an interest restriction return extends to anything
25contained, or required to be contained, in the return (including
any election included in the return).

(2) But the enquiry does not extend to an enquiry into an amount—

(a) which is contained, or required to be contained, in a
company tax return of a UK group company, and

(b) 30which is taken into account in any calculation required for
the purposes of the interest restriction return.

(3) Sub-paragraph (2) does not affect—

(a) any question as to whether or not, as a result of this Part of
this Act, the amount falls to be left out of account, or to be
35brought into account, in any accounting period of the
company, or

(b) the way in which, by reference to that amount and other
matters, any provision of this Part of this Act has effect to
determine whether or not the amount, or any other
40amount, is to be left out of, or brought into account, in any
accounting period (whether of that company or another
company).

(4) Nor does sub-paragraph (2) limit the operation of any provision of
Part 4 of Schedule 18 to FA 1998 (determinations and assessments
45made by officers of Revenue and Customs).

(5) If—

(a) at any time an enquiry into an interest restriction return
(“the previous return”) has been closed, and

(b) the previous return is subsequently superseded by an
interest restriction return submitted under paragraph 8
5(“the revised return”),

the enquiry into the revised return extends only to matters arising
as a result of information that was not included in the previous
return.

(6) For this purpose an enquiry is “closed” when a closure notice is
10given in relation to the enquiry.

Enquiry into return for wrong period or wrong group

44 (1) If it appears to an officer of Revenue and Customs that the period
of account for which an interest restriction return has been
submitted is or may be the wrong period, the power to enquire
15into the return includes power to enquire into the period for which
the return ought to have been made.

(2) If sub-paragraph (1) applies, paragraph 41 (normal time limits for
opening enquiry) has effect as if the return were one that had been
submitted for the correct period of account.

(3) 20If it appears to an officer of Revenue and Customs that the
worldwide group (“the relevant group”) in relation to which an
interest restriction return has been submitted—

(a) consists of, or may consist of, two or more worldwide
groups,

(b) 25includes, or may include, entities that are members of a
different worldwide group or groups, or

(c) does not include, or may not include, entities that should
be members of the relevant group,

the power to enquire into the return includes power to enquire
30into the returns for the periods of account of the worldwide
groups which ought to have been made.

Amendment of self-assessment during enquiry to prevent loss of tax

45 (1) If after notice of enquiry has been given into an interest restriction
return but before the enquiry is completed, an officer of Revenue
35and Customs forms the opinion that—

(a) the amount stated in the self-assessment of a company as
the amount of tax payable is insufficient,

(b) the deficiency is attributable to matters in relation to which
the enquiry extends, and

(c) 40unless the assessment is immediately amended there is
likely to be a loss of tax to the Crown,

the officer may by notice to the company amend its self-
assessment to make good the deficiency.

(2) In sub-paragraph (1) the reference to a company is to a company
45that was a member of the group at any time in the period of
account for which the interest restriction return was submitted.

(3) An appeal may be brought, by notice, against an amendment of a
company’s self-assessment by an officer of Revenue and Customs
under this paragraph.

(4) Notice of appeal must be given—

(a) 5within 30 days after the amendment was notified to the
company,

(b) to the officer of Revenue and Customs by whom the notice
of amendment was given.

(5) None of the steps mentioned in section 49A(2)(a) to (c) of TMA
101970 (reviews of the matter or notification of appeal to tribunal)
may be taken in relation to the appeal before the completion of the
enquiry.

(6) In this paragraph “self-assessment” has the meaning given by
paragraph 7 of Schedule 18 to FA 1998.

15Revision of interest restriction return during enquiry

46 (1) This paragraph applies if a reporting company submits a revised
interest restriction return at a time when an enquiry is in progress
into the previous return.

(2) The submission of the revised return does not restrict the scope of
20the enquiry but the revisions may be taken into account (together
with any matter arising) in the enquiry.

(3) So far as the revised return affects the tax payable by a company,
it does not take effect until the enquiry is completed (and,
accordingly, paragraph 70 has effect subject to this sub-
25paragraph).

(4) But sub-paragraph (3) does not affect any claim by the company
under section 59DA of TMA 1970 (claim for repayment in advance
of liability being established).

(5) The submission of a revised return whose effect is deferred under
30sub-paragraph (3) takes effect as follows—

(a) if the conclusions in the closure notice state either—

(i) that the revisions were not taken into account in the
enquiry, or

(ii) that no revision of the revised return is required
35arising from the enquiry,

the revision takes effect on the completion of the enquiry,
and

(b) in any other case, the revisions take effect as part of the
steps required to be taken in order to give effect to the
40conclusions stated in the closure notice.

(6) For the purposes of this paragraph the period during which an
enquiry into an interest restriction return is in progress is the
whole of the period—

(a) beginning with the day on which an officer of Revenue and
45Customs gives notice of enquiry into the return, and

(b) ending with the day on which the enquiry is completed.

Completion of enquiry

47 (1) An enquiry into an interest restriction return submitted by a
reporting company is completed when an officer of Revenue and
Customs by notice (a “closure notice”)—

(a) 5informs the company that the officer has completed the
enquiry, and

(b) states the officer’s conclusions.

(2) The closure notice takes effect when it is given.

(3) If an officer of Revenue and Customs concludes that the return
10should have been made for one or more different periods of
account of the group, the closure notice must designate the period
of account (or periods of account) for which the return should
have been made.

(4) If an officer of Revenue and Customs concludes that an interest
15restriction return in relation to a worldwide group should have
been submitted—

(a) in relation to one or more different worldwide groups, or

(b) in relation to a different membership,

the closure notice must designate each period of account of a
20worldwide group for which an interest restriction return should
have been made or for which an interest restriction return should
have been submitted in relation to a different membership.

(5) If the officer concludes that the group in relation to which the
return was submitted has a different membership, the designation
25under sub-paragraph (4) must also include details of the members
of the group that the officer considers are UK group companies.

(6) If the officer concludes that the return should have been submitted
in relation to one or more different worldwide groups, the
designation under sub-paragraph (4) must also include—

(a) 30sufficient details to identify the different worldwide group
or groups, and

(b) details of the members of the group that the officer
considers are UK group companies.

(7) A designation by a closure notice of a period of account under this
35paragraph must specify the dates on which the period of account
begins and ends.

(8) In this paragraph references to UK group companies, in relation to
a period of account, do not include UK group companies that are
dormant throughout the period.

40Direction to complete enquiry

48 (1) An application may be made at any time to the tribunal for a
direction that an officer of Revenue and Customs gives a closure
notice in respect of an enquiry into an interest restriction return
within a specified period.

(2) The application is to be made by the reporting company for the
period of account of the group for which the return was
submitted.

(3) The application is subject to the relevant provisions of Part 5 of
5TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4) The tribunal must give a direction unless satisfied that an officer
of Revenue and Customs has reasonable grounds for not giving a
closure notice within a specified period.

Conclusions of enquiry

49 (1) 10This paragraph applies where a closure notice is given under
paragraph 47 to a company by an officer.

(2) The closure notice must—

(a) state that, in the officer’s opinion, no steps are required to
be taken by the company as a result of the enquiry, or

(b) 15state the steps that the company is required to take in order
to give effect to the conclusions stated in the notice.

(3) The closure notice may (but need not) specify the allocated
disallowance for particular companies specified in the notice.

(4) If—

(a) 20the return was made for the wrong period, and

(b) a period of account designated under paragraph 47(3)
begins or ends at any time in that period,

the closure notice must require the company to take steps to make
the return one appropriate to that designated period of account.

(5) 25If there is more than one designated period of account within sub-
paragraph (4), the closure notice must require the company to
submit an interest restriction return for each of those designated
periods of account.

(6) If—

(a) 30a period of account of a worldwide group (“the relevant
group”) is designated under paragraph 47(4),

(b) the company is a member of the relevant group for that
period of account, and

(c) condition A or B is met,

35the closure notice must require the company to submit an interest
restriction return for the designated period of account of the
relevant group.

(7) Condition A is met if the UK group companies comprised in the
relevant group were regarded as members of the worldwide
40group in relation to which the return was made.

(8) Condition B is met if—

(a) the relevant group includes UK group companies that
were not regarded as members of the group in relation to
which the return was made, and

(b) the ultimate parent of the relevant group is not the
ultimate parent of a worldwide group in relation to which
a reporting company has been appointed for a period of
account that includes a time falling within the designated
5period of account of the relevant group.

(9) If sub-paragraph (6) applies in relation to two or more designated
periods of account of a worldwide group (whether those periods
are of the same or different groups), the closure notice must
require the company to submit separate interest restriction returns
10for each of the designated periods of account.

(10) If, as a result of this paragraph, a closure notice requires a
company to submit an interest restriction return for a period of
account of a worldwide group, the company is treated for the
purposes of this Part of this Act as if it had been appointed as the
15reporting company of the group in relation to the period.

(11) For this purpose it does not matter whether the return that was
subject to the enquiry was submitted in relation to a different
worldwide group.

(12) Sub-paragraph (10) is ignored in determining the period within
20which the return must be submitted (as to which, see instead
paragraph 50(2)).

Interest restriction returns to be submitted to an officer of Revenue and Customs

50 (1) If, as a result of a closure notice given under paragraph 47 (closure
notice in respect of a return subject to enquiry), a company is
25required to submit one or more interest restriction returns, the
return or returns must—

(a) be submitted to an officer of Revenue and Customs,

(b) give effect to the conclusions stated in the notice, and

(c) contain such consequential provision as the company
30considers appropriate.

(2) A return submitted in compliance with the closure notice is of no
effect unless it is received by an officer of Revenue and Customs
before the end of the period of 3 months beginning with the day
on which the closure notice is given to the company.

(3) 35A return submitted in compliance with the closure notice—

(a) must indicate the respects in which it differs from the
return that was the subject of the enquiry, and

(b) supersedes that return.

(4) For provision dealing with cases where no return is submitted
40before the end of the period mentioned in sub-paragraph (2), see
paragraph 58.

Return in relation to a worldwide group: other entities part of another group

51 (1) This paragraph applies if—

(a) an enquiry has been made into an interest restriction
return (“the original return”) for a period of account of a
worldwide group (“the original group”),

(b) a closure notice has been given in respect of the enquiry
5that designates a period of account of a worldwide group
under paragraph 47(4) (“the new group”),

(c) the new group consists of both UK group companies that
were not regarded as members of the original group and
other UK group companies, and

(d) 10the ultimate parent of the new group is the ultimate parent
of a worldwide group (“the existing group”) in relation to
which a reporting company has been appointed for a
period of account that includes a time falling within the
designated period of account of the new group.

(2) 15An officer of Revenue and Customs must give a notice to that
company appointing it as the reporting company in relation to
each designated period of account of the new group.

(3) The notice of appointment must be given within the period of 30
days beginning with the day on which the closure notice was
20given.

(4) If—

(a) an interest restriction return has been submitted for a
period of account of the existing group, and

(b) that period of account begins or ends at any time in a
25designated period of account of the new group,

the return is to be treated as withdrawn.

(5) Accordingly—

(a) any notice of enquiry or closure notice in relation to the
return is also to be treated as withdrawn,

(b) 30any appeal in respect of any matter stated in a closure
notice in relation to the return is treated as withdrawn, and

(c) any determination of any such appeal is treated as being of
no effect.

(6) If—

(a) 35an interest restriction return for a period of account is
treated as withdrawn as a result of sub-paragraph (4), and

(b) the period of account begins at any time before a
designated period of account of the new group,

the notice under sub-paragraph (2) is also to be treated as if it
40constituted, on the day on which it is given, the appointment of the
company in relation to a period of account of the existing group
beginning with that time and ending immediately before the
beginning of the designated period of account.

(7) If—

(a) 45enquiries are open at any time in relation to more than one
interest restriction return, and

(b) this paragraph is capable of applying by reference to a
closure notice to be given in respect of any one of those