The Finance Act 2007 changed the rules about when HMRC can open an enquiry into company tax returns. For accounting periods ending after 31 March 2008, HMRC will have 12 months from the date of delivery of the return to exercise its power to enquiry into the return, instead of the anniversary of the statutory filing date. However, this change does not apply to members of large and medium-sized groups that meet two of the following conditions:

a) Turnover of more than £5.6 million

b) Balance sheet total of more than £2.8 million

c) More than 50 employees

HMRC have recognised that it would be helpful to encourage large groups to file early and have, therefore, issued some guidelines. The idea is that HMRC will agree with the group upon an anniversary target date and will not open enquiries outside that period.

This gives HMRC a bit of a problem, because they do not want to put themselves under an extra statutory constraint, but they want to encourage early filing. Whilst confirming that they cannot fetter their legal powers (oh, yes they can – that is what concessions and acting under the care and management provisions are all about), they say they will make every effort to meet the group anniversary target where they have agreed to do so. It should be necessary to open enquiries after that date only when a group fails to honour any agreed conditions or when material new information comes to light that was not available when the original agreement was reached.

It will be very interesting to see how seriously this is taken, because unless HMRC do honour this obligation, there is little point in anybody having anything to do with it.