What is a deduction notice under section 232 of TIOPA 2010?

A deduction notice is a formal notice issued by an HMRC officer to a company within the charge to United Kingdom corporation tax. It is issued when the officer has reasonable grounds to consider that the deduction scheme conditions are or may be met in relation to a transaction involving that company.

When can an HMRC officer issue a deduction notice under section 232?

An HMRC officer can issue a deduction notice when the officer reasonably considers that the deduction scheme conditions are or may be met in relation to a transaction to which the company is a party. The officer does not need to be certain the conditions are met; a reasonable belief that they may be satisfied is sufficient.

Who has the power to issue deduction notices under TIOPA 2010 section 232?

The power to issue deduction notices rests with individual HMRC officers rather than the Commissioners for HMRC directly. Although the power originally sat with the Commissioners, the legislation was rewritten to reflect the established practice of delegating this function to individual officers.

Does a company need to have claimed a tax deduction before a deduction notice can be issued?

No. A deduction notice can be issued even if the company has not yet claimed a tax deduction. It is sufficient that the HMRC officer reasonably considers the deduction scheme conditions are or may be satisfied in relation to a transaction. Once issued, the consequences set out in the legislation apply to the company's tax treatment.

Taxation (International and Other Provisions) Act 2010 section 232

Deduction notices

Section 232 sets out when an HMRC officer may issue a deduction notice to a company that is within the charge to corporation tax, where the officer has reasonable grounds to believe that certain scheme conditions may be met.

An HMRC officer may give a deduction notice to a company within the charge to corporation tax if the officer has reasonable grounds to consider that the "deduction scheme conditions" are or may be met in relation to a transaction involving that company.
The power to issue deduction notices rests with individual HMRC officers rather than the Commissioners for HMRC directly, reflecting existing practice where this function is delegated.
The section defines the key terms "deduction notice" and "deduction scheme conditions" and signposts the consequences that follow from a deduction notice being issued.
This approach to delegating the function to HMRC officers is also applied consistently in related sections 235, 255 and 256 of the same Act.

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