© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
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L2: Scope of appeal
See also
N1: Tribunal's role (general)
Tribunal does have jurisdiction to determine whether there is an assessment or claim: see K2: Appealable decisions (indirect tax)
No hypothetical questions
“I do not consider that there is any rule of national or EU law which would permit a hypothetical question of law to be determined. The courts and tribunals are for resolutions of actual disputes by persons affected by the outcome.” (Mather v. HMRC [2014] UKFTT 1062 (TC), §85).
Appeal against part of assessment is appeal against whole
"[100] For all these reasons, I find that the Appellant appealed the sums due in terms of the assessments for the Disputed Periods and those are clearly defined in the schedules in the Notices of Assessment(s). The Appellant had identified an argument in relation to an element of the assessments, which may or may not succeed, but the assessments for the Disputed Periods are what the Tribunal must consider." (Monmore Properties Ltd v. HMRC [2024] UKFTT 137 (TC), Judge Anne Scott)
Direct tax: Tribunal to determine the matter in question
"If the appellant notifies the appeal to the tribunal, the tribunal is to determine the matter in question." (TMA 1970, ss.49D(3), 49G(4) and 49H(4))
"(1) In sections 49A to 49H—
(a) “matter in question” means the matter to which an appeal relates;" (TMA 1970, s.49I(1)(a))
Appeal against closure notice limited to the subject matter of the conclusions
“The closure notice completes that enquiry and states the inspector’s conclusions as to the subject matter of the enquiry. The appeal against the conclusions is confined to the subject matter of the enquiry and of the conclusions. But I emphasise that the jurisdiction of the special commissioners is not limited to the issue whether the reason for the conclusion is correct. Accordingly, any evidence or any legal argument relevant to the subject matter may be entertained by the special commissioner subject only to his obligation to ensure a fair hearing.” (HMRC v. Tower MCashback 1 LLP [2010] EWCA Civ 32, §41, Moses LJ with whose approach Lord Walker agreed [2011] UKSC 19, §17).
"[70]...According to para, 34(3) of Schedule 18 FA 1998, an appeal may be brought against an amendment of a company’s return. It seems to me that “the matter to which the appeal relates” for the purposes of section 49I(1)(a) must be that amendment and the amendment is therefore the “matter in question” which the tribunal is required to determine by section 49G(4) TMA. That then restricts the ambit of the appeal at the conclusion of which the tribunal may decide that there has been an overcharge or an undercharge and so make a reduction or an increase in the assessment pursuant to section 50(6) or (7) as appropriate. There is a limit on the jurisdiction of the FTT which is not simply a matter of ensuring procedural fairness. Any purported exercise by the FTT of a broader power to consider matters beyond that would be an error of law." (Investec Asset Finance Plc v. HMRC [2020] EWCA Civ 579, Rose LJ)
“In my judgment the principles to be applied are those set out by Henderson J as approved by and elaborated upon by the Supreme Court. So far as material to this appeal, they may be summarised in the following propositions:
i) The scope and subject matter of an appeal are defined by the conclusions stated in the closure notice and by the amendments required to give effect to those conclusions.
ii) What matters are the conclusions set out in the closure notice, not the process of reasoning by which HMRC reached those conclusions.
iii) The closure notice must be read in context in order properly to understand its meaning.
iv) Subject always to the requirements of fairness and proper case management, HMRC can advance new arguments before the FTT to support the conclusions set out in the closure notice.” (Fidex Ltd v. HMRC [2016] EWCA Civ 385, §45).
“The scope of the appeal is defined by and confined to the subject matter of the enquiry, the conclusions and amendments (if any) in the closure notice. An appeal does not permit HMRC to launch a new roving enquiry into a tax return.” (Fidex Ltd v. HMRC [2014] UKUT 454 (TCC) §62(2)).
“If Parliament had intended a continuation of the system of appeals against assessments there would have been no need to provide that an appeal may be brought against the conclusion or amendment; the equivalent of the former system would have been that the appeal was against the amended self-assessment. Instead Parliament enacted a system under which the Revenue had to state a conclusion and make an amendment, against which an appeal could be brought, necessarily limited to that conclusion or amendment.” (D’Arcy v. HMRC [2006] SPC 549, §10).
- Terms of appeal do not define jurisdiction and powers of FTT
"[220] However, the terms of an appellant's appeal do not define the jurisdiction and powers of the tribunal. The tribunal's powers are found in section 50 TMA. Those powers enable the tribunal to increase an assessment where the taxpayer is found to have been undercharged or reduce an assessment where the taxpayer is found to have been overcharged. The powers can only be exercised by reference to the jurisdiction provided by Parliament to the tribunal in legislation, which in this case is that found in s49G TMA "to decide the matter in question". (Gunfleet Sands Limited v. HMRC [2023] UKUT 260 (TCC), Judge Raghavan and Judge Bowler)
- Not limited by error HMRC made in failing to amend a figure
"[207] ... [Counsel for the taxpayer] relies in particular on the description of the FTT's jurisdiction in the judgement of Lady Justice Rose in the Court of Appeal case of Investec Asset Finance Plc v HMRC [2020] STC 193 at [70] to say that it is the amendment appealed (and that alone) which sets the boundaries of the FTT's jurisdiction...
...
[233] In this case, the conclusions of the Closure Notices as set out in the 3 August 2017 email and understood in the context of the parties' history of engagement, set the parameters of "the matter in question" for s49D TMA. The erroneous lack of amendment to the qualifying expenditure figure did not set those parameters. Once the matter in question was identified, the FTT had the powers provided in s50 TMA; i.e. the FTT could decide that the self-assessment figures should be adjusted." (Gunfleet Sands Limited v. HMRC [2023] UKUT 260 (TCC), Judge Raghavan and Judge Bowler)
- Subject-matter of enquiry provides context for interpreting conclusion but does not broaden scope of appeal
“It is clear from this that a narrowly drawn closure notice cannot be widened by reference to the scope of the enquiry that preceded it. That makes perfect sense: an enquiry may cover a range of issues but the closure notice may state conclusions and make amendments only in respect of one matter remaining in dispute. However, we reject the appellant’s submission that the only circumstance in which context should be considered is where the closure notice is ambiguous. Both Kitchin LJ and Moses LJ made clear that a closure notice must be considered in its context. Lord Hope made the same point in the Supreme Court decision in Tower MCashback at [84] when he said: “Notices of this kind, however, are seldom, if ever, sent without some previous indication during the enquiry of the points that have attracted the officer’s attention. They must be read in their context.” No qualification was added to suggest that context is not relevant where the closure notice appears to be clear on its terms. The subject matter of the enquiry must always be considered." (B&K Lavery Property Trading Partnership v. HMRC [2016] UKUT 525 (TCC), §§34…35, Judges Bishopp and Falk).
- Consequential amendments may affect the construction of the conclusions
"[35] However, to go beyond this (we would suggest) uncontroversial proposition seems to us to be dangerous. If were to be suggested that – to the extent that they were wider in ambit than the conclusions expressed in a closure notice – the consequential amendments should generally be used to construe the conclusions more widely than their ordinary meaning would otherwise permit, then we do not consider that such analysis can be correct as a general proposition. It overlooks the very obvious point that amendments to a return, intended to give effect to the conclusions expressed in a closure notice, may fail properly to articulate the necessary consequential amendments, and so themselves to susceptible of a successful appeal under section 31(1)(b) of the Taxes Management Act 1970. In short, whilst the nature of the consequential amendments in a closure notice may affect the construction of the conclusions expressed in the same closure notice (whether to widen or to narrow them), they can never be anything more than a part of the process of construction. At the end of the day, what is at issue is the true meaning of the conclusions themselves, read in context and in the light of the entirety of the factual matrix, including the whole of the closure notice in question. If the meaning of those conclusions is clear, then those conclusions cannot be widened by reference to the consequential amendments – even if these are, in themselves, clearly and distinctly wider than the true meaning of the conclusions." (Daarasp LLP v. HMRC [2021] UKUT 87 (TCC), Marcus Smith J and Judge Brannan)
- Review process cannot change scope of closure notice (but may shed light on correct interpretation)
"[64] To the extent that the FTT additionally considered, at [115(3) and (4)], (set out above), that the scope of “the matter in question” could be altered by the subsequent review process, we would disagree. The scope of the closure notice was to be determined, in context, at the time it was issued, on the basis of the understanding of a reasonable recipient standing in the shoes of the taxpayer. Subsequent discussions between the parties of the loan relationship position might conceivably be relevant as shedding light on the nature of such an understanding at that time but they would not retrospectively extend the scope of the matter in question. However, we consider that any error in this respect made by the FTT did not vitiate its central conclusion, which was that the closure notice contained a conclusion that there were no losses or reliefs available to offset the corporation tax assessed." (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
- Subsequent events cannot change scope of closure notice (but may shed light on correct interpretation)
“Given that the jurisdiction of the Tribunal is determined by the conclusion in the closure notice, the Tribunal does not consider that its jurisdiction can be affected as such by anything said after the closure notice was issued. Subsequent documents can be relevant only to the extent that they might shed further light on the correct interpretation of the closure notice.” (B&K Lavery Property Trading Partnership v. HMRC [2015] UKFTT 470 (TC), §69).
- HMRC can argue for higher amendment on appeal
"[73] I would conclude that the description of the scope of the matter in question in para. 117 of the FTT’s decision is a useful and practical one. It is for the First-tier Tribunal to decide what the subject matter of the closure notice is within the bounds I have described. They are best placed to determine whether the context of the closure notice and the surrounding circumstances demonstrate that the subject matter is broader than the particular conclusion and adjustments addressed in the closure notice. If that is the case, it should be open to HMRC to put forward arguments in any appeal even if they result in a larger amount of tax being due, provided that the different arguments all deal with the same matters in question identified in the closure notice. Although it is accepted that this case goes beyond the point decided in Tower MCashback and Fidex, I do not regard those cases as requiring a bright line to be drawn. I would therefore dismiss the Appellants’ appeal on Issue 3." (Investec Asset Finance Plc v. HMRC [2020] EWCA Civ 579, Rose LJ)
- Where a point was clearly within the scope of the enquiry, did the closure notice indicate that the point was not being relied on?
"[36(3)] The Closure Notices in this case are apt to be described as “unspecific” and “uninformative”. It may be that they could have been better framed. But the question before us is not whether the conclusions in the Closure Notices could have been better framed. The question we must address is whether the reasonable recipient – knowing of the scope of the enquiry, and in particular knowing that the enquiry embraced the “knock-out” points – would nevertheless have considered, on reading the Closure Notices, that HMRC was concluding that some losses, albeit in an unquantifiable amount – were inevitably or definitely allowable. In short, that the officer was concluding that the “knock-out” points were all not being relied upon, such that the allowable loss figures of the Daarasp and Betex partnerships lay somewhere in the range of above nil and £18,192,004.00 (in the case of Daarasp) and above nil and £25,482,181 (in the case of Betex)." (Daarasp LLP v. HMRC [2021] UKUT 87 (TCC), Marcus Smith J and Judge Brannan)
- Conclusion that amount taxable contained conclusion that there were no reliefs to set against
"[61] Although we heard numerous arguments from each of the parties, we consider that the jurisdiction issue before the FTT essentially boiled down to one question; did the conclusion in the closure notice to which the amendments gave effect encompass a conclusion that there were no losses or reliefs to offset the gain on the disposal of the Property?
[62] As we have described above, the FTT’s decision on this, at [112], was that it was “readily apparent that HMRC’s conclusion was that Shinelock had realised a chargeable gain of £94,270 on the disposal of the Property and that this amount was a profit chargeable to corporation tax, ie that there were no losses or reliefs to offset this amount”. At [115(4)], the FTT found that the closure notice “set out a clear conclusion by HMRC that there were no reliefs or losses of any description available to offset the chargeable gain”.
[63] We consider that the FTT was entitled to interpret the closure notice (which it found to be in the letters of 14 and 15 May 2018 taken together) in this way and to reach this decision." (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
- Appeal against closure notice can extend to claim made after closure notice
"[65] We do not accept [HMRC's] submission that the FTT could never have had jurisdiction in relation to the appeal because no claim had been made by Shinelock for a NTLRD by the date when the closure notice was issued. It would have followed from that fact that, as the FTT found explicitly at [115(2)], HMRC’s reasons for the conclusion in the closure notice did not include the absence of such a claim, or indeed any consideration of whether there was a NTLRD. However, Mr Ripley’s submission ignores both the fundamental difference between the conclusion in a closure notice and the reasons for it, and the right of appeal given to Shinelock against the amendments made in the closure notice. In light of the FTT’s conclusion that the availability of a loss to reduce the chargeable gain was within the “matter in question”, which we have found to be a conclusion which was open to it, the position regarding any claim was an issue which Shinelock was entitled to have determined by the FTT as part of its appeal. To the extent that this argument relies on the position under section 50(7A) TMA, which deals with appeals against claims, we agree with the FTT’s conclusion, at [117], that in view of the FTT’s decision regarding “the matter in question”, jurisdiction exists in relation to the appeal under section 49G(4)." (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
FTT can amend any part of the return consequential to the conclusions appealed
"[236]...Parliament must have intended the Tribunal's powers in s50 to align with the scope of the appeal. Otherwise, the situation arises where an appeal could properly proceed about the subject matter (informed by the conclusions of the closure notice as discussed above) only to find the tax payable amount could not be altered because of a limitation in the Tribunal's powers under s50...
[237]...However, for the reasons we have explained above, the modification does not mean that the Tribunal can amend any part of the return; it must be a part of the return which was consequential to the closure notice conclusions as construed by the FTT within the limits discussed above." (Gunfleet Sands Limited v. HMRC [2023] UKUT 260 (TCC), Judge Raghavan and Judge Bowler)
FTT cannot give effect to a claim that would have been made if its conclusions were known at the time of return
"[94] [Counsel for the taxpayer] submits that no claim for relief is required where HMRC amend a land transaction return following an enquiry. HMRC should give effect to the relief in their closure notice notwithstanding there has been no claim pursuant to section 58D(2). If HMRC fail to give effect to the relief then the FTT has jurisdiction to do so on an appeal against the closure notice.
...
[116]...SDLT is a self-assessed tax which imposes hard-edged deadlines. Where a relief requires a claim, and a claim is not made in accordance with any procedural requirements, the taxpayer will not be entitled to relief. In the present context, section 58D(2) is clear that relief “must” be claimed in a return or an amended return. The relevant facts were known to Mr Ridgway at the time he made his return. He made an error in concluding that the Property was non-residential property. The absence of any provision for Mr Ridgway to make a claim out of time or during the course of an enquiry is consistent with the benefit of certainty and finality referred to by the Court of Appeal in Candy." (HMRC v. Ridgway [2024] UKUT 36 (TCC), Judges Cannan and Tilakapala)
Appeals against assessments limited to the subject matter of the assessments
“Nor is it in dispute that an analogy can be drawn between the scope of a discovery assessment and the scope of a closure notice.” (Clark v. HMRC [2018] UKUT 397 (TCC), §55, Arnold J and Judge Herrington - on the facts, an assessment that focussed on one transfer could be upheld by focussing on an earlier transfer).
- Appeals against IHT determination limited to matters specified in notice
"[67] In the inheritance tax context, under s221, determinations are made of “matters” specified in the notice. The matters that may be specified in a notice are listed in s221(2). They include the “value transferred”, the “tax chargeable” and any other matter relevant for the purposes of the Act: s221(2)(f). Appeals are made against determinations (see [32] above).
[68] Adapting the Fidex principles in the extracts above to the inheritance tax context, it seems to us that the scope and subject matter of the appeal to this tribunal is defined by the matters determined in the s221 notice.
[69] In our view, the matters determined in the s221 notice are not (as the appellant appeared to argue) limited to the literal text of the determination. A “matter” has a broader meaning than that. In this case, the matter determined in the first of the three alternative determinations (see [30(1)] above) was, in substance, whether the loan note liability fell to be taken into account in determining the value of Mrs Pride’s estate immediately before death. HMRC clearly arrived at that determination by applying s103 (and not by applying s175A); but that does not, in our view, confine the “matter” determined to the s103 analysis.
[70] We are fortified in this view by the dicta from Fidex, in the somewhat different context of income tax appeals, to the effect that whilst the appeal does not provide an opportunity for a new roving enquiry, the tribunal is not deprived of jurisdiction where it reasonably concludes that a new issue raised on an appeal represents an alternative or an additional ground for supporting the income tax equivalent of a matter determined in a s221 notice.
[71] We are also fortified in our view by the context, which, relevantly, was that
(1) prior to their making the s221 determination, HMRC asked for information about the loan notes, their repayment terms, and the identity of those entitled to repayment (their 11 December 2017 letter to Mr Pride); but
(2) as Mr Pride’s response said nothing about the release of the loan notes that had taken place; and stated that he and his sister were the individuals entitled upon repayment (his letter of 15 December 2017), HMRC were under the impression, up to including the time when the s221 determination was issued, that the liability under the loan notes on their original terms (i.e. repayment due in 2025 unless either party exercised their early-redemption rights) remained in force (and that neither party had exercised their early-redemption rights).
What we draw from this context is that the reason that HMRC did not cite s175A as an alternative in the notice in determination was that they were not furnished with the complete relevant information when they asked questions about the loan notes. Here, s175A does not in our view represent something “new” or “roving”, but rather a provision leading to the same substantive outcome as that set out in the determination, and which would have been specified in the determination had the appellant given a more complete response to HMRC’s enquiries.
[72] We conclude that the tribunal has jurisdiction to determine the substantive issue." (Pride v. HMRC [2023] UKFTT 316 (TC), Judge Citron)
- Appeals against assessments not limited to the figure
"[55] On balance, however, I agree with Mr Ewart that the old participators could have appealed. Paragraph 14 of schedule 2 to OTA 1975 allows a participator to appeal "against an assessment". An "assessment" will show what, if any, amount of tax is said to be due, but I cannot see why the right to appeal should be limited to that figure. In fact, the Judge himself evidently accepted that it would also be possible to appeal "the appropriateness of the use of allowances rather than allowable losses to set against assessable profits" and a participator could potentially have very good reason to contest such a point. To my mind, it would have been equally possible to appeal the fact that the 26 August 2015 assessment gave the "Discharge" figure as £1,157,973 when on MCX's case the correct figure would have been £422,061 higher to take account of the APRT which had previously been set against PRT. It was implicit in that part of the assessment that HMRC saw £422,061 of the tax that they were repaying as APRT rather than PRT. Whether they were right to do so was an issue eminently suitable for decision by the FTT, and in my view it could have been the subject of an appeal to the FTT.
[56] In the circumstances, it seems to me that the present proceedings were an abuse of process." (HMRC v. MCX Dunlin (UK) Limited [2021] EWCA Civ 186, Newey LJ)
- Limited to the subjective discovery
"[106] In the first place, I agree with [the taxpayer] that the scope of the assessment, and of any appeal from it, must be defined by the subjective discovery that the assessing officer has made. That is the only assessment which the officer has jurisdiction to make, and the scope of the assessment, as opposed to the arguments which may be used to support it, cannot in my view be extended by virtue of the appeal process." (Clark v. HMRC [2020] EWCA Civ 204, Henderson LJ)
Officer may have had the "wider arrangement" in mind
"[107] I draw attention in particular to the third of the principles stated by Kitchin LJ, namely that the closure notice (or, in the present case, the discovery assessment) must be read in context in order properly to understand its meaning. In my view, the basic fallacy in the argument so skilfully advanced by Mr Jones is that it adopts an unduly narrow reading of officer Sidhu's letter, by focusing on the LML Transfer alone to the exclusion of the other matters which (as I have already explained) she clearly had in mind when writing the letter. On a fair reading of the letter as a whole, it seems clear to me that HMRC were still in the course of investigating the composite series of transactions which began with the Suffolk Life Transfer, and that the critical loss of tax identified by the officer was not one arising from the LML Transfer viewed in isolation, but rather one arising from the making of an unauthorised member payment in respect of Mr Clark, in the tax year 2009/10, in the course of the composite series of transactions which included the LML Transfer and was still under investigation by HMRC.
[108] In my judgment, it is an inescapable inference that officer Sidhu had this wider picture well in mind when she made the assessment, and on the proper construction of the letter her "discovery" extended to any loss of tax in 2009/10 occasioned by an unauthorised member payment made to or in respect of Mr Clark, arising from the series of transactions beginning with the transfer of assets into the LML Pension. As I have already noted, the amount of the Suffolk Life Transfer was exactly the same as the amount of the LML Transfer, and the calculation of tax payable in the letter is therefore identical for both transfers. Importantly, as the Upper Tribunal rightly recognised, neither Mr Clark nor his professional advisers were left in any doubt about the precise amount of tax said to be due from Mr Clark in respect of an unauthorised member payment made in respect of him in the relevant tax year. If HMRC were not yet in possession of the full facts relating to the bizarre series of transactions which Mr Clark set in train, and did not yet appreciate (any more than Mr Clark or his advisers) that the trusts of the LML Pension were void for uncertainty, it seems to me that this was a misfortune for which Mr Clark ultimately has nobody to blame but himself." (Clark v. HMRC [2020] EWCA Civ 204, Henderson LJ - HMRC able to switch from claiming tax in relation to one transfer to claiming tax in relation to another, albeit of the same amount)
Appeals against closure notices refusing claims limited to the subject matter of the closure notice
“We hold that the scope of the appeal as defined by the closure notice in this case was broadly framed as a straightforward disallowance of the Appellant’s claim. We accept that broadly framed closure notices are – absent special circumstances – to be deprecated. There were special circumstances in this case, namely the fact that the enquiry was being opened and closed more-or-less simultaneously, without actual enquiry, in order to provide subject-matter for the Appellant’s appeal. In these circumstances, no actual enquiry having been conducted, HMRC was entitled to frame its conclusion broadly in the closure notice, and that is what it did.” (White v. HMRC [2018] UKUT 257 (TCC), §29, Marcus Smith J and Judge Jonathan Richards).
Distinguishing conclusions and reasons
- Conclusion more likely to be that relief not due than that one or more conditions for relief not met
“Focusing on the terms of the closure notice itself, in light of the enquiry, I believe the conclusion is contained in the second sentence of paragraph [2], that is to say that the sum of €83,849,399 representing the value of the derecognised listed bonds should not have been included in the change in basis adjustments. The reason for that conclusion is contained in the first sentence of paragraph [2], namely that the derecognition of the listed bonds and preference shares should not have occurred on transition to IFRS. There follows in paragraph [3] the amendment to the return that is required.” (Fidex Ltd v. HMRC [2016] EWCA Civ 385, §63).
"[25] We cannot accept this. In the context of HMRC's enquiry (which in the letter opening the enquiry was said to be in relation to the "figure shown for the company's R&D claim"), it is clear to us that HMRC's conclusion was that the figure for the R&D claim should be reduced to zero. This is exactly what the explanatory letter of 16 February 2022 says will be the amendment made by the closure notice.
[26] Given the distinction drawn in Fidex and Investec between, on the one hand, the conclusions stated in the closure notice and the amendments required to give effect to those conclusions and, on the other hand, the reasons for the conclusion, there cannot be any real doubt that the conclusion is the reduction to zero of the figures for the enhanced expenditure claimed and that HMRC's belief that the payment condition had not been met represented their process of reasoning in reaching that conclusion.
[27] It follows from this that the subject matter of the appeal (and therefore the matter in question) for the purposes of s 49G TMA is the reduction of the figures for enhanced R&D expenditure to zero." (Tills Plus Limited v. HMRC [2024] UKFTT 614 (TC), Judge Vos)
“The Tribunal also notes that in circumstances where a taxpayer must fulfil several requirements in order to be eligible for a relief, the enquiring officer would only need to determine that any one of those requirements is not satisfied in order to conclude that the taxpayer is not eligible for that relief. If it is clear to the enquiring officer that one of the requirements is not satisfied, it would be unnecessary for the enquiring officer to consider whether or not each of the other requirements is satisfied. The enquiring officer could simply conclude that the taxpayer is not entitled to the relief for the reason that one of the requirements has not been satisfied. That would not be a concession that any of the other requirements is necessarily satisfied. Rather, it would simply be a case of reaching a conclusion (that the taxpayer is not entitled to the relief) for a single reason, in circumstances where there may or may not be other reasons also why that conclusion must be reached…In such a case, it would seem unlikely that the enquiring officer would make the non-satisfaction of one requirement the conclusion of the closure notice, rather than the reason for the conclusion that the taxpayer is not entitled to the relief. While each case must be determined on its own circumstances, this is a factor to be considered. Different considerations may apply if the enquiring officer indicated in the course of the enquiry that he or she was satisfied as to all requirements except one, and that what remained to be determined in the enquiry was whether the remaining requirement is satisfied.” (B&K Lavery Property Trading Partnership v. HMRC [2015] UKFTT 470 (TC), §§62…63 upheld on appeal at [2016] UKUT 525 (TCC), §42, Judges Bishopp and Falk).).
- Conclusion is that an amount is fully taxable, charging provision is a reason
“The conclusion reached was that the receipt of the SIP shares and CIP cash was fully taxable. Whether some or all of that liability to tax arises because the receipt is taxable under s 477(3)(b) or because another provision applies is a question of the reasons for the conclusion reached. It was clearly concluded that the full amount received was fully taxable, and the scope of the appeal therefore covers whether and to what extent the receipt of the SIP shares and the CIP cash constitute taxable income.” (Sjumarken v. HMRC [2016] UKUT 568 (TCC), §52, Judges Berner and Falk)
- Denial of a relief is a different conclusion to an amount being taxable
“The position would be quite different in circumstances where a closure notice relates to whether an amount is properly taxable and HMRC subsequently raises a separate issue, such as trying to challenge a claim for a relief which was included in the return and which was not queried during the enquiry, or was dropped by HMRC as an issue before the closure notice was issued. In that case HMRC may well not be able to challenge the relief on appeal, but that would be because the scope of the appeal would be restricted to the correct tax treatment of the amount received rather than whether the relief is available.” (Sjumarken v. HMRC [2016] UKUT 568 (TCC), §53, Judges Berner and Falk).
- Amendments are numerical amendments
“We agree with HMRC that the amendments required to be stated in the closure notice are numerical amendments: they are the alterations to the figures in the return that HMRC believe are required to give effect to their conclusions. These amendments appear at sentence [5] and are also reflected in the schedule. They are stated separately from the conclusions as the legislation requires, and give effect to them.” (B&K Lavery Property Trading Partnership v. HMRC [2016] UKUT 525 (TCC), §42(3), Judges Bishopp and Falk).
- Any change in basis must arise out of the same circumstances (public law restriction)
“[HMRC] say that, practically HMRC are constrained by public law considerations in that they cannot raise an assessment on one basis and maintain it on another (unless it arises out of the same circumstances).” (Vodafone Group Services Ltd v. HMRC [2014] UKFTT 701 (TC), §113).
“They also accept that it would be unreasonable to exercise the power to alter the basis for an existing assessment where, for example, the altered assessment is an entirely new replacement assessment not arising from the same set of circumstances or transactions that led to the making of the original assessment.” (BUPA v. CEC (No.2) [2007] EWCA Civ 542, §29).
- But not limited by legal arguments made in respect of that subject matter
“…if the Commissioners are to fulfil their statutory duty under [TMA 1970 s.50] they must in my judgment be free in principle to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice. Subject always to the requirements of fairness and proper case management, such fresh arguments may be advanced by either side, or may be introduced by the Commissioners on their own initiative.” (HMRC v. Tower MCashback LLP 1 [2011] UKSC 19, §15, quoting Henderson J with approval).
“It is the HMRC officer’s conclusions/amendments in the closure notice which matter, and not the process of reasoning which has led to them…The FTT has jurisdiction to entertain legal arguments which have played no part in the officer’s reasoning for the conclusions in the closure notice; any element of ambush or unfairness must be avoided by proper case management.” (Fidex v. HMRC [2014] UKUT 454 (TCC) §§62(3)…62(6)).
“While the Supreme Court in Tower MCashback (at [18]) and the Upper Tribunal in Fidex (at [62(5)]) did refer to the duty of HMRC to make closure notices as informative as possible and contain the officer’s reasons, it was clear because at the same time both courts said that the closure notice did not need to contain reasons, that this was not a duty which was absolute; the impression is that the Tribunal had to fairly balance the competing interests of taxpayer and general public in deciding what fairly was in dispute between the parties. And in doing so the Tribunal should have a look at the context of the closure notice (in this case, the notice of determination) and in particular the preceding and accompanying letters.” (Edwards-Moss v. HMRC [2016] UKFTT 147 (TC), §31).
- HMRC permitted to advance additional legal or factual grounds in support of their amendment
“While there must be respect for the principle that an appeal does not provide an opportunity for a new “roving enquiry” into a company’s tax return, 35 the FTT is not deprived of jurisdiction where it reasonably concludes that a new issue of fact or law raised on an appeal represents an alternative or additional legal or factual ground for challenging or supporting an amendment in the closure notice…The situation here is precisely parallel [to Tower MCashback]: the original attack on Fidex’s entitlement to claim the debit in question was based on paragraph 19A, and on whether the debit claimed existed at all; the new ground was based on the contention that if the debit exists it is impermissible under paragraph 13. In each case the essential subject matter of the enquiry and the essential conclusion in the closure letter relates to Fidex’s entitlement to claim the debit in question. Although every case ultimately turns upon its own facts and context, it would in our view have be extraordinary if the FTT had found that it had no jurisdiction in the present case, given the striking parallels with Tower MCashback.” (Fidex v. HMRC [2014] UKUT 454 (TCC) §§76…80)
- Excise duty exception
“In our judgement the wording of section 16(4)(b) Finance Act 1994 (above) is important in this appeal. That is because it gives the clearest possible indication that the decision being appealed is “the original decision” notwithstanding that there has been a statutory review in respect thereof. This is not surprising given that a Review is just that; it is a review of the initial decision, not an appeal from it. In our judgment it would be open to a Reviewing Officer to uphold an original decision whilst adding to or supplementing the reasons given for arriving at a particular conclusion said to justify a decision not to restore, but not to uphold an original decision on wholly different grounds to those given by the decision making officer.” (SG Equipment Leasing v. DBF [2015] UKFTT 677 (TC), §8).
- Taxpayer’s position not fully “open” pending determination of appeal against self assessment
“However widely one identifies the subject matter of the enquiries and closure notices, they cannot in my judgment include an application for relief under section 392 which had not been made by the time of the closure notices based on events which did not occur until some 8 months after the closure notices.” (HMRC v. Dhanak [2014] UKUT 0068 (TCC), §61, David Richards J).
- Taxpayer’s position may be open in respect of events occurring before the issue of the closure notice
“The relevant circumstances in the Glaxo case were different, and in particular, although the direction by the Inland Revenue applying the transfer-pricing provisions was not given until after the appeals had been lodged, the transaction said to be affected by those provisions occurred during the relevant years of account. Whether or not that is the appropriate ground for reconciling the two decisions, there can be no doubt that the reasoning of the decision in Tower MCashback must be applied to this case.” (HMRC v. Dhanak [2014] UKUT 0068 (TCC), §63, David Richards J).
Primarily for FTT to determine scope of closure notice/assessment
"[73] I would conclude that the description of the scope of the matter in question in para. 117 of the FTT’s decision is a useful and practical one. It is for the First-tier Tribunal to decide what the subject matter of the closure notice is within the bounds I have described. They are best placed to determine whether the context of the closure notice and the surrounding circumstances demonstrate that the subject matter is broader than the particular conclusion and adjustments addressed in the closure notice." (Investec Asset Finance Plc v. HMRC [2020] EWCA Civ 579, Rose LJ)
“The FTT was therefore required to consider the closure notice, in context, and identify the conclusions it contained. That, so it seems to me, is precisely what Sir Stephen Oliver did. He properly directed himself by reference to the principles explained by the Supreme Court in Tower MCashback and he then proceeded to consider the closure notice in the context of the enquiry which it completed. In that regard, he noted that the enquiry was not some kind of roving investigation into Fidex's tax returns but a focused consideration of whether, having regard to the terms of the loan relationships' code in Schedule 9 to the 1996 Act, the implementation of the scheme served to increase for tax purposes the loss shown in Fidex's self-assessment tax return. He continued that the stated effect of the contribution notice, by which I understand Sir Stephen to have been referring to the stated conclusion, was that it did not. I believe, as did the UT, that this was a conclusion to which he was perfectly entitled to come.” (Fidex Ltd v. HMRC [2016] EWCA Civ 385, §62).
“For the reasons I have given earlier, it was a matter for the Special Commissioner to identify the subject-matter of the appeal…” (HMRC v. Tower MCashback 1 LLP [2010] EWCA Civ 32, §50, Moses LJ).
"[63] We consider that the FTT was entitled to interpret the closure notice (which it found to be in the letters of 14 and 15 May 2018 taken together) in this way and to reach this decision. We are mindful of the clear guidance given by the Supreme Court in Tower MCashback and the Court of Appeal in Fidex as to “the importance of leaving it to the fact-finding tribunal to determine the subject matter of the closure notice” [5].The FTT clearly understood the distinction between the conclusion in a closure notice and the reasons for that conclusion, and the distinction between a right of appeal against a conclusion and the amendments made to give effect to it. The FTT did not misdirect itself as to the law, referring extensively to the guidance in Tower MCashback and Fidex, and it took into account all the facts and evidence in reaching its decision." (Shinelock Limited v. HMRC [2023] UKUT 107 (TCC), Judge Thomas Scott and Judge Greenbank)
“It is a matter for the fact finding tribunal (the FTT) to identify the subject matter of the enquiry, the conclusions and, therefore, the appeal…In determining these matters the context is relevant and may include, in addition to the subject matter of the enquiry and the contents of the closure notice themselves, any other relevant correspondence…In making its determination the FTT should also balance protection of the taxpayer with the public interest in the collection of the correct amount of tax.” (Fidex v. HMRC [2014] UKUT 454 (TCC) §§62(7)…(8)…(9)).
But not the same as a case management decision
“The question of the correct construction of a closure notice is not a matter of discretion, but a mixed question of fact and law. If the decision discloses an error of law then an appeal will lie in the normal way.” (B&K Lavery Property Trading Partnership v. HMRC [2016] UKUT 525 (TCC), §39, Judges Bishopp and Falk).
Taxpayer’s position may be open in respect of events occurring before the issue of the decision pending determination of appeal
“The relevant circumstances in the Glaxo case were different, and in particular, although the direction by the Inland Revenue applying the transfer-pricing provisions was not given until after the appeals had been lodged, the transaction said to be affected by those provisions occurred during the relevant years of account. Whether or not that is the appropriate ground for reconciling the two decisions, there can be no doubt that the reasoning of the decision in Tower MCashback must be applied to this case.” (HMRC v. Dhanak [2014] UKUT 0068 (TCC), §63, David Richards J).
But not fully open
“However widely one identifies the subject matter of the enquiries and closure notices, they cannot in my judgment include an application for relief under section 392 which had not been made by the time of the closure notices based on events which did not occur until some 8 months after the closure notices.” (HMRC v. Dhanak [2014] UKUT 0068 (TCC), §61, David Richards J).
Taxpayer can rely on unrelated overpayment in same return to offset underpayment relied on by HMRC
“It seems right that if HMRC put the correctness of one aspect of a tax return in issue, they must accept that the taxpayer can counter by proving (if he can) that another aspect of the same tax return was unduly favourable to HMRC, even if the taxpayer would be out of time to make a stand-alone correction under s 9ZA. That must be especially the case here, where the dividends and benefit in kind were an issue in the appeal in any event, at least in respect of 2010 and 2011…For each of 2008 and 2009 only one assessment is in issue, which is the appellant’s self assessment as subsequently amended by HMRC. By amending that self assessment, HMRC put the entire self-assessment within the jurisdiction of the Tribunal.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §§163…170, Judge Mosedale).
Even in respect of an appeal against a discovery assessment
“Should 2009 and 2010 be treated differently because they were discovery assessments and not amendments to self-assessments? In other words, can we go further and not only reduce the discovery assessments to nil under s 50(6)(c) but reduce the self-assessment under s 50(6)(a)? Ms Vowles appealed the discovery assessment but was too late to amend her self-assessment. But, as we have said, s 50(6) should be given a broad interpretation in line with the above authorities to ensure only the correct tax is collected. The discovery assessment is intimately linked with the self-assessment: the ‘discovery’ is that the self-assessment is insufficient (s 29(1)(b)): by putting the question of whether the self-assessment was insufficient before the Tribunal, HMRC has put the self-assessment within the jurisdiction of the Tribunal and under s 50(6)(a) if the self-assessment overcharges the taxpayer it can be reduced.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §172, Judge Mosedale).
Limit to parts of the return consequential to the closure notice conclusions
"[236]...Parliament must have intended the Tribunal's powers in s50 to align with the scope of the appeal. Otherwise, the situation arises where an appeal could properly proceed about the subject matter (informed by the conclusions of the closure notice as discussed above) only to find the tax payable amount could not be altered because of a limitation in the Tribunal's powers under s50. This lacuna could affect taxpayers too. A taxpayer who is successful in persuading the Tribunal that HMRC's closure notice conclusions are wrong on a new argument that they had not factored into their self-assessment might not be able to translate that win into a decrease in tax if HMRC had amended an irrelevant part of the return in error. They would be stuck with the Tribunal only being able to alter the amendment HMRC had incorrectly picked.
[237] ... However, for the reasons we have explained above, the modification does not mean that the Tribunal can amend any part of the return; it must be a part of the return which was consequential to the closure notice conclusions as construed by the FTT within the limits discussed above." (Gunfleet Sands Limited v. HMRC [2023] UKUT 260 (TCC), Judge Raghavan and Judge Bowler)
VAT appeals with supervisory jurisdiction
- Input VAT on goods used for entertainment purposes
"(4) Subject to subsection (11) below, where—
(a) there is an appeal against a decision of HMRC with respect to, or to so much of any assessment as concerns, the amount of input tax that may be credited to any person or the proportion of input tax allowable under section 26, and
(b) that appeal relates, in whole or in part, to any determination by HMRC—
(i) as to the purposes for which any goods or services were or were to be used by any person, or
(ii) as to whether or to what extent the matters to which any input tax was attributable were or included matters other than the making of supplies within section 26(2), and
(c) VAT for which, in pursuance of that determination, there is no entitlement to a credit is VAT on the supply, acquisition or importation of something in the nature of a luxury, amusement or entertainment,
the tribunal shall not allow the appeal or, as the case may be, so much of it as relates to that determination unless it considers that the determination is one which it was unreasonable to make or which it would have been unreasonable to make if information brought to the attention of the tribunal that could not have been brought to the attention of HMRC had been available to be taken into account when the determination was made." (VATA 1994, s.84(4))
"Section 84(4) therefore provides that the Tribunal shall uphold HMRC’s disallowance of input tax unless the decision was unreasonable, or would have been unreasonable if “information brought to the attention of the tribunal that could not have been brought to the attention of HMRC had been available to be taken into account when the determination was made”. In other words, the Tribunal has the duty:
(1) to vary the decision in the appellant’s favour if information subsequently provided shows that the decision was unreasonable; and
(2) to vary the decision in HMRC’s favour if the appellant was under-assessed by the decision." (Telent Technology Services Limited v. HMRC [2022] UKFTT 147 (TC), Judge Redston)
- treating pre-registration VAT as input tax
[127] I accept the argument that whether one describes it as a first stage in a decision or as a prior decision, there was a decision to allow expenditure to be treated as input tax. That decision was made in exercise of HMRC's discretion and in that regard the Tribunal has a supervisory jurisdiction.
[128] I find that, having made that decision, as it were in principle, then, as Judge Bishopp pointed out in Wilf Gilbert, the provisions of VATA must be applied and the officer did so. That is the second stage or the second decision. Ms Brown is correct to say that those provisions are not discretionary. The Tribunal's jurisdiction in that regard is therefore not supervisory." (Aspire in the Community Services Limited v. HMRC [2024] UKFTT 176 (TC), Judge Anne Scott)
- Flat-rate VAT scheme
"(4ZA) Where an appeal is brought—
(a) against such a decision as is mentioned in section 83(1)(fza), or
(b) to the extent that it is based on such a decision, against an assessment,
the tribunal shall not allow the appeal unless it considers that HMRC could not reasonably have been satisfied that there were grounds for the decision." (VATA 1994, s.84(4ZA))
- Group registration
"(4A) Where an appeal is brought against the refusal of an application such as is mentioned in section 43B(1) or (2) on the grounds stated in section 43B(5)(c)—
(a) the tribunal shall not allow the appeal unless it considers that HMRC could not reasonably have been satisfied that there were grounds for refusing the application,
(b) the refusal shall have effect pending the determination of the appeal, and
(c) if the appeal is allowed, the refusal shall be deemed not to have occurred.
(4B) Where an appeal is brought against the giving of a notice under section 43C(1) or (3)—
(a) the notice shall have effect pending the determination of the appeal, and
(b) if the appeal is allowed, the notice shall be deemed never to have had effect.
(4C) Where an appeal is brought against the giving of a notice under section 43C(1), the tribunal shall not allow the appeal unless it considers that HMRC could not reasonably have been satisfied that there were grounds for giving the notice.
(4D) Where—
(a) an appeal is brought against the giving of a notice under section 43C(3), and
(b) the grounds of appeal relate wholly or partly to the date specified in the notice,
the tribunal shall not allow the appeal in respect of the date unless it considers that HMRC could not reasonably have been satisfied that it was appropriate." (VATA 1994, s.84(4A) - (4D))
Challenge that the date specified is too late not within s.84(4D)
"[120] ... There is nothing in section 43C(4) which precludes HMRC identifying a date which, though earlier than the date of the notice, is or might be laterthan the first date on which the body was not eligible to be treated as a member of the VAT group. Accordingly, we do not consider that an appeal based on the ground that the date specified in the notice was too late is an appeal contemplated by or within section 84(4D). Properly analysed, we consider that that is precisely the nature of the ground identified at paragraphs 27 to 32 of HSBC’s grounds of appeal.
[121] Because we have determined that this is not a justiciable ground of appeal, we do not need to decide whether HMRC’s ability validly to assess any VAT is a relevant factor which might legitimately be considered by HMRC in specifying a termination date under section 43C(4). However, had we had needed to reach a decision, we would have determined that there is no reason to exclude this factor from being a relevant consideration." (HSBC Electronic Data Processing (Guangdong) Ltd v. HMRC [2022] UKUT 41 (TCC), Zacaroli J and Judge Thomas Scott)
- Treatment of persons as single taxable person
"(7) Where there is an appeal against a decision to make such a direction as is mentioned in section 83(1)(u), the tribunal shall not allow the appeal unless it considers that HMRC could not reasonably have been satisfied that there were grounds for making the direction." (VATA 1994, s.84(7))
- Option to tax decisions
"(7ZA) Where there is an appeal against such a refusal as is mentioned in section 83(1)(wb)—
(a) the tribunal shall not allow the appeal unless it considers that HMRC could not reasonably have been satisfied that there were grounds for the refusal, and
(b) the refusal shall have effect pending the determination of the appeal." (VATA 1994, s.84(7ZA))
- Record keeping decisions
"(7B) Where there is an appeal against a decision to make such a direction as is mentioned in section 83(1)(zza)—
(a) the tribunal shall not allow the appeal unless it considers that HMRC could not reasonably have been satisfied that there were grounds for making the direction;
(b) the direction shall have effect pending the determination of the appeal." (VATA 1994, s.84(7B))
VAT appeals where the burden is on HMRC
- Security for VAT due from other people
"(4E) Where an appeal is brought against a requirement imposed under paragraph 4(2)(b) of Schedule 11 that a person give security, the tribunal shall allow the appeal unless HMRC satisfies the tribunal that—
(a) there has been an evasion of, or an attempt to evade, VAT in relation to goods or services supplied to or by that person, or
(b) it is likely, or without the requirement for security it is likely, that VAT in relation to such goods or services will be evaded.
(4F) A reference in subsection (4E) above to evading VAT includes a reference to obtaining a VAT credit that is not due or a VAT credit in excess of what is due." (VATA 1994, s.84(4E) - (4F))
VAT appeals where FTT has additional jurisdiction
- Avoidance involving group companies and supplies not at market value
"(7A) Where there is an appeal against a decision to make such a direction as is mentioned in section 83(1)(wa), the cases in which the tribunal shall allow the appeal shall include (in addition to the case where the conditions for the making of the direction were not fulfilled) the case where the tribunal are satisfied in relation to the relevant event by reference to which the direction was given, that—
(a) the change in the treatment of the body corporate, or
(b) the transaction in question,
had as its main purpose or, as the case may be, as each of its main purposes a genuine commercial purpose unconnected with the fulfilment of the condition specified in paragraph 1(3) of Schedule 9A." (VATA 1994, s.84(7A))
Challenging prior decision on VAT appeal (s.84(10))
"(10) Where an appeal is against an HMRC decision which depended upon a prior decision taken in relation to the appellant, the fact that the prior decision is not within section 83 shall not prevent the tribunal from allowing the appeal on the ground that it would have allowed an appeal against the prior decision." (VATA 1994, s.84(10))
- Decision that could not have been taken but for the prior decision
"[22]...The need for a "prior decision" implies, I think, that section 84(10) cannot be invoked to challenge something that amounted to no more than a factor in the subject of the appeal, not a distinct "prior decision". The subsection would not, therefore, be in point merely because, for instance, HMRC had chosen to take a particular matter into account in making the decision under appeal, even if they had resolved on their attitude to the matter in question in advance of the appealed decision. Any challenge to what HMRC had done would have to be mounted under section 83, as part of the appeal against the (final) decision, or perhaps by way of judicial review, not under section 84(10).
[23] Turning to the significance of the word "depended", the UT considered that it "connotes a decision A which has to be taken before decision B both as a matter of fact and as a matter of legal necessity or requirement". This formulation seems to me to capture the sense of section 84(10) of the VATA. In the context, "depended" signifies that decision B (i.e. that under appeal) could not have been taken but for decision A. Parliament had in mind a "prior decision" comparable to the "necessary legal precursor" in Corbitt.[24] In the context of an appeal against "the VAT chargeable on the supply of any goods or services" (section 83(1)(b) of the VATA) or an assessment (section 83(1)(p)), I find it hard to see how the decision under appeal could have "depended" on any prior decision in the relevant sense unless the latter decision dictated whether or not there was legal liability..." (Metropolitan International Schools Limited v. HMRC [2019] EWCA Civ 156, Newey LJ)
- treating pre-registration VAT as input tax
[127] I accept the argument that whether one describes it as a first stage in a decision or as a prior decision, there was a decision to allow expenditure to be treated as input tax. That decision was made in exercise of HMRC's discretion and in that regard the Tribunal has a supervisory jurisdiction.
[128] I find that, having made that decision, as it were in principle, then, as Judge Bishopp pointed out in Wilf Gilbert, the provisions of VATA must be applied and the officer did so. That is the second stage or the second decision. Ms Brown is correct to say that those provisions are not discretionary. The Tribunal's jurisdiction in that regard is therefore not supervisory." (Aspire in the Community Services Limited v. HMRC [2024] UKFTT 176 (TC), Judge Anne Scott)
- Not a basis for advancing public law arguments
"[25]...Section 84(10) of the VATA is inapplicable both because HMRC's view on whether the School should be granted a transitional period amounted to no more than a factor in their decision to assess and because the assessments could have been raised without HMRC reaching any decision on any legitimate expectation contention. The legitimate expectation point did not bear on whether there was "VAT chargeable" or a liability to assess and, in the words of the UT, "HMRC had to deal with it first because it was raised in negotiation by the taxpayer, but it did not otherwise have to". If the School wishes to pursue its legitimate expectation argument, it must seek to do so in its judicial review claim, not in the context of these proceedings." (Metropolitan International Schools Limited v. HMRC [2019] EWCA Civ 156, Newey LJ)
Fast tracking appeal where parties mistaken about issues properly before FTT (jurisdiction)
“The original appeal in this matter was under reference TC/2014/01853 and the hearing was on 6 May 2015. Towards the end of that hearing it became clear that although both parties had thought that the appeal related to the tax years 2009/10 and 2010/11 it seemed that, possibly, there was in fact extant only an appeal in regard to 2009/2010…On 25 June 2015, the Tribunal issued detailed Case Management Directions, a copy of which is annexed at Appendix 1. Those Directions set out the chronology and the outstanding issues. Thereafter a competent appeal in regard to 2010-2011 was lodged with the Tribunal. Both parties requested that the two appeals be consolidated since evidence had been led by both parties in regard to both tax years…By Directions dated 2 September 2015 the Tribunal consolidated appeals TC/2014/01853 and TC/2015/04417 to proceed under the latter reference and the consolidated appeal be listed to be determined without a hearing in terms of Rule 29(1)(a) of Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 and a copy of those Directions are annexed at Appendix 2.” (Harrison v. HMRC [2015] UKFTT 539 (TC), §§1 – 3).
No challenge to validity of accelerated payment notice on appeal against penalty
"[48] Having regard to all of these considerations, it is a clear and necessary implication of the FA 2014 scheme for PPN (and APN) notices, construed as a whole and in light of its statutory purpose, that the ability to raise a collateral public law challenge to the validity of the underlying PPN is excluded at the penalty and enforcement stages..." (Beadle v. HMRC [2020] EWCA Civ 562, Simler LJ)
Permissible to challenge allocation of payments on late payment penalty appeal
"[17] In my view, this is a dispute about 'the amount of the penalties' within the proper meaning and effect of the statutory provisions set out above, meaning that the Tribunal does have jurisdiction to consider these penalties. Contrary to Paragraph 55 of HMRC's composite statement of case, I do not consider that it would be 'outwith the jurisdiction of the Tribunal to make [the allocation of payments] via the circuitous route of quantum of penalties'.
[18] These are my reasons.
[19] Reason 1: The fact that there is a dispute about allocation does not mean that this dispute cannot be a justiciable dispute about amount.. The route is not 'circuitous': it is dead straight. There is direct and immediately proximate cause and effect: the allocation is the cause, and the amount of the penalties is the effect. But consideration of the effect does not preclude consideration of the cause; and indeed is artificial without consideration of the underlying cause. 20. Reason 2: This is a common-sense reading of the legislation. The legislation providing for appeals against penalties is expressed in simple language. There is no expressed reservation or carve-out. The obvious Parliamentary purpose inherent in the plain reading of Schedule 56 Paragraph 13 is that penalties should be capable of being appealed to this Tribunal, and that the scope of appeal is wide. As such, I would be very hesitant to impose any reading on the Paragraph which would in effect impose any limitation not otherwise clearly expressed in it.
...
[24] Reason 6: I find further support for my conclusion as to justiciability in the Tribunal's decisions in Bilaman Management Services LLP [2014] UKFTT 270 (TC) (Judge Swami Raghavan and Mrs Shameem Akhtar) and C & DDH Ltd [2014] UKFTT 688 (TC) (Presiding Member Mr Peter Sheppard and Dr Heidi Poon). Although both are first instance decisions, and neither binds me, both are full reserved decisions. Both were decisions following substantive hearings (albeit both hearings were assymetric, in the sense that the Appellant neither appeared nor was represented). Both involved challenges to the size of the penalties inter alia on the basis of mis-allocation of payments: see Paragraph [27] of Bilaman; and Paragraphs [37-38] of C & DDH. In neither appeal does HMRC seem to have argued, unlike here, that the appeals, insofar as they raised issues of (mis)allocation were non-justiciable. Although both appeals were dismissed (for other reasons), it seems to me that both hearings proceeded on the footing that allocation was justiciable, and was capable, at least in principle, of amounting to a reasonable excuse." (Crawford v. HMRC [2022] UKFTT 37 (TC), Judge McNall)
Not permissible to challenge refusal to accept late Fixed Protection 2012 notice on appeal to FTT
"[48] We acknowledge that HMRC’s interpretation of Regulation 7 produces a result that the Appellants and other taxpayers might find unwelcome. If HMRC refuse to accept a late Paragraph 14 notice or, for example, capriciously refuse to accept a Paragraph 14 notice that does not contain the taxpayer’s correct national insurance number because of a transposition error, then a taxpayer’s remedy lies in expensive judicial review proceedings rather than in less formal proceedings before the FTT. We therefore pause to consider whether this result was truly what the Regulations intended. There are, however, several areas of the tax code in which the tribunal is not given full jurisdiction to resolve all challenges that a taxpayer may wish to make to an HMRC decision. Beadle provides an example of such a situation. Ultimately, we have concluded that taxpayers’ understandable wish to bring all of their challenges in one forum does not constitute a “necessary implication” to the effect that challenges to HMRC’s exercise of discretion can be brought in an appeal under Regulation 7 given the clear indications in Regulation 7 to the contrary.
[49] Having weighed up the competing indications, in respectful disagreement with the FTT, we consider that HMRC’s construction of Regulation 7 is to be preferred. On an appeal notified to the FTT, the FTT’s sole jurisdiction is to consider whether the requirements of Regulation 4 are met." (Executors of David Harrison v. HMRC [2021] UKUT 273 (TCC), Judge Richards and Judge Greenbank)
FTT considering quantum of penalty even though not expressly challenged
"[68]...We have therefore considered whether, in the absence of an express appeal against the quantum of the penalty by the Appellant, we have no option but to affirm the quantum of the penalty as it stands.
[69] However, we think that that would be an overly-restrictive approach to the legislation and the facts and would not be in keeping with the overriding objective in paragraph 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the "Tribunal Rules") or our power to regulate our own procedure in paragraph 5 of the Tribunal Rules. The former paragraph requires that we deal with cases fairly and justly and the latter paragraph gives us wide powers of case management. We think that it is implicit in the grounds of appeal in this case that the Appellant is objecting not just to the penalty itself but also, in the event that we affirm the decision to assess a penalty, to the amount of the penalty." (Kent Couriers Limited v. HMRC [2024] UKFTT 145 (TC), Judge Beare)