top of page

F3: Opening a statutory enquiry

Power to open enquiry into tax return

Personal and trustee return

"(1)     An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”)—

(a)     to the person whose return it is (“the taxpayer”),

(b)     within the time allowed." (TMA 1970, s.9A(1))

Partnership return

"(1)     An officer of the Board may enquire into a partnership return if he gives notice of his intention to do so (“notice of enquiry”)—

(a)     to the partner who made and delivered the return, or his successor,

(b)     within the time allowed." (TMA 1970, s.12AC(1))

Company tax return

"(1)     an officer of Revenue and Customs may enquire into a company tax return if they give notice to the company of their intention to do so (“notice of enquiry”) within the time allowed." (FA 1998, Sch 18, para 24(1))

SDLT

 

"(1)     The Inland Revenue may enquire into a land transaction return if they give notice of their intention to do so (“notice of enquiry”)—

(a)     to the purchaser,

(b)     before the end of the enquiry period." (FA 2003, Sch 10, para 12)

Power to open enquiry into tax return

Power to enquire into a period if company makes error over accounting period

"(1)     In the case of a company tax return which appears to an officer of Revenue and Customs—

(a)     is or may be a return for the wrong period, or

(b)     has become a return for the wrong period as a result of a direction under section 11(3) of the Corporation Tax Act 2009 (power of officer of Revenue and Customs to direct which accounting date to be used where company carries on several trades),

the power to enquire into the return includes power to enquire into the period for which the return ought to have been made.

 

(2)     A return is a “return for the wrong period” in the following cases.

(3)     The first case is where the return is made for a period which is treated in the return as an accounting period, but which is not an accounting period of the company.

(4)     The second case is where the return is made on the basis that there is no accounting period ending in or at the end of the specified period, but there is such an accounting period." (FA 1998, Sch 18, para 26(1) - (4))

Specified period

"(6)     In this paragraph “the specified period” means the period specified in the notice requiring a company tax return." (FA 1998, Sch 18, para 26(6))

Power to enquire into a period if company makes error over accounting period

Deemed enquiry into partners' personal returns

 

"(6)     The giving of notice of enquiry under subsection (1) above at any time shall be deemed to include the giving of notice of enquiry—

(a)     under section 9A(1) of this Act to each partner who at that time has made a return under section 8 or 8A of this Act or at any subsequent time makes such a return, or

(b)     under paragraph 24 of Schedule 18 to the Finance Act 1998 to each partner who at that time has made a company tax return or at any subsequent time makes such a return." (TMA 1970, s.12AC(6))

"[32] HMRC gave notice under section 12AC(1) of the opening of inquiries into the partnerships’ tax returns for the tax years 1998/99, 1999/2000, 2000/01 and 2001/02. By virtue of section 12AC(6)(a), the giving of notice opening an enquiry into a partnership return is deemed to include the giving of a notice of enquiry “under section 9A(1) of this Act to each partner who at that time has made a return under section 8 or 8A of this Act or at any subsequent time makes such a return”. There were therefore deemed inquiries into the partners’ personal tax returns in respect of what I have called Year 2." (R (oao De Silva) v. HMRC [2017] UKSC 74)

Query whether deemed enquiry is limited to partnership matters

"[46] As well as making that argument, HMRC also presented their own competing articulation of the interaction between actual and deemed enquiries as follows:

(1) Section 9A(3) does not prevent a “deemed enquiry” under s12AC(6) from being opened at a time when an “actual enquiry” under s9A is open.  The restriction in s9A(3) applies only to prevent multiple actual enquiries under s9A.

(2) A deemed enquiry under s12AC(6), however, has a limited scope which limits the practical significance of actual and deemed enquiries being permitted to carry on at the same time. The deemed enquiry under s12AC(6) is, HMRC submit, limited to what Ms Nathan QC referred to as “penumbral matters” relating to a taxpayer’s participation in the partnership whose corresponding partnership return is the subject of an enquiry under s12AC(1).

...

[48] However, it seems to us, and we understood both parties to agree, that we do not actually need to decide whether a deemed enquiry under s12AC(6) is into the totality of the individual return as the Appellants argue, or only into penumbral matters, as HMRC argue." (Reid and Emblin v. HMRC [2020] UKUT 61 (TCC), Nugee J and Judge Richards)

Deemed enquiry into partners' personal returns

Power to enquire into 'voluntary' SDLT return

 

"[51] The appellant also relies on two FTT decisions in the context of direct tax returns pursuant to the Taxes Management Act 1970 (“TMA 1970”). In Bloomsbury Verlag GmbH v Revenue and Customs Commissioners [2015] UKFTT 660 (TC), HMRC had not issued a notice to file a company return which was a pre-requisite to an obligation on the taxpayer to do so. A document purporting to be a return for a particular accounting period was filed by the taxpayer which was seeking to establish a right to loss relief for losses claimed in the return. The FTT held that a return filed where there was no obligation to do so was not a return for the purposes of TMA 1970. It is this decision which appears to have coined the description a “voluntary” return. The same decision was reached by the FTT in Patel v Revenue and Customs Commissioners [2018] UKFTT 185 (TC) in the context of personal tax returns. The taxpayer successfully argued that an enquiry and subsequent closure notice were invalid because there had been no notice to file a return.  The latter decision prompted an amendment to TMA 1970 which effectively provided that enquiries into voluntary returns would be valid (see Allam v HM Revenue and Customs [2021] UKUT 291 (TCC)). The appellant says that the same principles apply to SDLT, and in the absence of any equivalent amending legislation there can be no valid enquiry into a voluntary return.

[52] The FTT in this appeal distinguished Bloomsbury and Patel on the basis that the SDLT regime has no requirement for HMRC to give any notice to a purchaser in order to trigger the obligation to deliver a return. The appellant says that it is irrelevant why the obligation to make a return has not arisen. What is important is that in this case, as in Bloomsbury and Patel, there was no obligation to make a return.

[53] In our view the FTT was right to distinguish the position in relation to direct tax cases from the position in relation to SDLT in the way it did. Unlike direct taxes, SDLT is a transactional tax where there are penalties for failing to put in a return. Although the parties did not put it in these terms, the question of construction in this case is whether the reference to a land transaction return in paragraph 12(1) and elsewhere in FA 2003 means only a return that is delivered pursuant to the obligation arising under section 76. Alternatively, whether it extends to a return submitted as a protective return. There are practical reasons, which we have noted above, why the enquiry provisions should be considered to apply to protective returns. Otherwise, the statutory regime would be unworkable. There would be no statutory procedure for a purchaser such as the appellant to protect its position in cases of uncertainty.

[...]

[60]  If necessary, we would also have found that the effect of section 194(12) was to deem the appellant’s Return to have been a valid return. We do not consider that restrictions on the application of retrospective legislation described in Lauri v Renad [1892] 3 Ch 402 at 420 and 421 and Yew Bon Tew v Kenderaan Bas Mara [1983] AC 553 at 558F and 563B affect that conclusion. However, for the reasons given above, the Return was valid as a protective return in any event." (Redmount trust Company Limited v. HMRC [2023] UKUT 68 (TCC), Judge Ramshaw and Judge Cannan)

Power to enquire into 'voluntary' SDLT return

Existence of enquiry is a question of law

 

“the question as to whether the steps that HMRC took in response to the claim amount to an “enquiry”…is a question of law” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §38)

Existence of enquiry is a question of law

Meaning of enquire 

 

“it must mean ‘examine’, ‘investigate’ or ‘make an investigation into’…’scrutinise’…” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §42); 

 

Query whether there is an enquiry if all relevant information contained in a return/claim and HMRC simply issue a decision

 

“Thus the tribunal in Portland Gas took the view that if all the relevant information was contained in the claim itself, the conclusion drawn by HMRC from that information would not be the result of any enquiry on their part. We are not bound by this observation of the tribunal; the remarks in this respect were obiter as the tribunal found that later correspondence did amount to an enquiry. With respect to that experienced tribunal, we cannot agree with them on this point. The conclusion reached by that tribunal seems to us to pay insufficient regard to the synonym for the act of enquiry which the tribunal itself had noted, namely that of “scrutinise”. It would also in our judgment have the unfortunate, and counter-intuitive, result of giving rise to different conclusions as to whether there had been an enquiry depending on the level of information provided by the taxpayer.” (Raftopolou v HMRC [2015] UKUT 579 (TCC), §89, Judges Berner and Raghavan)

 

Notice of Enquiry and closure notice cannot normally be in the same letter

 

"[49] While I agree with much of what the UT said in the passage just quoted, I draw the opposite conclusion from it. It must be right that HMRC does not open an enquiry without considering, even "scrutinising", available materials. Clearly an officer of HMRC must turn his mind to the claim in hand before opening an enquiry. This shows that there can and will be consideration before the decision is taken to open an enquiry, not that the enquiry starts with such consideration. The statute is clear: once a decision is taken to open an enquiry, the HMRC officer must give notice to the taxpayer of his intention to enquire into the claim. Under the scheme of these provisions, the notice precedes the enquiry under paragraph 5 and alerts the taxpayer to the start of a formal process with its attendant statutory powers available to HMRC.
[50] I conclude therefore that HMRC's letter in this case could not serve both as a notice under paragraph 5 and as a closure notice under paragraph 7. I find it difficult to think that the same document could ever serve as both but, as not every circumstance can be foreseen, I do not express a concluded view." (HMRC v. Raftopoulou [2018] EWCA Civ 818, §§49 - 50)  

“We appreciate that the Court of Appeal in Raftopoulou considered that it would be difficult for the same document to constitute an enquiry notice and a closure notice, and in the ordinary course that must be the case. In this instance, however, HMRC was seeking to avoid thwarting the Appellant’s clear desire to appeal what he saw as a decision, and so the 8 March 2013 letter sought to give the Appellant a decision to appeal against. It is this factor that gives rise to a measure of artificiality in the 8 March 2013 letter – where an enquiry is opened (“…I have checked your claim…under 10 paragraph 5…”) and then closed (“…I am closing my check of the claim…”) – but we consider this course was amply justified in all the circumstances.” (White v. HMRC [2018] UKUT 257 (TCC), §25, Marcus Smith J and Judge Jonathan Richards).

Examples 

 

HMRC response not going beyond the face of letter sent to them insufficient to amount to an enquiry, but seeking policy advice on application of a time limit was (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §44 – 46)
 

Meaning of enquire 

HMRC may only enquire into a return submitted by or on behalf of the taxpayer

 

“But her case on the first four returns impliedly raised the issue of whether the 2008 and 2009 tax enquiries were validly opened, because if Ms Vowles, or someone on her behalf, had not submitted the tax returns in question, HMRC would be unable to enquire into them.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §54, Judge Mosedale)

Duress required to void consent to return being submitted

 

“While we accept that she was the victim in an abusive relationship, and in practice did not know the contents of the tax returns nor read the post sent to her, we consider that as a matter of law she would have to show duress in the sense of fear of imminent danger in order to vitiate her consent to Mr Walker acting on her behalf in completing her tax returns, reading her post, and corresponding with HMRC.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §57, Judge Mosedale)
 

HMRC may only enquire into a return submitted by or on behalf of the taxpayer

No return by taxpayer where agent submits fraudulently without authority

 

"[79] The box on the declaration was clearly completed by CACL or the return would not have been received by HMRC. However, I am satisfied that Mr Robson had not seen the return, he had not confirmed the accuracy of its contents and he had not given authority for its submission. For the reasons set out above, I rejected HMRC’s submissions that the email correspondence showed that Mr Robson knew a SATR was to be submitted on his behalf and that he authorised CLAC to do so; I am not convinced the evidence supports such a finding. I do not consider the fact that the email chain heading changes to “tax return” or the reference to an investment are sufficient when viewed against Mr Robson’s honest and credible evidence to demonstrate that Mr Robson knew a SATR would be submitted or that he authorised it.

[80] The facts of Mr Robson’s appeal are unusual and specific and as I have concluded that CACL were not authorised to act on behalf of Mr Robson, I do not accept that Clixby supports HMRC’s case to the extent submitted. While cases such as this must be rare, it appears to be an unfortunate loophole in HMRC’s system that this process was open to abuse.

[81] I concluded that CLAC was the not authorised agent of Mr Robson. That being so, the return cannot be deemed to have been submitted on behalf of Mr Robson. As s29 TMA requires the filing of a return the statutory requirements are not satisfied." (Robson v. HMRC [2023] UKFTT 226 (TC), Judge Dean)

No return by taxpayer where agent submits fraudulently without authority

HMRC may enquire into retrospectively validated returns

"[43] The FTT considered the Section 12D Issue at [32] – [77] of the Decision. It concluded that s 12D did have the effect of retrospectively validating the notices of enquiry and the closure notices. In particular:

(1) The purpose of s 12D was clear. It was to codify a previous policy of HMRC to treat voluntary returns as valid and as having been made pursuant to a notice under s 8 TMA 1970. The Explanatory Notes to the Finance (No 3) Bill 2018 and extracts from Hansard did not assist in resolving the issue (see [43] and [47].

(2) Section 12D was expressed to apply “for the purposes of the Taxes Act” and by s 87(3) FA 2019 was treated as always having been in force. It was clearly designed to give certainty to taxpayers and HMRC that the process of assessment encompassing enquiry notices and closure notices in relation to voluntary returns would be respected (see [55] – [60]).

(3) It was a deeming provision and its scope fell to be construed in accordance with the decision in Marshall v Kerr [1994] STC 638. Validation of the enquiry notices and closure notices inevitably flowed from the deemed state of affairs (see [62]).

(4) This interpretation did not give rise to any injustice or absurdity (see [63] – [75]).

[44] The submissions before us were in large measure a rehearsal of the submissions made to the FTT. For the reasons which follow we are satisfied that there was no error of law in the FTT’s conclusion." (Allam v. HMRC [2021] UKUT 291 (TCC), Edwin Johnson J and Judge Cannan)

HMRC may enquire into retrospectively validated returns

Notice of enquiry

 

Only requirement is notice of intention to enquire 

 

“The only requirement is that it gives notice of the intention to enquire into a land transaction return” (Cooltinney Developments Ltd v. HMRC [2011] UKFTT 252 (TC) §32) 

 

"It does not seem to me that s 12AC requires particular formality about the giving of notice. Chambers English Dictionary (7th edn) defines 'notice' as intimation, announcement, information, warning. It seems to me that the purpose of the notice to be given is to warn the taxpayer that an enquiry is underway so that he knows questions may be asked and that time limits may be affected, and to provide a mechanical activation of the enquiry procedure. This does not require something formal: all that is needed is something in writing which informs the taxpayer that an enquiry is underway. It seems to me therefore that a letter which announces that 'I intend enquiring into' a tax return is sufficient to be a notice for the purposes of s 12AC." (Flaxmode Ltd v. HMRC [2008] STC (SCD) 666, §27).

 

For the relevant tax year

“Therefore we conclude that the Respondents must be accurate in relation to the essential elements of a notice of enquiry, even if the taxpayer would be capable of discerning the Respondents’ true intention despite a minor error.  For a notice of enquiry to meet the requirements of Section 9A TMA 1970, the return into which the enquiry will be opened must be stated accurately and with sufficient detail for it to be clear which return is intended. The detail as to the relevant return must be correct…The return which was described in the letter of 17 January 2011 is for a tax year which does not exist.  We conclude that the disputed notice of enquiry is not in substance and effect in conformity with the intent and meaning of the Taxes Acts.” (Mabbutt v. HMRC [2016] UKFTT 306 (TC), §§36…37 – notice of enquiry intended for 08/09 tax year referred to the tax year “ended 6 April 2009”. Not saved by s.114)

 

Reference to incorrect year-end saved by objective reading

 

“The recipient of HMRC’s letter cannot reasonably have understood it to mean that the writer had no wish to enquire into the return which had been made, but wanted to enquire instead into some other, hitherto unmade, return. On the contrary, despite the error there is no arguable ambiguity about what was meant: the writer intended to enquire into the return whose receipt he was acknowledging. Ernst & Young plainly understood that to be the message. The requirement that the taxpayer be informed of the opening of an enquiry was accordingly met and for that reason, in our view, this issue can be resolved without resort to section 114. If such resort is nevertheless necessary it seems to us clear that, despite the error, the letter was “in substance and effect in conformity with or according to the intent and meaning of the Taxes Acts”, as section 114(1) puts it, and its defect is cured.” (GDF Suez Teeside Limited v. HMRC [2017] UKUT 68 (TCC), §117, Newey J and Judge Bishopp effectively overruling Mabbutt v. HMRC [2016] UKFTT 306 (TC), §36).

 

Must be clear to the taxpayer that an enquiry is being undertaken 


“We also derive from Portland Gas the proposition that what is important is the substance of what is communicated by HMRC to the taxpayer and not the formality. There is no requirement that notice of an enquiry should formally state that an enquiry is being opened.” (Raftopolou v HMRC [2015] UKUT 579 (TCC), §100, Judges Berner and Raghavan)

“a communication should be regarded as giving notice of an intention to enquire provided the intended effect is reasonably ascertainable by the person to whom it is directed” … “It must also be clear to the taxpayer from what HMRC say that an enquiry is being undertaken” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §48, §55); 

“it is necessary to consider…the characteristics of the recipients, its own knowledge (or lack of it) and the overall factual context” (Cooltinney Developments Ltd v. HMRC [2011] UKFTT 252 (TC) §33); XX Mannai

Circumstance dependent 


“the circumstances in which correspondence might constitute notice of an enquiry and a closure notice should in practice be carefully circumscribed by reference to the circumstances being dealt with” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §55);

 

Notice not required to be in a single document/look at totality 

“It does not say give a notice. There can be no assumption therefore that the notice be comprised in a single document, nor, where more than one document is sent to the purchaser, that anyone of those documents should be regarded as the notice” (Cooltinney Developments Ltd v. HMRC [2011] UKFTT 252 (TC), §31 cited with apparent approval in Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §47)

 

Question of whether intention to enquire apparent to reasonable taxpayer:


“The question is whether a reasonable taxpayer receiving the two letters of 17 January 2011 would have understood them as having to be read together and from that composite communication would have understood that they were intended to give the taxpayer notice of HMRC’s intention to open an enquiry into a return. Mr Mabbutt, or to be more precise a reasonable taxpayer, could not reasonably have thought that the copy of the Dickinsons letter sent to him was a separate document, unrelated to the enquiry and provided for some other purpose. Any dispassionate and reasonable reader of the Mabbutt letter would recognise that it could be fully understood only if read together with the Dickinsons letter; the latter was incorporated by reference into the former.” (HMRC v. Mabbutt [2017] UKUT 289 (TCC), §47).


“There is nothing in the wording of Section 9A TMA 1970 which would prevent notice being given by means of more than one document.  However, in this case the Respondents are clear in their letter to the agents that a copy of the notice of enquiry is enclosed with that letter.  There is no reference to the letter to the agents forming part of the notice.  Similarly the letter to the Appellant refers to the enclosed copy letter to the agents being enclosed “for your information”.  Given those descriptions we consider that the Respondents’ intention was that the letter to the Appellant alone would constitute the notice of enquiry.  That intention is further demonstrated in the Respondents’ letter of 26 April 2011 (see paragraph 16(g) below) which refers to “my letter”, not my letters, as being the disputed notice of enquiry.  It was not the Respondents’ intention that both letters of 17 January 2011 should together form the notice of enquiry.  On that basis we find that the disputed notice of enquiry is the letter of 17 January 2011 to the Appellant alone.” (Mabbutt v. HMRC [2016] UKFTT 306 (TC), §16(d))

Notice of enquiry

​Notice must be received or deemed to be received

“But the requirement of ‘notice … to’, in my judgment, is language which should be taken expressly to assert the ordinary situation in law that acceptance requires to be communicated or notified to the offeror, and is inconsistent with the theory that acceptance can be constituted by the act of posting…” (Holwell Securities Ltd v. Hughes [1974] 1 WLR 155, Russell LJ applied in Sharya UK Ltd v. HMRC [2018] UKFTT 72 (TC), §46, Judge Richard Thomas).

“As I have said, it was not enough for HMRC to send the NOE letter:  it had to be received.  It was for HMRC to prove that they sent the NOE letter and I find that they have proved this.  It was for the appellant to prove its case that the NOE letter was not received at the White House.  This is because of the Interpretation Act 1978 which provides as s 7 as follows…” (Spring Capital Ltd v. HMRC [2016] UKFTT 246 (TC), §31).

“In summary, the law is that a notice of enquiry must be received by the taxpayer within the enquiry window to be effective, but the taxpayer is deemed by s 115(2) and s 7 IA 78 to have received it if it was sent to any place specified in s 115(2) unless the taxpayer can prove the letter did not arrive or arrived after the enquiry window closed.” (Tinkler v. HMRC [2016] UKFTT 170 (TC), §71, Judge Mosedale, emphasis original).

 

See A5: Communication for general principles re notice

Notice via an agent with actual or apparent authority to give receipt is sufficient

 

"[51] In conclusion, BDO had neither actual nor apparent authority to receive a s.9A notice on behalf of Mr Tinkler and the UT erred in concluding otherwise. This means that the copy notice enclosed with the BDO letter was not effective as a s.9A notice. Given that no s.9A notice was validly sent to Mr Tinkler, and that he never received such a notice, it follows that no valid s.9A notice was given in this case." (Tinkler v. HMRC [2019] EWCA Civ 1392, §51, Hamblen LJ)

“[107] Where the TMA required notice to be given to a person, there is no reason at all to suppose Parliament intended to oust the normal rules of agency.  So where, for instance, as in Spring Salmon and Seafood  the agent was expressly authorised to receive a notice on behalf of the taxpayer, that notice was given to the taxpayer when it was given to the agent.  I also agree that because the normal rules of agency were not ousted from s 9A, that express authorisation by the taxpayer for the agent to receive a particular kind of notice is not required.  All that is required is actual or apparent authority for the agent to receive notices, including the kind of notice in question, in order for service on the agent of the s 9A notice to be service on the taxpayer.” (Tinkler v. HMRC [2016] UKFTT 170 (TC), §107).
 

Form 64-8 does not give authority to receive notice of enquiry

"[41] Interpreting Form 64-8 together with the linked website page, HMRC are acknowledging that a "formal notice of enquiry" is a form which "must" be sent to the taxpayer "instead" of the agent and that the authority to deal with the agent is limited to correspondence in relation to such enquiries, reflecting an agreement made with professional bodies.
[42] In my judgment this is a clearly expressed limitation on the general authority being sought by HMRC and the corresponding represented authority of the agent. This is, moreover, a matter of deliberate decision in the light of the agreement made between HMRC and professional bodies.
[43] It is also understandable that there should be such a limitation. The giving of a notice of enquiry is an important step with serious and immediate consequences. The tax return can no longer be amended and the taxpayer's liability for the year in question will not be settled until the enquiry is closed which may, as in this case, take years. It is also a notice which has to be given within a specified time limit. It is therefore unsurprising that HMRC should refer to it as a "formal notice of enquiry" and treat it differently to other forms and pursuant to a specific regime agreed with professional bodies.
[44] I accordingly agree with the FTT that Form 64-8 did not give BDO apparent authority to receive a notice of enquiry on Mr Tinkler's behalf." (Tinkler v. HMRC [2019] EWCA Civ 1392, §§41 - 44, Hamblen LJ)

Apparent authority requires the third party to have acted in reliance

"[45] I also accept [the taxpayer's]  further submission that HMRC did not in any event rely on BDO having such authority. HMRC acted in accordance with the stated position in Form 64-8 and the accompanying website page. The "formal notice of enquiry" was purportedly sent to Mr Tinkler. No such notice was sent to BDO. BDO received a copy of the notice sent to Mr Tinkler for information purposes. Whether or not it is capable of amounting to the giving of a notice under s.9A (ground (iii)), it did not purport to be a notice. Unlike the notice to Mr Tinkler, it was not headed as a s.9A notice; it refers to the notice "which has today been issued to your client"; it states that the copy notice is enclosed "for information", and it makes no request for the notice or information of it to be passed on to Mr Tinkler.
[46] It is a requirement of the doctrine of apparent authority that the third party relies on the representation of authority which has been made. As set out in the definition of apparent authority in Article 72 at 8-022 of Bowstead & Reynolds on Agency (21st edition), the third party has to deal with the agent "on the faith of" the representation made. This is discussed further at 8-024 by reference to the cases there cited. As stated at 8-024(2) – "The third party must have relied on the representation"." (Tinkler v. HMRC [2019] EWCA Civ 1392, §§45 - 46, Hamblen LJ)

Receipt of "notice" for information purposes only may not be receipt of notice

"The "formal notice of enquiry" was purportedly sent to Mr Tinkler. No such notice was sent to BDO. BDO received a copy of the notice sent to Mr Tinkler for information purposes. Whether or not it is capable of amounting to the giving of a notice under s.9A (ground (iii)), it did not purport to be a notice. Unlike the notice to Mr Tinkler, it was not headed as a s.9A notice; it refers to the notice "which has today been issued to your client"; it states that the copy notice is enclosed "for information", and it makes no request for the notice or information of it to be passed on to Mr Tinkler." (Tinkler v. HMRC [2019] EWCA Civ 1392, §§45 - 46, Hamblen LJ)

Courtesy letters held sufficient

“It seems to me that the "courtesy" letters were quite clearly giving the recipient partners notice that HMRC intended to enquire into the Partnership Tax Returns which had been submitted in respect of the partnerships of which the recipient partner was a member. The fact that the letters went on to refer to the partners' Company Tax Returns does not seem to me to change things. It is clear that the reference to the Company Tax Returns also being treated as being under enquiry "until the enquiry is completed" (that is, the enquiry referred to in the first paragraph of the letters and so the enquiry into the Partnership Tax Returns) does not alter the fact that, in the first paragraph, clear notice was given that HMRC intended to enquire into the relevant Partnership Tax Return.” (R (oao Sword Services Ltd) v. HMRC [2015] EWHC 3544 (Admin), §17)

Notice must be from HMRC: awareness alone not sufficient

"[69]...[HMRC] argued that it is sufficient if Mr Tinkler was told about the enquiry within the relevant time frame as nothing in section 9A of the TMA says that the notice must be in any particular form. [HMRC] speculated that HMRC could give good notice of an intention to open an enquiry by using an aeroplane to write it in the sky provided they could show that the taxpayer had seen it (it might raise other issues about HMRC’s obligation of confidentiality under the Commissioners for Revenue and Customs Act 2005).

[70] We do not accept those submissions. We agree instead with [the taxpayer] that section 9A of the TMA is prescriptive in that it requires HMRC to give the notice of an intention to open an enquiry to the taxpayer (or his properly authorised agent). [The taxpayer] was also correct to say that it is section 115(2) of the TMA that is relevant. In the case of an individual, that sub-section permits HMRC to give ‘the notice or other document’ by serving it by post addressed to the taxpayer ‘at his usual or last known place of residence, or his place of business or his place of employment’. It follows from section 7 IA78 that if the notice is not properly addressed then the notice does not become properly served simply because someone forwarded it to the intended recipient or the intended recipient learns of it from some source." (Tinkler v. HMRC [2018] UKUT 73 (TCC), §§69 - 70, Judges Berner and Sinfield)

Unless, possibly, the taxpayer is culpable 

“[22] [HMRC] submit that it is not open to the relevant Claimants … to assert that a tax enquiry was not properly opened since, they suggest, the 1970 Act needs to be "read purposively" in such a way as not to require that a notice must be served on a person who has not been identified as a partner in the relevant Partnership Tax Return…

[24] In circumstances where HMRC is having to resort to an invitation to the Court to adopt a purposive construction to what, on the face of it, is a clear requirement in section 12AC(1)(a) of the 1970 Act that notice be served on the partner "who made and delivered the return", it seems to me that it is appropriate that this aspect of the claim should proceed to a full hearing, and I grant permission in respect of the 'category 2' cases accordingly.” (R (oao Sword Services Ltd) v. HMRC [2015] EWHC 3544 (Admin), §§22…24, Picken J)

 

“[70] In my view it does not lie in the mouth of someone failing to comply with a legal obligation to identify its existence to a public authority, and to attest to the truth of what it is telling it, to complain when the public authority does not then send it a notice of enquiry into the information proffered. It is perhaps an example of the principle operating in other parts of the law, ex turpi causa non oritur actio or, in new money, an action does not arise from a base cause…

[75] In other words those who, under section 12 AC(1)(a), were the partners making and delivering the tax returns were on notice of the enquiries: see El Ajou v. Dollar Land Holdings Ltd [1994] 2 All ER 685, 703, per Hoffmann LJ. They did not receive formal notices of the enquiry, but since they knew of the enquiry that is sufficient for the purposes of the legislation.” (Sword Services Ltd v. HMRC [2016] EWHC 1473, §§70…75, Cranston J).
 

Notice must be received or deemed to be received
Notice must be from HMRC: awareness alone not sufficient

Method of giving notice

 

No particular form

 

“Secondly, there is section 12AC(1)(a) and its requirement that a notice of enquiry into a tax return is to be given to the partner who made and delivered the return. To my mind, the Parliamentary intention behind that provision is to ensure that the taxpayer knows in writing of the enquiry and so has the opportunity to put its case. There is no particular form prescribed for a notice of enquiry and so long as the taxpayer knows of HMRC's decision to conduct an enquiry that is sufficient. In this regard Flaxmode Ltd v. Revenue and Customs Commissioners [2008] STC (SCD) 666 is, in my view, correct.” (Sword Services Ltd v. HMRC [2016] EWHC 1473 (Admin), §71).

“No formality is prescribed for the notice, and there are no specific provisions for what it must contain” (Cooltinney Developments Ltd v. HMRC [2011] UKFTT 252 (TC) §32); 

“notice of enquiry need not be in any particular form, the only requirement being that it gives notice of an intention to enquire into a land transaction return”… “no degree of formality required to constitute the opening of an enquiry. The question is purely one of substance…”(Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §48, §55);

Notice required to be given, not served

“As s 9A TMA did not require the notice of enquiry to be served, the applicable sub-section is s 115(2).  The parties were agreed that notice could be given if it was sent to Mr Tinkler’s usual or last known place of residence.” (Tinkler v. HMRC [2016] UKFTT 170 (TC), §62).

 

Statutory methods of giving notice not prescriptive

 

“I agree that as a matter of law s 115 does not set out the only methods by which notice of an enquiry can be given to a taxpayer, but that if s 115 methods are not used, there is no deemed giving of notice.  HMRC must prove notice was actually given to the taxpayer within the enquiry window.” (Tinkler v. HMRC [2016] UKFTT 170 (TC), §93).

 

Verbal notice

 

“Both parties were agreed that no particular form for opening an enquiry was prescribed by law.  S 9A TMA required only that notice of the enquiry should be given “to” the taxpayer within the time allowed; s 115 TMA said that a notice which had to be given “may” be served by post.  Therefore, it seems, that a notice of enquiry does not have to be in writing at all (see R (oao Spring Salmon & Seafood Ltd) v HMRC [2004] STC 444 at [23].” (Tinkler v. HMRC [2016] UKFTT 170 (TC), §133).
 

No duty to give reasons for opening enquiry (but can be challenged by applying for closure notice)

"[12]...The power can also be (and is also) exercised to conduct random checks on tax returns, and does not require a reasoned basis for its exercise." (JJ Management Consulting LLP v. HMRC [2020] EWCA Civ 784, Simler LJ)

“As I have just stated, HMRC do not need a reason to suspect underdeclaration before opening an enquiry.  An enquiry can be opened at random.  Moreover, HMRC in law do not need to give the taxpayer a reason for opening enquiries and would not even have to inform the taxpayer whether the enquiry was being opened randomly or otherwise…So while a failure to explain the purpose of the enquiry to the taxpayer does not invalidate it, the taxpayer can challenge the enquiry, as the appellant has done in this case, by applying for it to be closed, and at that stage the purpose of the enquiry is almost certainly going to have to be explained by HMRC.” (Codexe Ltd v. HMRC [2017] UKFTT 569 (TC), §§21…26, Judge Mosedale).

 

“As noted above, there is no requirement in the legislation for HMRC to have a particular reason or to inform the taxpayer of specific concerns in opening an enquiry.  HMRC may do so at random which accords with their need to be able to verify information provided by a taxpayer under a self assessment system.  A failure to provide the taxpayer with full reasons for the enquiry at the outset does not, therefore, somehow invalidate the enquiry as the appellant seems to argue.” (Cherian v. HMRC [2016] UKFTT 316 (TC), §78).

 

Method of giving notice
No duty to give reasons for opening enquiry

Defective notice

 

See A4: Defective form and errors

Notice erroneously said it was enquiring into claim rather than return: valid enquiry

"[99] The Appellant’s skeleton argument does not challenge the validity of the 5 August 2019 enquiry notice (as opposed to the closure notice), but HMRC nonetheless acknowledge that it contains an error and seek to defend its validity.

[100] The error in the enquiry notice is a statement that the enquiry is being conducted pursuant to Schedule 11A FA 2003 into a claim made by AKA for overpayment relief in respect of SDLT.  In fact, AKA had not made a claim for overpayment relief pursuant to Schedule 11A, but rather had applied to amend the SDLT return pursuant to paragraph 6 of Schedule 10 FA 2003, and the enquiry was thus in fact to be conducted pursuant to Part 3 of Schedule 10.

[101] By virtue of s 83(2) FA 2003, this mistake will not invalidate the enquiry notice, provided that the enquiry notice is nonetheless substantially in conformity with Part 4 FA 2003 and its intended effect was reasonably ascertainable by the Appellant.

[102] The Tribunal is satisfied that apart from this error, the enquiry notice was substantially in conformity with the relevant provisions of the FA 2003. 

[103] The enquiry notice gave the correct details of the property and the unique transaction reference number.  The enquiry notice, which was sent following a request made by the Appellant for repayment of an amount of SDLT on the ground that the SDLT return had been incorrectly completed, stated that “I am checking into your claim for overpayment relief regarding their Stamp Duty Land Tax return for the above acquisition”.  The Appellant’s agent responded to the enquiry notice on 27 August 2019, providing information that had been requested by HMRC.  There is no suggestion in that letter that the agent did not understand what the enquiry was about.  On the material before the Tribunal, it is not apparent that there was anything else that AKA could have thought that the enquiry was about.  The Tribunal is accordingly satisfied that the intended effect of the enquiry notice was reasonably ascertainable by the Appellant and its agent.

[104] The Tribunal therefore finds that the enquiry notice was valid." (Ladson Preston Limited v. HMRC [2021] UKFTT 251 (TC), Judge Staker)

Defective notice

Must be opened for a proper purpose

 

"[52]...The principled position is that all investigations are subject to the public law restriction that powers must only be exercised for a proper purpose. In the same way as a section 9A enquiry could not be launched purely out of malice or on a capricious basis, there is no reason for importing a test from paragraph 21 of schedule 36, which is concerned with powers of compulsion to provide information, to all other aspects of the exercise of functions by HMRC save (on the appellants’ case) section 9A enquiries." (JJ Management Consulting LLP v. HMRC [2020] EWCA Civ 784, Simler LJ)

“I note, however, that as set out in the Qualapharm case to which the appellant refers, such an enquiry may be regarded as not validly made where HMRC do not have a proper purpose as regards checking the taxpayer’s tax position.  In this case I do not need to consider the issue of the tribunal’s jurisdiction in that respect as it is clear from the evidence that HMRC’s purpose was and remains to check the appellant’s tax position in 2012/13.” (Cherian v. HMRC [2016] UKFTT 316 (TC), §79).

Civil investigation not to be used for the dominant purpose of furthering criminal investigation

 

 

“At the Second Hearing, HMRC’s Counsel accepted that HMRC could not use its civil powers for “the dominant purpose of furthering a criminal investigation”, see [87] of the Second Decision.” (Gold Nuts Ltd v. HMRC [2017] UKFTT 84 (TC), 163, Judge Redston).

Must be opened for a proper purpose
Time limits for opening enquiries

Time limits for opening enquiries

- Personal, trustee, company returns: 12 months

“At the hearing it was common ground that, because the enquiry notice dated 8 April 2010 had not been delivered to the appellant, the closure notice in respect of the 2008 period was not valid.” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §99 – but note HMRC made a consequential amendment by reference to a valid closure notice in respect of the previous year, and the same loss - §255).

Return delivered on time: 12 months from delivery

Personal and trustee return

"(2)     The time allowed is—

(a)     if the return was delivered on or before the filing date, up to the end of the period of twelve months after the day on which the return was delivered;"(TMA 1970, s.9A(2))

"(6)     In this section “the filing date” means, in relation to a return, the last day for delivering it in accordance with section 8 or 8A." (TMA 1970, s.9A(6))

Company tax return

"(2)     If the return was delivered on or before the filing date, notice of enquiry may be given at any time up to twelve months from the day on which the return was delivered (subject to sub-paragraph (6))" (FA 1998, Sch 18, para 24(2))

“By implication where the amendment is made at a time when it is possible to give notice under para 24(2) or (3), the inspector could give notice under that provision and the enquiry is not so limited.” (Hallamshire Estates Ltd v. Walford [2004] STC (SCD) 330 at 333).

 

Time limit for medium and large group companies runs from filing date

"(6)     In the case of a company which is a member of a group other than a small group, the 12-month period in sub-paragraph (2) shall start not from the day on which the return was delivered but from the filing date.

(7)     In sub-paragraph (6) “group” and “small group” have the same meaning as in sections 474(1) and 383 of the Companies Act 2006." (FA 1998, Sch 18, para 24(6) - (7))

Meaning of filing date where company make error re accounting period

"(5)     In relation to a return for the wrong period the references to the filing date in paragraph 24(2) and (3) (period within which notice of enquiry may be given) are to the date that would be the filing date if the period for which the return was made were a period of the kind it is treated as in the return." (FA 1998, Sch 18, para 26(5))

Return delivered late: 12 months from delivery plus remainder of the quarter

 

"(2)     The time allowed is—

[...]

(b)     if the return was delivered after the filing date, up to and including the quarter day next following the first anniversary of the day on which the return was delivered;

[...]

For this purpose the quarter days are 31st January, 30th April, 31st July and 31st October." (TMA 1970, s.9A(2))

"(3)     If the return was delivered after the filing date, notice of enquiry may be given at any time up to and including the 31st January, 30th April, 31st July or 31st October next following the first anniversary of the day on which the return was delivered." (FA 1998, Sch 18, para 24(3))

 

Return that is amended: 12 months from delivery plus remainder of the quarter (but limited to amendment)

 

"(2)     The time allowed is—

[...]

(c)     if the return is amended under section 9ZA of this Act, up to and including the quarter day next following the first anniversary of the day on which the amendment was made.

For this purpose the quarter days are 31st January, 30th April, 31st July and 31st October." (TMA 1970, s.9A(2))

"(4)     If the company amends its return, notice of enquiry may be given at any time up to and including the 31st January, 30th April, 31st July or 31st October next following the first anniversary of the day on which the amendment was made." (FA 1998, Sch 18, para 24(4))

“If a return is amended by the taxpayer, the Revenue has until the first quarter day following the first anniversary of the amendment to give a Notice of Enquiry. If the ordinary time limit has expired by the time of the Notice of Enquiry, the scope of the enquiry is limited to the matters to which the taxpayer's amendment relates, or which are affected by that amendment (s 9A(5)(b), s 12AC(5))” (HMRC v. Tower MCashback LLP 1 [2010] EWCA Civ 32, §§19).

Query whether an enquiry into an amendment must explicitly limit itself

“I find that the notice was specific to the amendment. The time allowed for the enquiry under s 9A is therefore as specified by s 9A(2)(c). As I find that the notice was given less than twelve months after the day on which the amendment was made, the notice was clearly in time. I reject the contention that this was notice about the original return and therefore out of time. That cannot be maintained given the terms of the notice itself.” (O’Sullivan v. Philip [2005] EWHC 2130 (Ch), §23).
 

Partnership returns: same as personal tax returns unless partnership share dispute referred to tribunal

"(2)     The time allowed is—

(a)     if the return was delivered on or before the filing date, up to the end of the period of twelve months after the day on which the return was delivered;

(b)     if the return was delivered after the filing date, up to and including the quarter day next following the first anniversary of the day on which the return was delivered;

(c)     if the return is amended under section 12ABA of this Act, up to and including the quarter day next following the first anniversary of the day on which the amendment was made;

(d)     if a dispute in relation to the return is referred to a tribunal under section 12ABZB(3) of this Act, up to and including the quarter day next following the first anniversary of the day on which HMRC received notification of the referral

For this purpose the quarter days are 31st January, 30th April, 31st July and 31st October." (TMA 1970, s.12AC(2))

"(7)     In this section “the filing date” means the day specified in the notice under section 12AA(2) of this Act or, as the case may be, subsection (3) of that section." (TMA 1970, s.12AC(7))

- Personal, trustee, company returns: 12 months

- SDLT: 9 months

 

"(2)     The enquiry period is the period of nine months—

(a)     after the filing date, if the return was delivered on or before that date;

(b)     after the date on which the return was delivered, if the return was delivered after the filing date;

(c)     after the date on which the amendment was made, if the return is amended under paragraph 6 (amendment by purchaser).

This is subject to the following qualification." (FA 2003, Sch 10, para 12)

 

Extended period where further return delivered

"(2A)     If—

(a)     the Inland Revenue give notice, within the period specified in sub-paragraph (2), of their intention to enquire into a land transaction return delivered under section 80 (adjustment where contingency ceases or consideration is ascertained), 81 (further return where relief withdrawn), 81A (return or further return in consequence of later linked transaction) or paragraph 6 of Schedule 6B (adjustment for change of circumstances), and

(b)     it appears to the Inland Revenue to be necessary to give a notice under this paragraph in respect of an earlier land transaction return,

a notice may be given notwithstanding that the period referred to in sub-paragraph (2) has elapsed in relation to that earlier return" (FA 2003, Sch 10, para 12)

- SDLT: 9 months

Calculating time

 

Time limit excludes day return submitted

“I am satisfied that the proper construction of paragraph 24(1) of Sch 18 is that the twelve month period “from the day on which the return was delivered” is to be calculated by excluding the day on which the return was filed, in other words that, as Mr Reeve submitted, “from” is akin to “after”.” (Dock and Let Ltd v. HMRC [2014] UKFTT 943 (TC) §72)
 

Calculating time

One enquiry per return/amendment

Personal and trustee returns

"(3)     A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 9ZA of this Act." (TMA 1970, s.9A(3))

Partnership returns

"(3)     A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 12ABA of this Act or in consequence of the referral of a dispute about the return under section 12ABZB(3) of this Act."  (TMA 1970, s.12AC(3))

Company tax return

"(5)     A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) by the company of its return." (FA 1998, Sch 18, para 24(5))

SDLT

(3)     A return that has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under paragraph 6." (FA 2003, Sch 10, para 12)

Second notice invalid

“The taxpayer submitted that this letter was invalid because it fell foul of s 9A(3) of the 1970 Act. For present purposes, that subsection provides, in effect, that a return which has been the subject of one notice of inquiry may not be the subject of another. The taxpayer, had, he argued, already been the subject of one notice of inquiry, the 14 June 2001 letter, so could not be the subject of another. Mr Hughes accepted that if the 14 June 2001 letter was a valid notice under s 9A then the 27 June 2001 letter was invalid.” (Siwek v. IRC [2002] STC (SCD) 247 at 250).
 

One enquiry per return/amendment

Scope of enquiry

 

Personal and trustee returns

"(4)     An enquiry extends to—

(a)     anything contained in the return, or required to be contained in the return, including any claim or election included in the return,

(b)     consideration of whether to give the taxpayer a transfer pricing notice under section 168(1) of TIOPA 2010 (provision not at arm's length: medium-sized enterprise),

(c)     consideration of whether to give the taxpayer a notice under section 81(2) of TIOPA 2010 (notice to counteract scheme or arrangement designed to increase double taxation relief),

but this is subject to the following limitation.

 

(5)     If the notice of enquiry is given as a result of an amendment of the return under section 9ZA of this Act—

(a)     at a time when it is no longer possible to give notice of enquiry under subsection (2)(a) or (b) above,

(b)     after a final closure notice has been issued in relation to an enquiry into the return, or

(c)     after a partial closure notice has been issued in such an enquiry in relation to the matters to which the amendment relates or which are affected by the amendment,

the enquiry into the return is limited to matters to which the amendment relates or which are affected by the amendment." (s.9A(4) - (5))

Partnership returns

"(4)     An enquiry extends to anything contained in the return, or required to be contained in the return, including any claim or election included in the return and including anything included in the return by virtue of section 12ABZB(7)(b), subject to the following limitations.

 

(5)     If the notice of enquiry is given as a result of an amendment of the return under section 12ABA of this Act—

(a)     at a time when it is no longer possible to give notice of enquiry under subsection (2)(a) or (b) above, 

(b)     after a final closure notice has been issued in relation to an enquiry into the return, or

(c)     after a partial closure notice has been issued in such an enquiry in relation to the matters to which the amendment relates or which are affected by the amendment,

the enquiry into the return is limited to matters to which the amendment relates or which are affected by the amendment.

 

(5A)     If the notice of enquiry is given as a result of the referral of a dispute under section 12ABZB(3) of this Act—

(a)     at a time when it is no longer possible to give notice of enquiry under subsection (2)(a) or (b) above,

(b)     after a final closure notice has been issued in relation to an enquiry into the return, or

(c)     after a partial closure notice has been issued in such an enquiry in relation to the matters to which the dispute relates or which are affected by it,

the enquiry into the return is limited to the matters to which the dispute relates or which are affected by it." (TMA 1970, s.12AC(4) - (5A))

SDLT

"(1)     An enquiry extends to anything contained in the return, or required to be contained in the return, that relates—

(a)     to the question whether tax is chargeable in respect of the transaction, or

(b)     to the amount of tax so chargeable.

This is subject to the following exception.

(2)     If the notice of enquiry is given as a result of an amendment of the return under paragraph 6 (amendment by purchaser)—

(a)     at a time when it is no longer possible to give notice of enquiry under paragraph 12, or

(b)     after an enquiry into the return has been completed,

the enquiry into the return is limited to matters to which the amendment relates or that are affected by the amendment." (FA 2003, Sch 10, para 13)

HMRC may enquire into calculations they performed

 

“[Counsel for the taxpayer] says that HMRC cannot “enquire” into these calculations under section 9A TMA because these calculations were “done” by HMRC.  I disagree…The wording of section 9A(4)(a) is clear.  HMRC is entitled to enquire into “anything contained in the return”.  That wording is broad and would naturally extend to the calculation of tax payable that is contained in the return.  I can see no justification for limiting HMRC’s enquiry to facts and information provided by the taxpayer in the manner suggested by [the taxpayer].” (Scott v. HMRC [2017] UKFTT 385 (TC), §§176…177, Judge Greenbank).
 

Scope of enquiry

Scope of enquiry as a result of deemed notice to partners

 

"[48] However, it seems to us, and we understood both parties to agree, that we do not actually need to decide whether a deemed enquiry under s12AC(6) is into the totality of the individual return as the Appellants argue, or only into penumbral matters, as HMRC argue." (Reid and Emblin v. HMRC [2020] UKUT 61 (TCC), Nugee J and Judge Jonathan Richards - FTT had held that the enquiry is limited to partnership matters but see De Silva, §32, above).

Scope of enquiry as a result of deemed notice to partners

HMRC not entitled to reach different conclusion on matter covered by s.54 agreement for the same year

 

“I therefore allow the appeal and hold that the First-tier Tribunal should have directed HMRC to close the enquiry into Easinghall’s 2011/2012 tax return because the parties are treated as having agreed that there has been no understatement of business takings by Easinghall for that year.” (Easinghall Ltd v. HMRC [2016] UKUT 105 (TCC), §39).

HMRC bound by s.54 agreement
bottom of page