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F6: Closing an enquiry

Final closure notices

 

Personal, trustee and partnership returns

"(1B)     The enquiry is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “final closure notice”) —

(a)     in a case where no partial closure notice has been given, that the officer has completed his enquiries, or

(b)     in a case where one or more partial closure notices have been given, that the officer has completed his remaining enquiries.

In this section “the taxpayer” means the person to whom notice of enquiry was given." (TMA 1970, s.28A(1B))

Same wording for partnership tax returns in s.28B(1B).

Company tax returns

"(1A)     An enquiry is completed when an officer of Revenue and Customs informs the company by notice (a “final closure notice”)—

(a)     in a case where no partial closure notice has been given, that they have completed their enquiries, or

(b)     in a case where one or more partial closure notices have been given, that they have completed their remaining enquiries.

(1B)     A partial or final closure notice takes effect when it is issued." (FA 1998, Sch 18, para 32(1A) - (1B))

SDLT

"(1)     An enquiry under paragraph 12 is completed when the Inland Revenue by notice (a “closure notice”) inform the purchaser that they have completed their enquiries and state their conclusions.

(2)     A closure notice must either—

(a)     state that in the opinion of the Inland Revenue no amendment of the return is required, or

(b)     make the amendments of the return required to give effect to their conclusions.

(3)     A closure notice takes effect when it is issued." (FA 2003, Sch 10, para 23)

Final closure notices

Partial closure notices

 

Personal trustee and partnership returns

"(1A)     Any matter to which the enquiry relates is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “partial closure notice”) that the officer has completed his enquiries into that matter." (TMA 1970, s.28A(1A))

Same wording for partnership tax returns in s.28B(1A).

Company tax returns

"(1)     Any matter to which an enquiry relates is completed when an officer of Revenue and Customs informs the company by notice (a “partial closure notice”) that they have completed their enquiries into that matter." (FA 1998, Sch 18, para 32(1))

Issue can only be a matter if, were it the only issue being enquired into, HMRC could issue a valid full closure notice in respect of it

"[74] It seems to me that the better view, that has regard to the language used and purpose of section 28A seen in its statutory context, taking account of the existence of section 28ZA, together with the legislative means by which PCNs were introduced, and giving weight to the judgments in Archer, is, as Mr Nawbatt submitted, that an issue can only be a "matter" for the purposes of section 28A(1A) if – were it the only issue being enquired into – HMRC could issue a valid FCN in respect of it. This respects the legislative scheme that treats PCNs and FCNs without distinction. It is consistent with a PCN (like a FCN) "taking effect" when issued, in circumstances where it is difficult to see how a conclusion on the validity of a claim without determining the tax consequences and making an assessment, can be described as "taking effect" rather than viewed as something to be taken into account when amending the assessment. It achieves the greater finality sought by this legislative amendment by early resolution of one or more discrete matters at the enquiry stage, together with accelerating payment of any tax due in consequence of the matter determined. And it avoids the unnecessary fragmentation of a single dispute into multiple "matters" that would frustrate the purpose of the statutory scheme." (Embiricos v. HMRC [2022] EWCA Civ 3, Simler LJ)

Entitlement to remittance basis not a distinct matter - must calculate tax due if not entitled

"[77] In fact it is common ground that Mr Embiricos had foreign income and gains in each fiscal year. In those circumstances, an amendment that simply removed the claim to the remittance basis in the return did not comply with the express requirements in section 28A(2)(b) and did not give effect to the domicile conclusion. In order to comply with section 28A(2)(b) a PCN was required to state the officer's conclusion that the remittance basis is disallowed and make the amendments of the return required to give effect to this conclusion by amending the return to bring into charge the relevant foreign income and gains, with a calculation (or assessment) of the income and capital gains tax payable for each year of assessment in question. In other words, where the conclusion on the validity of the matter enquired into has computational consequences for the tax return and self-assessment contained within it, the PCN must give effect to the conclusion by amending the taxpayer's self-assessment (here by bringing the income and gains into charge and assessing the tax payable in consequence). This achieves the desired early resolution and finality in relation to a discrete aspect of an enquiry, enabling earlier payment to be made consequent on the amendments to the self-assessment made by the PCN to give effect to the officer's conclusion.

...

[82] Here, having concluded that Mr Embiricos was domiciled in the UK in the relevant tax years and so was not entitled to the remittance basis of taxation in those tax years, HMRC could not give effect to that conclusion without the information necessary to determine his worldwide income and gains in the relevant fiscal year on the arising basis, and without making all amendments to the returns for those tax years required to give effect to their conclusion, including an assessment of the amount of tax consequently brought into charge. Without that, a valid PCN could not be issued in accordance with the statutory requirements in section 28A(2)(b) TMA." (Embiricos v. HMRC [2022] EWCA Civ 3, Simler LJ)

Partial closure notices

Company makes error re accounting period in return

 

"(2)     If an officer of Revenue and Customs concludes in a partial or final closure notice that the return was a return for the wrong period, the closure notice must designate the accounting period for which a return should have been made (specifying the dates on which the period begins and ends).

(3)     If there is more than one accounting period ending in or at the end of the period specified in the notice requiring a return, the closure notice shall only designate the first of those accounting periods for which no return has been delivered.

Paragraph 35 provides for a return to be delivered for any other outstanding accounting period." (FA 1998, Sch 18 para 32(2) - (3))

"(1)     Where, following an enquiry into a company tax return—

(a)     it is finally determined—

(i)     that the return is a return for the wrong period, and

(ii)     what the period is for which the return should have been made, and

(b)     the effect of the determination is that there is a further period (“the outstanding period”) for which a company tax return should have been made under the original notice requiring a return,

then, if there is no such return delivered by the company which can be amended so as to become a return for the outstanding period, the original notice shall be taken to require the company to deliver a return in respect of that period." (FA 1998, Sch 18 para 35(1))

Filing date for further return: 30 days

"(2)     The filing date for such a return for an outstanding period is whichever is the later of—

(a)     the original filing date, and

(b)     the last day of the period of 30 days beginning with the day on which the matters mentioned in sub-paragraph (1)(a) are finally determined." (FA 1998, Sch 18 para 35(2))

Company makes error re accounting period in return

Only requirements are notice of completion of enquiries and HMRC’s conclusions 

 

“There is no prescribed form for a Closure Notice under paragraph 32, but it is essential to the validity of such a Closure Notice that the document (or perhaps documents) relied upon should both state that HMRC has completed their enquiry, and state their conclusions. This flows naturally from the language of paragraph 32(1).” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §24(i), Briggs LJ).

 

“it met the requirements…in that it informed Portland that HMRC had completed their enquiries and it stated HMRC’s conclusions” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §51).

 

“Section 28B(1) sets out how an enquiry is completed. It describes a “closure notice” as a notice from an officer of HMRC that “informs the taxpayer that he has completed his enquiries and states his conclusions”. It is apparent that a document that does not do these things will not be a closure notice, since it will not meet the definition. Section 28B(2) contains an additional mandatory requirement for the content of a closure notice: it must either state that no amendment of the return is required or it must “make the amendments of the return required to give effect to his conclusions”.” (Lam v. HMRC [2016] UKFTT 659 (TCC), §25).

 

No closure notice if conclusions not clear

 

“Applying practical common sense, we are prepared to assume that the November Letter (read alone or with the October Notice to which it referred) did communicate a clear message that HMRC had completed its enquiry. But it left the reasonable reader in hopeless confusion, and partly in the dark, about their conclusions. The October Notice purported to state a conclusion that the Return needed no amendment, whereas the November Letter stated that HMRC intended to amend the return, but without any specification of the amendment intended to be made.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §38, Briggs LJ).

Level of detail required regarding HMRC’s conclusion will vary 

 

“This should not be taken as an encouragement to officers of HMRC to draft every closure notice that they issue in wide and uninformative terms. In issuing a closure notice an officer is performing an important public function in which fairness to the taxpayer must be matched by a proper regard for the public interest in the recovery of the full amount of tax payable. In a case in which it is clear that only a single, specific point is in issue, that point should be identified in the closure notice. But if, as in the present case, the facts are complicated and have not been fully investigated, and if their analysis is controversial, the public interest may require the notice to be expressed in more general terms. As both Henderson J and the Court of Appeal observed, unfairness to the taxpayer can be avoided by proper case management during the course of the appeal.” (HMRC v. Tower MCashback LLP 1 [2011] UKSC 19, §18, Lord Walker).

“The aim should be to be helpful, both to the taxpayer and to the Tax Tribunal which will have to case manage any appeal. The officer should wherever possible set out the conclusions that he has reached on each point that was the subject of enquiry which has resulted in his making an amendment to the return.” (HMRC v. Tower MCashback LLP 1 [2011] UKSC 19, §85, Lord Hope).

“The officer does not need to give reasons for his conclusions…The officer has a duty to make the closure notice as helpful to the taxpayer as is possible or appropriate in the circumstances.” (Fidex v. HMRC [2014] UKUT 454 (TCC) §§62(4)…(5)).

“In accordance with the decision of the Supreme Court in the case of Tower MCashback v. HMRC [2011] UKSC 19, in construing a closure notice it is permissible to refer to the surrounding circumstances, and other related documentation.” (Bristol & West Plc v. HMRC [2013] UKFTT 216 (TC), §27).
 

Only requirements are notice of completion of enquiries and HMRC’s conclusions 

Letter indicating provisional or tentative view not a closure notice

 

"[65] We agree with the FTT that the letter of 20 March 2017 is not a closure notice within the terms of section 28A TMA.  In the letter, the HMRC officer did not tell Mr Norton that she had completed her enquiries and did not state a concluded view.  The officer based her views about Mr Norton’s tax position on information obtained from a colleague who was still engaged in discussions with Mr Norton’s accountant.  The officer only stated that the information suggested that Mr Norton owed additional tax which indicates a provisional or tentative view rather than a firm conclusion.  The officer made it clear that the assessments and amendment were not final in the last two paragraphs of the letter when she stated that she had informally suspended collection of the additional amounts due until discussions between Mr Norton’s accountant and her colleague had been finalised.  Only then would the officer contact Mr Norton again about his tax liability and, we infer, finalise the position. 

[66] There was no dispute that there is nothing to preclude a taxpayer from relying upon section 114 TMA although it is usually HMRC who rely on the section.  Section 114 applies to cure documents, such as purported closure notices, which would otherwise be invalid for “want of form [or because] of a mistake, defect or omission therein, if the same is in substance and effect in conformity with or according to the intent and meaning of the Taxes Acts”.  In our view, the absence of key features in the letter of 20 March 2017 such as a statement that the HMRC officer had completed her enquiries and a definitive statement of her conclusions were errors of substance rather than mere want of form.  In the letter, the HMRC officer said that there were ongoing discussions between a colleague and the Company about the car benefit charge and that the officer would contact Mr Norton again about his tax liability when those discussions were finalised.  This indicated that HMRC had not completed their enquiries or reached a concluded view about Mr Norton’s tax liabilities.  The reference to the collection of the additional amounts of tax being suspended pending completion of the discussions also indicates that the amendments notified by the letter were not final.  We are forced to conclude that these show that the letter was not in substance and effect a notice of closure in conformity with or according to the intent and meaning of section 9A of the TMA.  Accordingly, we dismiss Mr Norton’s appeal on this ground." (Norton v. HMRC [2023] UKUT 48 (TCC), Judge Sinfield and Judge Paines)

Letter indicating provisional or tentative view not a closure notice

Must state amount of tax due (if any)

 

"[46] Archer is authority for the proposition that a closure notice issued on completion of an enquiry into a personal tax return under section 28A must amend the taxpayer's self-assessment (which forms part of the return by virtue of section 9(1)) so as to state the precise amount of tax which is said to be payable. Only thus can the closure notice "make the amendments of the return" required to give effect to the officer's conclusions within the meaning of section 28A(2)(b). The only alternative available to the officer is to state that in his opinion no amendment of the return is required: see section 28A(2)(a)." (R (oao Amrolia) v. HMRC [2020] EWCA Civ 488, Henderson LJ)

"[18] [The taxpayer] submits that the requirement in section 28A (2) (b) is not satisfied unless the closure notice itself informs the taxpayer of the amount of tax that he is required to pay. In support of that submission he relies on the decision of Browne-Wilkinson J in Hallamshire Industrial Finance Trust Ltd v IRC [1979] 1 WLR 620. He held that an assessment made by the Inland Revenue was required to state the amount of tax payable. At 625 he said:

"The majority of taxpayers on receiving an assessment look only at the amount of tax payable, having neither the time nor the ability — without professional advice — to discover whether that sum is correct. Yet the Crown argues that it would fully have discharged its functions of assessing and giving notice of assessment without specifying any amount of tax payable, merely by stating the facts which would enable someone skilled in tax matters to compute the tax which the Crown is going to demand…, such demand probably not being made until after time for appealing against the assessment has expired. In my judgment the words of the statute would have to be very clear to force the court to this conclusion."

[19] He concluded that the words of the statute did not compel that result. As he put it at 627:

"A man should be told what tax he has to pay, not merely given the information from which a skilled adviser would be able to decide the tax eventually to be demanded."

...
[31] In my judgment in principle Hallamshire still holds good where it is HMRC who calculate the tax due, despite the change to self-assessment. I consider, therefore, that the closure notices did not comply with section 28A (2). Unless section 114 can be successfully invoked to supply the omission to amend the self-assessment, no debt payable under section 59B (5) has been created. The application of section 114 was not addressed in Hallamshire, so it is to that question that I now turn." (R (oao Archer v. HMRC [2017] EWCA Civ 1962, Lewison LJ)

Does not apply to a personal partnership amendment notice under s.28B(4) 

"[57] Where I differ from Mr Chacko is in the next crucial step in his argument, where he submits that a notice under section 28B(4) must therefore be treated in the same way as a closure notice, with the result that the reasoning of this court in Archer applies and the notice is invalid if it fails to state on its face the amount of tax payable. For the reasons I have given, I consider this further step in the argument to be mistaken. The amendments which have to be made to the partner's return are confined to those needed to give effect to the amendments of the partnership return. If the officer giving the notice chooses to go further, and amend the partner's self-assessment, there is nothing to prevent the officer from taking that course, and collection proceedings then may be based on the relevant amendments pursuant to 59B(5). But that does not turn the notice into the equivalent of a closure notice, or import a requirement for the notice itself to state the amount of tax payable as a condition of its validity." (R (oao Amrolia) v. HMRC [2020] EWCA Civ 488, Henderson LJ)

Must state amount of tax due (if any)

Proceedings to enforce jeopardy amendment does not indicate the enquiry is closed

 

“The matter of enforcement does not depend on closure of an enquiry.  Tax that arises as a consequence of an amendment under s 9C TMA is payable 30 days after the date of notice of amendment (see s 59B(5) TMA).  As a s 9C amendment can only be made in the course of an enquiry, and before it is closed, that shows that the payment date, and consequent ability of HMRC to enforce that payment obligation, is not dependent upon the enquiry being closed.  Accordingly, the fact of enforcement action does not show that the enquiries have been closed.” (Baruela v. HMRC [2015] UKFTT 422 (TC), §10).

Proceedings to enforce jeopardy amendment does not indicate the enquiry is closed

Formalities generally not required 

 

“…no formality is prescribed for the notice” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §51).

 

“Statute law prescribes no particular form for the issue of closure notices. It would admittedly be unusual for a closure notice to be issued by e-mail, but we accept that a valid closure notice issued in writing, including e-mail, that informed the company into whose return HMRC had been making enquiries that the enquiries had been completed, stating the conclusion of those enquiries or indicating that no adjustments were required, would be a valid closure notice.” (Bristol & West Plc v. HMRC [2013] UKFTT 216 (TC), §27).

 

Must be written notice

 

“ “Notice" in paragraph 32(1) means notice in writing: see section 832 of the Taxes Act 1988.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §24(iii), Briggs LJ).

 

No requirement to state date issued

 

“Paragraph 32 contains no requirement that a closure notice should state its date of issue, and there is no specific provision, in relation to closure notices, that indicates when a closure notice has been issued.” (Bristol & West Plc v. HMRC [2013] UKFTT 216 (TC), §27).

 

What amounts to a closure notice is 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);

 

Further correspondence may make later letter closure notice 

 

“That engagement might therefore be said to evidence further enquiries on HMRC’s part before coming to a final decision, thus constituting this final letter a closure notice.” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §52).

 

Enquiry and closure notice cannot usually be in the same letter

 

See F3: Opening statutory enquiries

Formalities generally not required 

Objective interpretation of documents/purported closure notice in context

 

“In our view the answer to the question identified in paragraph 25 above depends upon the correct interpretation of the October Notice, as it would be understood by a reasonable person in the position of its intended recipient, namely B&W, having B&W's knowledge of any relevant context…” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §26, Briggs LJ).

Simultaneous service of two incompatible notices: both invalid

“In Barclays Bank v Bee [2002] 1WLR 322 the simultaneous service of two incompatible statutory notices (under Part II of the Landlord and Tenant Act 1954) had the effect of invalidating both of them, even though, viewed on its own, the relevant notice was in perfect conformity with the statutory requirements.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §27, Briggs LJ).

Sequential service of incompatible notices: first notice may not invalidate second

“Mr Prosser referred us, out of his duty to the court, to Saxon Weald Homes Ltd v Chadwick [2011] EWCA Civ 1202, in which two successive letters were sent by the landlord to its tenant, the first seeking possession and the second, a week later, confirming that the tenant had achieved the status of assured tenant…In Bee, document A plainly did form part of the contextual background, because it was delivered at the same time as document B. By contrast in the Saxon Weald case, the earlier inconsistent letter did not form part of the relevant contextual background, since its inconsistency with the later letter was capable of being explained on the ground that the landlord had, in the meantime, changed its mind. Far from establishing any principle that context may not invalidate a document which appears valid on its face, read in isolation, in our view Bee constitutes plain authority for the opposite conclusion for the reasons stated above.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §§28…29, Briggs LJ).
 

Objective interpretation of documents/purported closure notice in context

Mistakes by HMRC

 

Mistaken reference to enquiries being closed is not sufficient

 

“In my judgment the letter of 16 June 2014 cannot itself be a closure notice, as it does not meet the requirements of s 28A TMA.  Although it contains a statement that “all relevant years are deemed closed”, that is not enough.  The letter does not state any conclusions; nor does it make any amendments…The statement regarding closure is not an operative statement in its own right.  It is by way of information (as it turns out, and unfortunately, misinformation to some extent) as to the effect of the earlier notices issued on 6 March 2013.  It is nothing more than a commentary on the effect of those earlier notices.  It could not therefore operate as a closure notice itself.  It is only if those other notices constituted closure notices that enquiries could be regarded as closed under s 28A TMA…The relevant notices issued on 6 March 2013 were clearly, according to their terms, notices of amendment under s 9C TMA, and not closure notices under s 28A.  The letter of 16 June 2014 could not convert those letters into closure notices.  The statement as to the deemed effect of the 6 March 2013 notices was simply wrong.  There is, as a matter of law, no deemed closure of those years by reason of the issue of the jeopardy amendments.  As s 9C itself makes clear, such a notice of amendment must, by definition, arise in the course of an enquiry.  It cannot therefore itself close an enquiry.” (Baruela v. HMRC [2015] UKFTT 422 (TC), §15).

 

Closure notice sent in error not a closure notice if taxpayer informed before time of issue

 

“[The taxpayer did not submit] that the October email, forewarning B&W that it was about to receive a Closure Notice which had been issued in error, did not form part of the relevant factual context for the purposes of interpreting the October Notice. In our view it plainly did. Although earlier in time, its terms excluded any possibility of a change of mind on the part of HMRC between 31 October (when the email was sent) and the (later) date of issue of the October Notice. On the contrary, it invited the reader to consider both documents together and, plainly, not to treat the October Notice, once received, as a statement that HMRC had completed its enquiry with the conclusions therein stated. It is true that the October email did not explain the nature of the mistake, by stating either that the enquiry was in fact continuing or that the conclusions stated were incorrect, or both. But, viewed as at either of the competing dates of issue, it was plainly sufficient to invalidate the October Notice, looking at the matter on any of the competing dates between 1 and 6 November.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §30, Briggs LJ).

 

HMRC cannot put a closure notice into suspense

“We would prefer to leave until a case in which it matters the question whether HMRC and the taxpayer can agree to vary the provisions of the Closure Notice regime. In the absence of agreement it must be asked whether HMRC has the power to deliver a Closure Notice on a suspended basis, so that it becomes validly issued, if at all, only upon such later date as HMRC choose. The short and simple answer is that, in our view, it does not have that power. Paragraph 32(1) is clear. The Notice takes effect when it is issued, neither earlier nor later. This interpretation accords both with the purpose of this part of the enquiry procedure, and with the procedural consequences of a Closure Notice. Taking the whole of paragraph 32(1) in its own context, the scheme requires HMRC first to decide to close its enquiry, so that it has been completed, to form a concluded view as to whether, and if so what, amendments are needed to be made to the self-assessment return to which the enquiry relates, and then to communicate both the completion of the enquiry and their conclusions to the taxpayer. There is no scope therefore for sending a closure notice at a time when HMRC has yet to make up its mind either whether the enquiry is completed, or about its conclusions arising from it.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §33, Briggs LJ).

 

Incompatible notices

 

See preceding section.
 

Mistakes by HMRC

No power to unilaterally withdraw closure notice

 

“A Closure Notice once issued cannot be withdrawn unilaterally by HMRC.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §24(iv), Briggs LJ).

No power to unilaterally withdraw closure notice

Time limits for assessments not applicable to closure notices/amendments

 

"[79] We were also referred to a decision of Patten J as he then was in Morris v HM Revenue & Customs [2007] EWHC 1181 (Ch). Patten J held that in the context of TMA 1970, there are no time limits within which HMRC must issue a closure notice once they have commenced an enquiry into a taxpayer’s return. HMRC did not rely on Morris to any great extent in their oral submissions and accepted that it was dealing with the separate regime under TMA 1970. We have not taken it into account in our reasoning, although our conclusion in the context of SDLT is consistent with the conclusion in Morris.

[80] For the above reasons we agree with the FTT that the time limit under paragraph 31(1) is specific to Part 5. It does not apply to closure notices. A purchaser is afforded protection from an unnecessarily prolonged enquiry by paragraph 24." (Redmount trust Company Limited v. HMRC [2023] UKUT 68 (TCC), Judge Ramshaw and Judge Cannan)

“The much more likely reason for not qualifying s 28A in a similar way is that there was no need to do so because s 34 has no application to s 28A.” (Morris v. HMRC [2007] EWHC 1181 (Ch), §45, Patten J).

Time limits for assessments not applicable to closure notices/amendments

Time of closure notice

Closure notice issued when collected for posting (at the earliest)

“As a general matter, we accept that the normal meaning of “issuing” something is to provide it, make it available, or deliver it. Accordingly our expectation, before referring to the context, is to suppose that a notice will only be issued when it is sent, or possibly received. The notion of saying that a notice in a letter has been issued when the letter has been typed or printed, and before it has been despatched, is inconsistent with the general meaning of the notion of “issue”. Even if the computer and other instructions meant that a letter sent for printing was automatically the subject of an irrevocable instruction that, once printed, it should subsequently be despatched, we still conclude that on the ordinary meaning of the term “issue”, the notice would not be issued until it was despatched…when the notice must be something that notifies the taxpayer of some state of affairs, the case for saying that such a notice can only be issued when the process of notification commences (or possibly when it is actually effected by receipt of the notice by the taxpayer) is absolutely compelling. We conclude, therefore, that the earliest possible date on which to say that the notice had been issued was 1 November, the date when we were told that it would have been collected for posting by the Royal Mail.” (Bristol & West Plc v. HMRC [2013] UKFTT 216 (TC), §§31…32).

 

However:

“The only alternatives (as a matter of law) for the issue date of a Closure Notice sent by post are the date of posting and the date of receipt. It is unnecessary in this case to decide which is correct.” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §24(ii), Briggs LJ).
 

Time of closure notice

Partnership return closure notices

To be given to nominated partner even after partnership ends

“So our finding is that even after the partnership ceased to exist, Mr Bintliff remained the nominated partner in relation to the returns made by the partnership. This means that HMRC were right to give the notice of amendment to Mr Bintliff.” (Phillips v. HMRC [2009] UKFTT 335 (TC), §98).

Partnership return closure notices

Consequential amendments: personal, trustee and partnership returns

 

Personal and trustee tax returns

"(2)     A partial or final closure notice must state the officer's conclusions and—

(a)     state that in the officer's opinion no amendment of the return is required, or

(b)     make the amendments of the return required to give effect to his conclusions.

(3)     A partial or final closure notice takes effect when it is issued." (TMA 1970, s.28A(2) - (3))

Partnership tax returns

"(2)     A partial or final closure notice must state the officer's conclusions and—

(a)     state that in the officer's opinion no amendment of the return is required, or

(b)     make the amendments of the return (including anything included in the return by virtue of section 12ABZB(7)(b) (amendment of partnership return following reference to tribunal)) required to give effect to his conclusions.

(3)     A partial or final closure notice takes effect when it is issued." (TMA 1970, s.28B(2) - (3))

No power to amend return other than to give effect to conclusions stated in the closure notice

 

“Having issued a Closure Notice, HMRC have no power to amend the relevant tax return otherwise than to give effect to the conclusions stated in the Closure Notice: see paragraph 34(2)(b).” (HMRC v. Bristol & West Plc [2016] EWCA Civ 397, §24(v), Briggs LJ).

Only the return enquired into may be amended

 

The main difference between income tax/CGT and corporation tax is that whereas corporation tax consequential amendments may be made to any return if required by the conclusion in the closure notice, income tax/CGT only permit amendments to the return enquired into.

 

Amendment may introduce figure for type of income which was not originally included

 

“[The taxpayer argued that…] There was no original self-assessment of any figure within Case VI of Schedule D. HMRC are therefore not seeking to amend or change an existing figure for an amount included in the return under Case VI of Schedule D, but rather are seeking to create a new entry in the Appellant’s tax return… The Tribunal rejects this argument.  TMA s 9A provides for an enquiry into a “return”, and s 28A provides for a closure notice to make amendments to a “return” to give effect to the conclusions of the enquiry.  The expression “return” has to be understood in the context of the references to that expression in s 8.  The Tribunal considers it to be quite clear that the expression “return” means the self-assessment tax return as a whole, rather than an individual box or item in a return.  It is an amendment to the return as a whole for a closure notice to give effect to a conclusion that a particular sum should be included in box B of the return rather than box A.  In any event, this would also be an amendment both to box A (which would be changed from a positive figure to zero) and to box B (which would be changed from zero to a positive figure).  It follows that the procedural argument fails.” (Manduca v. HMRC [2013] UKFTT 234 (TC), §§36…64, Judge Staker).

Letter denying claim as out of time interpreted as amendment reducing claim to zero

 

“The letter from HMRC to Dr Raftopoulou dated 9 November 2011  states the conclusion arrived at by the HMRC officer who had considered Dr Raftopoulou’s claim, namely that the claim described as an amendment, but clearly understood to refer to the claim for relief from overpaid tax) was out of time and that a repayment could not therefore be made. The substance of the letter is to be understood as an amendment to the claim so as to eliminate the excess amount of it by reducing it to zero.” (Raftopolou v HMRC [2015] UKUT 579 (TCC), §105, Judges Berner and Raghavan)

Consequential amendments

Amending year 2 tax return to recover tax wrongly repaid in respect of loss relief carry back claim made outside the return

 

"[31]...Secondly, the mechanisms in paragraph 2(6) of Schedule 1B for giving effect to a claim in Year 2 are not confined to repayment, set off and the increase in the aggregate of payments on account, none of which would alter the tax chargeable for Year 2. Paragraph 2(6) includes the words “or otherwise”, which open the door to an adjustment of the amount chargeable to income tax by virtue of both section 8(1AA)(a), which provides that the amounts in which a person is chargeable “take into account any relief … a claim for which is included in the return” and section 9(1)(a) which makes similar provision for the self-assessment. Where relief has already been given in error, it would in my view be open to HMRC, in completing an enquiry, to amend the return (for example, under section 28A(2) TMA) by altering the amount chargeable to income tax for Year 2 in order to recover the sums which were wrongly paid as relief. Thirdly, section 59B(5) provides for payment of income tax which is payable as a result of an amendment of a self-assessment under section 28A on completion of an enquiry into a personal tax return."(R (oao De Silva) v. HMRC [2017] UKSC 74)

" [67] ...For the pre-2007 claimants, De Silva is clear authority, at the highest level, for the propositions that:
(a) full information about the taxpayer's carry-back claim must be included in his Year 2 return, even if he has previously made the same claim in Year 1 under schedule 1A to TMA, and even if HMRC have already given effect to that earlier claim without opening an enquiry into it under schedule 1A; and
(b) HMRC may then institute an actual or deemed enquiry into the Year 2 return under section 9A of TMA, in which all aspects of the claim can be examined, and if it emerges upon completion of the enquiry that relief has been given in error, the Year 2 return may be amended so as to recoup the sums wrongly paid (in reliance on the words "or otherwise" in paragraph 2(6) of schedule 1B to TMA).
How, then, do the claimants contend that the enactment of ITA makes all the difference for the post-2007 claimants?

...

[70] In our view, this argument breaks down at the first stage. We do not accept that the admittedly highly prescriptive scheme for calculation of income tax liability in Chapter 3 of Part 2 of ITA must be construed as excluding from its ambit the operation of paragraph 2(6) of schedule 1B, in circumstances where a carry-back claim for trade loss relief has been made by the taxpayer. On the contrary, it seems clear to us that Parliament intended paragraph 2(6) to continue to apply to such claims, and that effect should therefore be given to them in the context of the Chapter 3 calculation of tax liability."(Knibbs v. HMRC [2019] EWCA Civ 1719, David Richards LJ)

Amending year 2 tax return to recover tax wrongly repaid in respect of loss relief carry back claim made outside the return

Consequential amendments to partners' tax returns

 

"(4)     Where a partnership return is amended under subsection (2) above, the officer shall by notice to each of the partners amend—

(a)     the partner's return under section 8 or 8A of this Act, or

(b)     the partner's company tax return,

so as to give effect to the amendments of the partnership return." (TMA 1970, s.28B(4))

Does not need to state tax due

"[59] But precisely because of the consequential nature of the notice, in a context where a valid closure notice has already been given terminating the enquiry into the partnership's return, I do not think there is any formal requirement for the resulting figure of tax due from the partner to be stated in accordance with the Hallamshire principle. It is enough if the notice, on a fair reading, makes clear to the partner what the relevant amendments are to his self-assessment and how his liability to tax for the relevant year is affected." (R (oao Amrolia) v. HMRC [2020] EWCA Civ 488, Henderson LJ)

Cannot make consequential decisions for taxpayer

"[60] The notice given to Dr Ranjit-Singh was also valid, in my judgment, to the extent that it fulfilled the minimum requirement of informing her of the reduced amount of her share of the LLP's allowable trade loss for 2004/05. However, the purported amendment of her self-assessment (on the mistaken assumption that she would now wish to carry back the whole of the reduced loss), and the requirement to pay additional amounts of tax and interest calculated on that basis, were in my view invalid, because they went beyond amendments to her self-assessment which were purely consequential on the reduction in her share of the LLP's allowable loss. Until Dr Ranjit-Singh had been given an opportunity to reconsider the various options open to her under sections 380 and 381 of ICTA 1988, it seems to me that no final amendment to her self-assessment could properly be made, and the deemed enquiry into her personal tax return under section 12AC(6)(a) must have remained open." (R (oao Amrolia) v. HMRC [2020] EWCA Civ 488, Henderson LJ)

Amending partner’s return not a pre-requisite to an appeal

 

“We therefore do not agree with Mr Feng’s argument that an effective appeal is not possible unless the tax effect on the individual partners has been made clear by amending their returns.” (Lam v. HMRC [2016] UKFTT 659 (TCC), §28).

 

Consequential amendment even after enquiry into partner’s return closed

 

“S28B(4) TMA entitles HMRC to amend a partner’s returns following an enquiry into the partnership tax return:  that is a quite separate power to the one which enabled HMRC to amend a taxpayer’s return after an enquiry into it.  So the 14/15 enquiry was closed but there remained for Mr Märtin the possibility that an amendment to his 14/15 tax return made under s 28B(4).  This Tribunal has no jurisdiction to prevent such an amendment being made.” (Martin v. HMRC [2017] UKFTT 488 (TC), §9, Judge Mosedale – the point does not appear to have been argued).

 

Standing to appeal in respect of partnership matters

 

See XX.

Not closure notice: does not operate to close deemed s.9A enquiry

"[58] I am encouraged in taking this view by the fact that the legislation nowhere expressly states that a notice under section 28B(4) is to operate as a closure notice of the deemed enquiry into the partner's personal tax return opened under section 12AC(6)(a) when notice was given of the enquiry into the LLP's partnership return under section 12AC(1). Nor can I see any proper basis for reading in a necessary implication to that effect. On the contrary, it seems to me that the deemed enquiry into each partner's individual return will remain open, if need be, following the giving of a notice under section 28B(4). If that is the position, the enquiry will then be terminated in due course by a closure notice under section 28A to which the requirements identified by this court in Archer will apply in the usual way."  (R (oao Amrolia) v. HMRC [2020] EWCA Civ 488, Henderson LJ)

"[54] ... For reasons that we have given above, the scheme of the legislation envisages that adjustments under s28B(4) are free-standing adjustments that are consequent on completion of the enquiry into the partnership tax return. They are not themselves closure notices and are not required to be completed by the issue of closure notices."  (Reid and Emblin v. HMRC [2020] UKUT 61 (TCC), Nugee J and Judge Richards)

Cannot be appealed

"[26]​ In summary, I do not consider that the decision in Unison provides any basis for me to depart from the conclusion of the Upper Tribunal in Reid and other decisions noted above that a s28B(4) notice is not a closure notice and cannot be appealed under s31 TMA 1970. Accordingly, this Tribunal has no jurisdiction in respect of the appeal and the application to strike out is granted." (Mathieson v. HMRC [2022] UKFTT 11 (TC), Judge Fairpo)

Challenge via judicial review

"[51] ... For example, if HMRC make a simple transcription error in a s28B(4) adjustment and therefore, as a matter of arithmetic, fail to reflect properly the outcome of the partnership closure notice in an individual tax return it is, perhaps, surprising that a taxpayer should be put to the expense of instituting judicial review proceedings to deal with a comparatively straightforward dispute. Similarly, if a particular partnership agreement is unclear, so it is not straightforward to determine how profits and losses are allocated as between partners, there will be a similar lack of clarity as to how adjustments made to the partnership return in the partnership closure notice should be reflected in s28B(4) adjustments. It is perhaps surprising that disputes of this kind cannot be aired in an appeal to the FTT but would have to be dealt with by judicial review. However, we regard these anomalies as simply the result of the scheme that Parliament has chosen to implement. They do not displace the clear implication, apparent on the face of the statutory provisions, that s28B(4) notices are not closure notices." (Reid and Emblin v. HMRC [2020] UKUT 61 (TCC), Nugee J and Judge Richards)

Consequential amendments to partners' tax returns

Consequential amendments: the company tax return enquired into

 

“(1)     This paragraph applies where a partial or final closure notice is given to a company by an officer.

(2)     The partial or final closure notice must state the officer's conclusions and—

(a)     state that, in the officer's opinion, no amendment is required of the return that was the subject of the enquiry, or

(b)     make the amendments of that return that are required—

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

(ii)     in the case of a return for the wrong period, to make it a return appropriate to the designated period." (FA 1998, Sch 18, para 34(1) - (2)

"(5)     In this paragraph “the designated period” means the period designated in the partial or final closure notice." (FA 1998, Sch 18, para34(5))

Consequential amendments: other corporation tax returns

"(2A)     The officer may by further notice to the company make any amendments of other company tax returns delivered by the company that are required to give effect to the conclusions stated in the partial or final closure notice.” (FA 1998, Sch 18, para 34(2A)).

Necessary to ensure consistency with the conclusions stated in the closure notice

 

“The nature of the amendments that can be made by a notice under subparagraph (2A) is limited to those “that are required to give effect to the conclusions stated in the closure notice”. That is to say the amendments must be necessary to ensure consistency with the conclusions stated in the relevant closure notice.” (Spring Capital ltd v. HMRC [2016] UKUT 264 (TCC), §67, Judges Sinfield and Greenbank).

 

Must be directly consequential

 

“Guidance produced by HMRC, in their Enquiry Manual (EM3878), states that such a consequential amendment should only be made if it is a “direct result” of the conclusions stated in a closure notice. Indeed, the guidance provides that there should not be reliance on paragraph 34(2A) “to make Revenue amendments which are not a direct result of the conclusions stated in the closure notice.”” (Spring Capital ltd v. HMRC [2016] UKFTT 671 (TC), §16).

 

Not future returns

 

“Furthermore, a notice under sub-paragraph (2A) can only make amendments to company tax returns that have been delivered by the company. It cannot specify amendments that must be made to company tax returns that may be delivered in the future. The power is not required for future returns as HMRC will be able to open an enquiry and make the relevant amendments in a closure notice for the relevant period.” (Spring Capital ltd v. HMRC [2016] UKUT 264 (TCC), §67, Judges Sinfield and Greenbank).

 

Conclusion upon which amendment is consequential need not expressly refer to other years to permit amendment of those returns 

 

“The conclusions in the 2007 closure notice in respect of the section 343 losses and the claim for amortisation of goodwill, as I have said, related to the fundamental entitlement to relief in both cases. In that sense, the conclusion expressed in the 2007 closure notice was equally applicable in relation to the 2008 period. Therefore, in my view, the consequential amendment as regards the 2008 period was necessary to give effect to the conclusions on the entitlement to the two reliefs expressed in the 2007 closure notice.” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §259).

 

Time limit (does not have to be made at same time as closure notice or within a reasonable time) 

 

“…our view is that, on a proper construction of paragraph 34, a notice under subparagraph (2A) is not required to be issued at the same time as the relevant closure notice... The legislation does not contain a manifest error which would require or permit a court or tribunal to read in any additional words such as a requirement for the notice under sub-paragraph (2A) to be issued “within a reasonable time” of the relevant closure notice.” (Spring Capital Ltd v. HMRC [2016] UKUT 264 (TCC), §§73…75, Judges Sinfield and Greenbank).

 

Late appeal of closure notice at same time as appealing 2A notice

 

“In any event, the taxpayer has a right to appeal against the notice under sub-paragraph (2A). It would also be open to the taxpayer to appeal against the relevant closure notice at the same time. If that appeal was out of time, the Tribunal would be able to take into account any delay in the delivery of the notice under subparagraph (2A) as a factor in deciding whether or not to permit an appeal against the closure notice out of time.” (Spring Capital Ltd v. HMRC [2016] UKUT 264 (TCC), §71, Judges Sinfield and Greenbank).
 

Consequential amendments: the corporation tax return enquired into
Consequential amendments: other corporation tax returns

Tax resulting from amendment treated as assessed

"Any reference in the Tax Acts (however expressed) to a person being assessed to tax, or being charged to tax by an assessment, include a reference to his being so assessed, or being so charged—

(a)     by a self-assessment under this Schedule, or an amendment of such a self-assessment, or

(b)     by a determination under paragraph 36 or 37 of this Schedule (which, until superseded by a self-assessment, has effect as if it were one)." (FA 1998, Sch 18, para 97)

Tax resulting from amendment treated as assessed

Challenging a closure notice

See Chapter J1: Challenging direct tax decisions

Closure notices may only be challenged on statutory appeal against that closure notice

 

"It follows from this that my view is that, unless and until the 2004 and 2005 closure notices, which denied the claim to terminal loss relief are successfully challenged by the mechanism provided by Parliament (ie an appeal against the 2004 and 2005 closure notices to this Tribunal) those closure notices are effective to deny the relief.” (Spring & Salmon Seafood Ltd v. HMRC [2013] UKFTT 320 (TC), §84, upheld on appeal [2014] UKUT 488 (TCC)).
 

Challenging a closure notice
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