TC09593 - [2025] UKFTT 00892 (TC)

The sole and narrow ground of appeal is that no notice of enquiry was issued to the nominated partner - ie, to SCL - in accordance with TMA 1970 section 12AC(1)(a); and hence no valid inquiry had been opened.

It is important to note that there is no challenge to the timing of the notice of enquiry; nor any appeal against the conclusions expressed in the Closure Notice; the disallowance of the loss; or the Revenue amendment.

HMRC bears the burden of establishing that a compliant notice of enquiry was given. The standard of proof is the civil standard - namely, the balance of probabilities.

All the Appellant's focus has been on the Defective Letter. HMRC accepts that it was addressed to the wrong entity: it was not addressed to SCL. This is put down to a 'simple clerical error' (sic).

In our view, the Appellant's exclusive focus on the Defective Letter is (and always was) fundamentally misconceived because the Company Secretary Letter:

It includes the following:

TMA 1970 section 12AC provides that an officer 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". That was SCL. Absent a compliant notice of enquiry, there is no valid enquiry; and hence no enquiry to be closed by way of closure notice.

A notice of enquiry does not need to observe any particular formality: see Flaxmode Ltd [2008] SpC 670 (Charles Hellier); all that is required is that notice be given to the taxpayer that HMRC intends to enquire into a return. This is assessed objectively.

This statement of the law has recently (25 May 2025) been approved by the Upper Tribunal (Upper Tribunal Judges Jonathan Cannan and Rupert Jones) in Scatola and others v HMRC [2025] UKUT 156 (TCC). The document giving notice must enable the reasonable recipient in the position of the taxpayer to understand which return HMRC are intending to enquire into. We consider this test to have been met in this case.

Hence, the nominated partner - SCL - was given notice of enquiry, on 11 May 2012.

In our view, the Defective Letter does not matter. No one has ever sought to argue that the receipt of two letters at the same address, one addressed to the right entity, and one to the wrong entity, means that the correctly addressed letter should be disregarded.