TC09594 - [2025] UKFTT 00893 (TC)

I was provided with a bundle of documents. The appellant tendered a witness statement which he adopted and on which he was not cross-examined. Mr Bernard Finerty (“Mr Finerty”) an accountant whose firm, BP Partners (“BP”) acted for the appellant in challenging the closure notice, also tendered a witness statement on which he was cross examined. From this evidence I find as follows:

The closure notice was issued to the appellant on 11 December 2020.

In a letter dated 16 December 2020, BP stated that they had received the closure notice, and that “We have no faith in the way this review has been conducted so we will not be requesting a peer review within HMRC…Instead we wish to appeal to the Lower Tier Tribunal”.

It then identified that the grounds of appeal would include: the processing of the enquiry and the lack of a valid justification for the review; the failure of HMRC to explain the basis on which they regard the company as non-trading; the failure of HMRC [to] explain why they believe that there were transactions not at arms length, when they are commercial arrangements between unconnected parties; the failure of HMRC to deal with the matter in a timely and competent manner; the wish of HMRC to charge amounts to tax on one hand, but then to deny capital loss relief for the corresponding values related to the company’s shares.

It then asked HMRC to “confirm that you will be applying to the Clerk to the Lower Tier Tribunal for the case to be listed and heard in due course” and for confirmation that tax demands should be stood over pending the “decision of the independent tribunal”.

HMRC set out their view of the matter, in their view of the matter letter dated 16 November 2022 (“the view of the matter letter”). In that letter they explained why they had reached the conclusion that the appellant was not entitled to share loss relief. They also acknowledged the appeal by BP and stated that “Although they have stated that they do not wish to opt for an Internal Independent, I am required to give you HMRC’s current view of the matter…” It seems clear to me that the word “review” has been omitted from the first part of that sentence.

The view of the matter letter also noted that BP had appealed “against the closure notice for the year ended 5 April 2011 issued on 11 December 2021”.

This was an error as the closure notice had been issued on 11 December 2020.

The view of the matter letter included an offer of an independent review. It explained that if the appellant did not want such a review, he could notify his appeal to the tribunal.

On 2 December 2022, BP acknowledged receipt of the view of the matter letter, noted that HMRC were accepting their appeal against the closure notice issued on 11 December 2021, and had searched their files and could find no reference to such an appeal.

HMRC responded on 4 January 2023 with which they enclosed the closure notice and various pieces of correspondence.

In a letter dated 31 January 2023, the HMRC investigator, having reviewed the records, noted that the closure notice was issued on 11 December 2020, the appeal was dated 16 December 2020, and apologised for the error in the view of the matter letter in which they stated the date of the closure notice as being 11 December 2021. That letter went on to say; “in view of my error above, I am extending the deadlines stated in my letter of 16 November 2022 for you to take the appropriate action to 2 March 2023”.

BP responded in a letter dated 14 February 2023 (“the Valentine’s Day letter”). They asked why HMRC appeared to have been confused with the date of the closure notice and the appeal and went on to say:

“We are also bemused as to why you have been unable, or unwilling, to follow our requests that the case is listed before the first Tier Tribunal. We enclose for information a further copy of the appeal letter of 16 December 2020, explaining the issues we have regard to the conduct of Counter Avoidance in this matter, and our wish for an independent review of all steps taken, and failure to respond to documentation in a timely manner.

We look forward to receiving your specific response with regard to this letter, together with your further advice as to when the case will be sent to the clerk to the lower Tier Tribunal for listing in due course”.

HMRC responded in a letter dated 8 March 2023 in which they apologised, again, for getting the date of the closure notice wrong in their view of the matter letter. It went on to clarify what steps the appellant needed to take following the view of the matter letter.

“… If you do not agree with our current view, it is up to you either to ask for an independent internal review, which you have already stated at the outset that you do not want, or it is up to you to apply to the tribunal. It is not for HMRC to do this. As such, I will not be sending the case to Clerk [sic] to the Lower Tier Tribunal for listing”.

A copy of this letter was sent to the appellant.

On 20 November 2023, BP wrote to HMRC “To confirm, our client wishes to proceed with an internal peer review. we believe that this option is the first step of the process we need to undertake. if this is no longer available, can you please explain why. If the peer review process cannot be enacted, then we will apply for a hearing of the case before the first Tier Tribunal…”.

In their letter of 20 December 2023, HMRC noted that the appellant wished to proceed with an internal peer review but explained that the deadline for that review “has long passed” and they would not be undertaking a review. They explained that the deadline was originally 17 December 2022 as set out in the view of the matter letter but that was subsequently extended to 2 March 2023 following HMRC’s letter of 31 January 2023. They went on to note that following the passing of the deadline, the appeal was settled under section 54 (1) TMA.

That letter went on to say that the appellant could contact the First-tier Tribunal “but I must assume that they wouldn’t be willing to hear an appeal this late without a very good reasonable excuse”.

On 16 January 2024, BP wrote to HMRC stating that the appellant wished to repudiate and/or resile from the agreement and wish to appeal to the tribunal.

HMRC responded to BP on 8 February 2024. It explained that the appeal was deemed to be settled because neither BP nor the appellant had notified the appeal to the tribunal. It went on to say that HMRC could not list the appeal for the tribunal, the onus being on the appellant and BP to do so. It noted that “this stage you would need to make a late application to the Tribunal Service”. They provided a link to an appropriate website. They also included a fact sheet which set out the appeal process.

HMRC copied that letter to the appellant.

In a letter to HMRC dated 6 March 2024, BP noted that there have been differences of opinion between the parties as to the effect of earlier exchanges of correspondence, expressed the view that the Valentine’s Day letter clearly referred to their wish for an independent review and that if HMRC were not prepared to accept this position, they would appeal to the tribunal.

BP followed up this letter with a further letter dated 21 March 2024 in which they asked HMRC “to confirm that the case is indeed going before the First Year [sic] Tribunal”.

In response, HMRC wrote to BP on 30 April 2024 in which they expressed the view that the Valentine’s Day letter “clearly did not contain a request for an Independent Review but incorrectly stated that you had included a request for an Independent Review in your letter dated 16 December 2020. The deadline to request an Independent Review has expired”.

It rehearsed the history of the correspondence and went on to explain that the time for seeking an independent review had expired, that HMRC could not reconsider their position, and that any appeal to the FTT will be late and they would have to consider the reasons for that lateness.

HMRC sent a further letter to BP on 8 May 2024 responding to points made by BP in letters sent to HMRC in March 2024. Once again, they rehearsed the history of the correspondence, explained that the time for seeking independent review had long passed, and that if an appeal was made to the FTT, the tribunal would need to consider reasons for that appeal being late.

That letter was copied to the appellant.

BP responded on 23 May 2024. They stated, inter alia, “However, on the basis that you are not objecting to our approach to the first Tier Tribunal for an independent review of this case, we will proceed with the application and matters can then be considered further”.

BP notified the appeal to the tribunal by a letter dated 22 July 2024 which was noted as received by the tribunal on 24 July 2024.

Mr Finerty gave the following evidence.

He has considerable experience in tax matters. He was aware of statutory deadlines but was awaiting responses from HMRC regarding the nature of the dispute and the use of reliefs. He accepted there was some confusion on his part regarding appealing to the tribunal. It was not for HMRC to do so on the appellant’s behalf, but for the appellant to do so.

He accepted that the date of the closure notice, which was expressed to be 11 December 2021 in the view of the matter letter, referred to the closure notice of 11 December 2020, given that that was the only closure notice against which an appeal had been made, and the reference to Pylorus.

He accepted that the wording of the Valentine’s Day letter was ambiguous but reflected an intention to request an independent review. In his view the wording of the letter was a request for such a review.

He had overlooked HMRC’s letter of 8 March 2023 which arrived in his office when he was on holiday. The appellant, who had also received a copy of this letter, had called him to notify him that he had received the letter and they had agreed that Mr Finerty would respond to it on his return. When he returned the letter had been filed away due to a clerical error and so was not acted upon.

HMRC appeared to accept that the settlement letter which was sent to BP on 20 December 2023, should have been sent to BP when the period for requesting an independent review or notifying an appeal elapsed. This meant that it was not until 20 December 2023 that BP were aware that HMRC had considered the matter to be settled.