TC09615 - [2025] UKFTT 01016 (TC)

It is clear from Tower and Fidex that the scope of Mr Tinkler’s appeal is defined by “the conclusions stated in the closure notice” and “what matters are the conclusions set out in the closure notice”. The focus must thus be on the Closure Notices.

The closure notice in Tower was that “the claim for relief under s 45 CAA was excessive” and HMRC could thus raise arguments based on s 45 generally, even though the covering letter made reference to earlier correspondence which related only to s 45(3). Moses LJ said, in words approved by Lord Walker:

“the closure notice itself was, in plain terms, a refusal of the claim for relief under s 45 CAA 2001. That was the conclusion stated pursuant to s 28B(1). There is neither statutory warrant nor any need to look further.”

In Mr Tinkler’s case, the Closure Notices for all years except 2013-14 state that “[Mr Tinkler’s] trade loss has been overstated”. They were therefore broadly drafted, like that in Tower. As Mr Gordon rightly accepted, HMRC could seek to support the same conclusion by arguing that the expenses relating to the Racing Activity were not wholly and exclusively for the purpose of the trade, on the basis that the inclusion of those expenses caused the losses to be overstated (although the consequential amendments would be different).

I considered whether the position was the same in relation to the Section 66 Issue. Mr Gordon had submitted that this section is not about whether a trade is being conducted with a view to the realisation of profits, but instead provides that “trade loss relief against general income for a loss made in a trade in a tax year is not available unless the trade is commercial”. Mr Gordon relied on the passage from Investec in which Rose LJ said that:

“the FTT does not have an unlimited discretion when determining what is ‘the matter to which an appeal relates’ for the purposes of section 49I(1)(a) TMA or ‘the matter in question’ for the purposes of section 49G(4) TMA…There is a limit on the jurisdiction of the FTT which is not simply a matter of ensuring procedural fairness. Any purported exercise by the FTT of a broader power to consider matters beyond that would be an error of law.”

However, Rose LJ went on to endorse the passage at [17] of Investec FTT, in which Judge Nowlan had said (my emphasis) “it is open to HMRC to mount different arguments in any appeal provided of course that the different arguments all deal with the same identified or obvious subject matter”. Mr Tinkler had claimed loss relief under s 64; the Closure Notice reduced the value of that claim on the basis that it was “overstated”, and s 66 provides that loss relief cannot be claimed if the trade was not commercial. The section therefore relates to “the same identified or obvious subject matter”, namely whether the claimed loss has been overstated. Moreover, as Lord Hope said at [84] of Tower, the Tribunal is not tied “to the precise wording of the closure notice when hearing the appeal”.

Mr Gordon also emphasised the part of the same paragraph of Tower where Lord Hope had said that closure notices must be read in context, in other words, by reference to the matters considered in the course of the enquiry. However, it is clear from the notes of Mr Tinkler’s meeting with HMRC on 30 April 2014 that he was aware HMRC were challenging the commerciality of the Trade, and his letter of appeal explicitly refers to section 66.

Although not raised by Mr Gordon, I noted that if HMRC were right on the Section 66 Issue, Mr Tinkler’s losses would not be “overstated” but would be “eliminated”. However, I decided that this made no difference: as Kitchen LJ said in Investec, it is not appropriate to construe a closure notice as if it is a statute.

I therefore conclude that the wording of the Closure Notices that “your trade loss has been overstated” allows HMRC to raise the Section 66 Issue as part of its case before the Tribunal in relation to all of the relevant years except 2013-14 (as to which, see §78ff below).