TC09615 - [2025] UKFTT 01016 (TC)

In Fidex Ltd v HMRC [2016] EWCA Civ 385 (“Fidex”), Kitchen LJ gave the only judgment with which Arden LJ and Sir Stephen Richards both agreed. The issue concerned the scope of a closure notice which had included the following passage:

“The derecognition of the listed bonds and preference shares should not have occurred on transition to IFRS. Therefore the sum of €83,849,399 representing the value of the derecognised listed bonds should not have been included in the change in basis adjustments following the adoption of IFRS.”

The closure notice thus did not make explicit reference to a statutory provision, but in correspondence HMRC had concentrated on whether Fidex had satisfied para 19A of the loan relationship provisions. Before the FTT, HMRC relied on para 13 (the unallowable purpose provision). In his judgment, Sir Stephen Oliver held that this was within the scope of the closure notice, finding (as summarised by Kitchen LJ at [48]):

“…the HMRC enquiry was directed at whether a scheme designed to produce a loss through the operation of the loan relationship provisions in Schedule 9 was successful in achieving that result. He considered that the stated effect of the closure notice was that it did not, and that to confine the Tribunal to an analysis of one provision in the statutory code would be to impose an unacceptable restriction on its judicial function.”

At [45], Kitchen LJ summarised the principles established in Tower as follows:

“(i)

The scope and subject matter of an appeal are defined by the conclusions stated in the closure notice and by the amendments required to give effect to those conclusions.

(ii)

What matters are the conclusions set out in the closure notice, not the process of reasoning by which HMRC reached those conclusions.

(iii)

The closure notice must be read in context in order properly to understand its meaning.

(iv)

Subject always to the requirements of fairness and proper case management, HMRC can advance new arguments before the FTT to support the conclusions set out in the closure notice.”

He also referred to the UT’s judgment in the case:

“[51] The UT went on to express the view, with which I agree, that it is not appropriate to construe a closure notice as if it is a statute or as though its conclusions, grounds and amendments are necessarily contained in watertight compartments, labelled accordingly. It also emphasised, again rightly in my judgment, that while there must be respect for the principle that the appeal does not provide an opportunity for a new roving enquiry into a company’s tax return, the FTT is not deprived of jurisdiction where it reasonably concludes that a new issue raised on an appeal represents an alternative or an additional ground for supporting a conclusion in the closure notice.

[52] The UT recognised there were certain differences between the Tower MCashback case and the present, but it considered there were striking similarities too. In Tower MCashback the legal ground of challenge changed but the subject matter of the enquiry and of the conclusion remained the same, namely whether the LLP was entitled to the capital allowance. So too in the present case, the legal ground of challenge changed but the essential subject matter of the enquiry and of the conclusion again remained the same, namely whether Fidex was entitled to claim the benefit of the debit…”

Kitchen LJ went on to conclude at [67] that the FTT had jurisdiction to hear and decide HMRC’s arguments on the unallowable purposes issue.