TC09615 - [2025] UKFTT 01016 (TC)

In Investec v HMRC [2017] UKFTT 0356 (TC) (“Investec FTT”), the FTT (Judge Nowland and Mrs Bridge) considered the above case law, and then said at [117]:

“It is for the First-tier Tribunal to decide what the subject matter of the closure notice happens to be; that the circumstances may demonstrate that the subject matter is slightly broader than the particular conclusion and adjustments addressed in the closure notice and that it is open to HMRC to mount different arguments in any appeal, even for instance occasioning greater adjustments to the taxable profits, provided of course that the different arguments all deal with the same identified or obvious subject matter.”

When the case reached the Court of Appeal, Rose LJ (as she then was) gave the only judgment, with which Jackson LJ and Sir Timothy Lloyd both agreed, see Investec v HMRC [202] EWCA Civ 579 (Civ) (“Investec”). The third issue to be determined was the scope of the closure notice. Rose LJ said:

“70.

I accept the point made by the Appellants that this case is different from the Tower MCashback and Fidex cases because Issue 4 is not a different argument in support of the adjustments made to their tax returns to implement the conclusion set out in the closure notices. I would also go part of the way with the Appellants in accepting 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. In their covering letter HMRC could have indicated that they might open up entirely different areas of the Appellants’ tax returns if the closure notice were appealed to the tribunal. The fact that the Appellants had been warned about those potential challenges being raised would not, in my view, empower the FTT to treat those issues as within the scope of the appeal…It seems to me that “the matter to which the appeal relates” for the purposes of section 49I(1)(a) must be that amendment and the amendment is therefore the “matter in question” which the tribunal is required to determine by section 49G(4) TMA. That then restricts the ambit of the appeal at the conclusion of which the tribunal may decide that there has been an overcharge or an undercharge and so make a reduction or an increase in the assessment pursuant to section 50(6) or (7) as appropriate. 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.

71.

The authorities do not support a narrow construction of those key phrases in sections 49I and 49G and they establish that the FTT is the appropriate stage at which the scope of the matter in question in the appeal is to be determined…

72.

The possibility of HMRC putting forward a case on appeal seeking a greater tax liability than that set out in the closure notice does not create an unfair imbalance between the interests of the Revenue and the taxpayer… There are other checks and balances in the scheme here designed to protect the taxpayer. Those protections are the time limit imposed on HMRC in opening an enquiry, the fact that only one enquiry can be opened into any one tax return and the ability of the taxpayer to seek a direction for the issue of a closure notice. A narrow confinement of the subject matter of the appeal is not intended to be one of the protections conferred on the taxpayer. The “venerable principle” is also an important underlying factor in any tax matter. I accept HMRC’s submission that proceedings before the FTT are not simply a dispute between two private parties and the venerable principle has a role to play here as the courts have found in the three cases which were cited to us.

73 I would conclude that the description of the scope of the matter in question in para. 117 of the FTT’s decision is a useful and practical one. It is for the First-tier Tribunal to decide what the subject matter of the closure notice is within the bounds I have described. They are best placed to determine whether the context of the closure notice and the surrounding circumstances demonstrate that the subject matter is broader than the particular conclusion and adjustments addressed in the closure notice. If that is the case, it should be open to HMRC to put forward arguments in any appeal even if they result in a larger amount of tax being due, provided that the different arguments all deal with the same matters in question identified in the closure notice. Although it is accepted that this case goes beyond the point decided in Tower
MCashback and Fidex, I do not regard those cases as requiring a bright line to be drawn. I would therefore dismiss the Appellants’ appeal on Issue 3.”