TC09615 - [2025] UKFTT 01016 (TC)

Fecha: 31-Jul-2025

The parties’ submissions

The parties’ submissions

55.

Mr Gordon submitted that the Section 66 Issue was not contained within the conclusion stated in the Closure Notices, and thus, following Investec, it would be an error of law for the Tribunal to consider and decide that Issue.

56.

Mr Waldegrave’s position was that the Section 66 Issue was within the conclusion stated by the Closure Notices, because that conclusion was that Mr Tinkler’s “trade loss has been overstated”. Mr Waldegrave said in the Response:

“Read in context, this must be understood as a conclusion that the Appellant’s claim for ‘trade loss relief’ (i.e. under section 64 of ITA 2007) had been overstated. This was the subject matter of the Closure Notices, and is accordingly the subject matter of the appeal. The Section 66 Issue is clearly relevant to that subject matter; indeed section 66 forms an integral part of the code which governs trade loss relief. In other words, HMRC’s argument based on section 66 constitutes a reason why the conclusion stated in the Closure Notices was correct.”

57.

Mr Gordon disagreed, saying that HMRC’s “true conclusion” was in the covering letters, all of which read (see for example that for 2010-11 at §14):

“Please find enclosed the closure notice which reflects our conclusion that the income and expenses relating to horse racing are not part of your trade and as such, the profits/and or losses that you’ve declared from your self-employed business are overstated.”

58.

In other words, said Mr Gordon, “HMRC’s conclusion was that there was not a single trade but a trade being carried on in parallel with a non-taxable activity”. Moreover, in contrast to the position in Tower and Fidex, HMRC had not raised the Section 66 Issue during the enquiries. Neither was it mentioned in the covering letters; Mr Gordon referred Rose LJ statement in Investec that“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”.

59.

Mr Waldegrave accepted that the Section 66 Issue was not referred to in the text of the Closure Notices or in the covering letters. However, he said that:

(1)

the requirement for a trade to be run on a commercial basis with a view to the realisation of profits had been raised at a meeting between Mr Tinkler and HMRC on 30 April 2014;

(2)

when Mr Tinkler wrote to HMRC on 12 September 2022 appealing the Closure Notices and asking for a statutory review, his first ground of appeal was that “I have always believed and continue to believe that I am carrying out a commercial trade in my Breeding/Racing Business”. This was followed by discussion of the case law on the badges of trade and commerciality, including a part which was headed “Trade losses - restriction of relief: uncommercial trades - not on a commercial basis…”. Under that heading, Mr Tinkler explicitly discussed the requirements of section 66; and

(3)

HMRC’s statutory review letter refers briefly to the parts of Mr Tinkler’s appeal letter relating to section 66, and also sets out the legislation.

60.

Mr Gordon’s position was that section 66 is not about whether a trade is commercial, but is instead a consequential restriction on losses, and what Mr Tinkler had said in the appeal letter could not be used to expand the conclusion in the Closure Notices. He also relied on Investec; I discuss his main submissions on that case below.