UT-2023-000051 - [2024] UKUT 00114 (TCC)

Section 28A(4) TMA permits a taxpayer to apply to the FTT for a direction that HMRC issue a closure notice within a specified period. Section 28A(6) provides that the FTT is obliged to give such a direction unless it is satisfied that there are reasonable grounds for not issuing a closure notice within a specified period. The burden is on HMRC to show that there are reasonable grounds for refusing the applications. In short, the FTT was not satisfied that there were reasonable grounds for not issuing a closure notice: see [64].

HMRC opened all the enquiries into the Respondents’ self-assessment returns in order to ascertain whether one or more of the Respondents was liable to a charge to income tax under Chapter 2, Part 13 Income Tax Act 2007 (“ITA”) which contains provisions known as the “transfer of assets abroad” (“ToAA”) legislation.

The ToAA legislation is complex anti-avoidance legislation which can give rise to a charge to tax in a number of circumstances. In their skeleton argument and at the hearing before us HMRC accepted that their enquiries, which had previously been broader, now related solely to section 731 ITA. This provision imposes a charge to income tax on income treated as arising to an individual section 732. Section 732, in broad terms, applies by virtue of subsection (1) if: (a) a relevant transfer occurs; (b) an individual receives the benefit in a tax year; and (c) the benefit is provided out of assets which are available for the purpose as a result of the transfer or one or more associated operations.

For the purposes of the ToAA legislation it was common ground that it was possible for relevant transactions to occur many years before the tax year in which the income arose or benefits were made available and which were subsequently subject to tax under the ToAA legislation in a later year. It therefore followed, that HMRC may, in the course of an enquiry, require information in relation to an earlier year if it was relevant to the tax position of an individual in a later year.