UT (Tax & Chancery) UT-2024-000113 - [2025] UKUT 00165 (TCC)

The conclusions on both the First Share Loss Relief Issue and Closure Notice Issue set out above are sufficient to dispose of this appeal in favour of HMRC. There was no error of law in the FTT conclusions at [101] that:

However, we have found there to be an error in the conclusion under the Second Share Loss Relief Issue that:

We have set aside that part of the FTT Decision and remade it, finding that the claim was not made in the 05-06 return and HMRC’s enquiry under paragraph 5, Schedule 1A TMA into the claim (made on the return) was valid.

We therefore go on to consider a point not determined by the FTT: whether the closure notice under paragraph 7, Schedule 1A TMA was valid. In so doing, we are entitled to look at all the evidence by virtue of s.12(4) of the Tribunals, Courts and Enforcement Act 2007. We may make any decision which the First-tier Tribunal could make if it were re-making the decision and may make such findings of fact as we consider appropriate.

We deal first with the same issue that the FTT considered in relation to the 06-07 return: whether the closure notice gave effective notice of the amount of loss relief denied. The FTT considered the nature of the numerical errors in the Schedule 1A closure notice at [20] and [98]-[100]. The Schedule 1A TMA closure notice was part of the factual context that would have informed the reasonable recipient of the s.28A TMA closure notice that the claim to share loss relief in respect of tax year 06-07 should be denied. We have already agreed with the FTT’s reasoning at [98]-[100].

We also accept Mr Way’s submission on behalf of HMRC that the same reasoning applies equally to the Schedule 1A TMA closure notice. Each notice would be read in the context of the other – they were part of the surrounding factual circumstances. We are satisfied that the reasonable recipient of the Schedule 1A TMA closure notice would equally understand that all relief had been denied in respect of the claim despite the numerical inaccuracies. In the alternative, the defects in the numbers should be cured pursuant to s.114 TMA.

This leaves the final remaining argument of Mr Grierson that the Schedule 1A TMA closure notice was ineffective and invalid because: a) it did not refer to Schedule 1A TMA on its face such that it was not clear to what claim, return or enquiry it related; or b) the notice did not specify that it was in relation to a standalone claim made outside the 05-06 return – the notice made no reference to the 05-06 return. Again, it would not be clear to what claim or enquiry the closure notice related.

We reject these submissions.

We are satisfied that the reasonable recipient of the closure notice would understand that it related to the enquiry opened under paragraph 5, Schedule 1A TMA in relation to the claim, made outside the 05-06 return, for share loss relief in the tax year 06-07. We come to that view despite the absence of reference to the 05-06 return or reference to Schedule 1A TMA in the closure notice.

The letter giving notice from HMRC was dated 25 July 2019. It began by stating:

From this, the letter was clear that it was closing an enquiry into a claim for share loss relief in respect of the year ended 5 April 2007 (06-07) claimed against 2005-2006 income.

The reasonable recipient in all the circumstances of the Appellant would have the benefit of the following factual context in addition to the terms of this notice by which to understand it:

The reasonable recipient would also be taken to understand the basic legal context (the legislative scheme by which s.9A enquiries were closed by closure notices under s.28A and paragraph 5, Schedule 1A enquiries by paragraph 7, Schedule 1A notices).

Thus, we are satisfied the reasonable recipient would understand the letter in question to be a Schedule 1A TMA closure notice closing the enquiry opened on 28 February 2007 into the claim made on the 05-06 return for share loss relief in relation to 06-07. The reasonable recipient would understand that the closure notice dated 25 July 2019 referring to the ‘check of your claim’ must be closing that enquiry under Schedule 1A TMA.

From these circumstances, the reasonable recipient would understand that there had been two enquiries opened and closed:

We are fortified in this conclusion by the fact that although the closure notice did not refer to any legislation (let alone Schedule 1A TMA) the notice correctly specified the year in respect of which the share loss relief claim was made (06-07), the year in which it was to be set against income (05-06), that it referred to a claim rather than a return and that it denied all relief claimed. The recipient would therefore understand that his claim in respect of share loss relief for 06-07, even if made on his 05-06 return, had been denied in full.

The matter which did give us pause for thought is whether the reasonable recipient of the Schedule 1A TMA closure notice would understand which return or claim was being enquired into.

We are of the view that the law does not require the reasonable recipient of a paragraph 7, Schedule 1A closure notice to be informed of a particular return to which the enquiry relates, in contrast to a s.28A closure notice. Instead, they must understand what claim is being enquired into because Schedule 1A TMA concerns claims made outside returns.

In this case, the reasonable recipient would understand that it was the claim for share loss relief (and that claim was made only on the 05-06 return and not in or on the 06-07 return which only made reference to it). Therefore, the failure of the closure notice to refer to the 05-06 return (and simply to the 06-07 tax year) does not undermine its validity.

Even if the closure notice is required to make clear the particular return in relation to which the enquiry is being closed, the reasonable recipient would understand that this letter must be the Schedule 1A TMA closure notice in respect of the claim and that claim was made on the face of the 05-06 return.

This is for the following reasons:

Therefore, even if the Schedule 1A TMA closure notice was required to give notice to the reasonable recipient so that they would understand which enquiry was being closed in respect of which specific return and the year in respect of which the claim was made, they would understand it to be the claim made on the 05-06 return in relation to the loss said to have been incurred in 06-07 but set off against 05-06 income.

We therefore remake the FTT’s decision and uphold the validity of the Schedule 1A TMA closure notice. This forms an alternative and additional basis on which the Appellant’s claim to share loss relief was lawfully denied by HMRC.

We dismiss the Appellant’s appeal. There was no error of law in the following conclusions of the FTT:

We allow HMRC’s cross-appeal. There was an error of law in the FTT’s decision that there was no valid enquiry opened into the claim made in the 05-06 return and thus the closure notice issued was invalid. We set aside that part of the FTT’s decision. We remake it and find that the Appellant’s claim to share loss relief was not made in the 05-06 return but was made on the return as a standalone claim. HMRC issued a valid notice of enquiry and valid closure notice for the purposes of paragraphs 5 and 7, Schedule 1A TMA denying the claim to share loss relief to set off against income in 05-06 which was to be treated as made in relation to 06-07, the year in which it was incurred.

Thus, the Appellant’s claim to share loss relief incurred in 06-07 was denied by HMRC in two valid closure notices.

Annex A