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

The FTT referred expressly to Raftopoulou and directed itself as to the applicable law in accordance with the above passage at [89] of the Decision. That self-direction as to the law was correct:

It was common ground before the FTT that the two closure notices dated 25 July 2019 contained errors as to the amount of the credit or relief that was being disallowed. While those errors were partially corrected in HMRC’s review conclusion letter, the appeal to the FTT was against HMRC’s closure notice and any review thereof.

Turning to the 06-07 closure notice, the FTT was required to construe it and determine what a reasonable person would have understood it to mean in light of all the factual circumstances. The FTT’s conclusion was an issue of law (Raftopoulou at [36]). The reasonable recipient would need to understand that: a) the notice closed the specific enquiry under s.9A TMA into the 06-07 return; and b) that all the share loss relief claimed, treated as made in the return, was denied.

There is no doubt about a) – the closure notice explains this clearly on its face but can also be read in the context of the letters giving notice to the Appellant and agent under s.9A TMA opening the enquiry which explained which return was being enquired into.

As for b), the conclusion of the closure notice as to how much of the relief claim was granted, the letter explained that the amount of the capital loss claimed and the claim to set that capital loss against 05-06 income were not allowable. This was explained by the FTT at [98]. The point before the FTT was the lack of clarity as to the amount of the relief claimed and denied. The FTT’s conclusion at [99] was that, notwithstanding the incorrect figures being included, the reasonable person would have understood that the entire loss was disallowed and the credit reduced to £0. The FTT gave detailed and rational reasons for that conclusion at [99].

There was no error of law in its reasoning or conclusion. The FTT took into account all the factual circumstances of which the reasonable recipient would be aware, including the two closure notices received and the nature and amount of the claim made.

In his written and initial oral submissions, Mr Grierson suggested that the FTT’s decision as to the meaning of the closure notice was a matter of fact not of law. This was incorrect. The construction of the document - what the reasonable recipient would understand it to mean - is a question of law (per Raftopoulou at [36]). It is not a matter on which the taxpayer’s evidence is required or necessarily even relevant.

In any event, even if the conclusion was based upon findings of fact, the FTT’s decision may only be impugned on the basis that it is perverse (per Edwards (Inspector of Taxes) v Bairstow [1956] AC 14). The Appellant’s own evidence that he did not understand the meaning of the closure notice was accepted by the FTT at [20]. The FTT clearly had that finding of fact in mind when considering the closure notice issue. However, the FTT also had the primary evidence before it of both closure notices themselves. That was sufficient evidence for the FTT to reach its conclusion at [100] that the reasonable person would have understood the closure notice under s.28A TMA for 06-07 to disallow the entire loss claimed by the Appellant.

In summary, we conclude that there was no error by the FTT in upholding the 06-07 closure notice made under s.28A TMA as valid and effective for the reasons it gave at [97]-[100]. This included the surrounding circumstances and important context of receiving two closure notices which would reasonably be read together as denying all loss relief claimed as explained at [99]. Despite the incorrect numerical references contained within them, it would have been clear to the reasonable recipient of the 06-07 closure notice that the claim to share loss relief was denied in full. The Appellant’s subjective understanding of the meaning of the closure notice did not need to be relied upon as it could not determine the objective assessment the FTT was required to make which was a matter of law. The subjective understanding of the Appellant regarding the notice forms no proper basis to find that the FTT erred in law and does not outweigh or prevail over that objective assessment.

We note that no permission was granted for an appeal against the FTT’s alternative conclusion at [99] that the errors in the closure notice fell within the ambit of s.114 TMA and could be cured on that basis alone. Absent a challenge to that alternative basis for the FTT’s conclusion, the Appellant’s argument as to the application of the principles from Raftopoulou would be insufficient to challenge the FTT’s finding.

Nonetheless, in his written submissions and oral argument Mr Grierson did seek to argue that the FTT erred in finding that s.114 TMA applied. He submitted that section 114 TMA could not apply to either enquiry notices or closure notices.

In relation to enquiry notice we do not need to decide the point – the validity of the enquiry notices and application of s.114 TMA have never been in issue before the FTT nor us and no permission was granted to argue this point. In any event, the enquiry notices were unambiguous as to the types of enquiries of which they were giving notice and any defects would be saved by the principles in Mabbutt. Therefore, the scope and application of s.114 TMA does not arise. In any event, [89] of Mabbutt provides authority to support the conclusion that s.114 may cure a defect in a s.9A enquiry notice:

In relation to closure notices, we also disagree with Mr Grierson – the wording of s.114(1) TMA is plainly apt to cure a defect in a closure notice because the provision may cure numerical defects in: ‘An assessment or determination, warrant or other proceeding which purports to be made in pursuance of any provision of the Taxes Acts’. A closure notice is of the same or similar type as an assessment or determination because an amendment to a claim or return included in a closure notice may impose liability to tax in a similar way to an assessment or determination. As such, it is an ‘other proceeding’.

Accordingly, there was no error of law in the FTT’s further and alternative conclusion that the defects in the numerical calculations in the 06-07 closure notice could be cured pursuant to s.114 TMA. This closure notice gave valid notice of the conclusion that the claim for relief given effect as if made in the 06-07 return should be denied in full.

The Appellant’s appeal on this ground is dismissed.