Märtin
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 June 2017 |
| Neutral Citation | [2017] UKFTT 488 (TC) |
| Date | 12 June 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Barbara Mosedale
The appellant appeared in person
J Davey QC, and I Afzal, S Chandler and N Macklam, all Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax – Applicant allegedly implemented icebreaker type-scheme – Enquiry opened – No action taken – Three years later applicant applied for closure – HMRC then requested information – Information not provided – Whether reasonable grounds for not issuing closure notice – In absence of evidence on reason for delay – No – Application granted – Taxes Management Act 1970 (TMA 1970), s. 28A.
The First-tier Tribunal (FTT) ordered HMRC to close an enquiry because, although the taxpayer had not responded to a request for information which would normally be sufficient not to order closure, in the absence of evidence from HMRC it could not be satisfied that HMRC's three year delay between opening the enquiry and requesting the information was justified.
The appellant (Mr Märtin) made a claim to loss relief in his 2012–13 tax return arising out of the activities of Great Marlborough LLP. Since then the following had happened:
1) On 19 February 2014 HMRC opened (or purportedly opened) an enquiry into Mr Märtin's 2012–13 tax return on a protective basis. This was because HMRC believed that Mr Märtin had participated in a tax avoidance scheme similar to that considered in various FTT and Upper Tribunal Icebreaker and Acornwood cases (the most recent being [2011] BTC 1,579 and [2017] BTC 415 respectively). HMRC did not request any information but said that they might require information later.
2) On 15 July 2016 HMRC opened an enquiry into Mr Märtin's 2014–15 tax return.
3) On 15 November 2016, after no real progress on the enquiries, Mr Märtin applied to the tribunal under TMA 1970, s. 28A to order HMRC to close both enquiries.
4) On 16 January 2017 HMRC opposed the closure of the 2012–13 enquiry and gave Mr Märtin a list of required information and documents (at the time of the hearing these had not been provided).
5) On 1 March 2017 HMRC closed the 2014–15 enquiry without making any amendment to the return, but said that they might make amendments to his 2014–15 return following an enquiry into Great Marlborough LLP's 2014–15 return.
At the hearing Mr Märtin decided not to pursue his contention that the 2012–13 enquiry had not been validly opened, but reserved the right to raise it in any subsequent proceedings challenging the validity of any amendment to his 2012–13 tax return.
Mr Märtin did not accept that HMRC had actually closed the 2014–15 enquiry because of their indication that they might make later amendments. If this had been the case the tribunal would have had jurisdiction to order the closer of that enquiry. The FTT considered that the 2014–15 enquiry had been closed as was stated clearly in the 1 March 2017 letter and therefore it had no jurisdiction to order closure of the enquiry. If HMRC were to make any amendments it would be as a result of the check on Great Marlborough LLP as was allowed by TMA 1970, s. 28B(4), which was a completely separate power to the one being considered in this case.
For the FTT not to order the closure of the enquiry HMRC had to satisfy them that there were reasonable grounds for keeping the enquiry open. The FTT accepted that HMRC's information request was for relevant information and was not excessive and the taxpayer failing to provide the information would normally be sufficient reasonable grounds not to order the enquiry to be closed, even where (as in this case) the tax at stake had been quantified. However because HMRC had taken three years from opening the enquiry to requesting the information and HMRC had not provided evidence to justify the delay, the closure ought to be granted. The FTT noted that if HMRC had been able to prove their assertions that the delay in requesting information was justified because they had decided to concentrate on resolving the position of the various LLPs involved in this and similar avoidance schemes before considering each individual partner's position and had thought that resolving the Icebreaker and Acornwood cases would assist, the closure may not have been ordered.
The FTT accordingly ordered the closure of the 2012–13 enquiry within 30 days of the decision.
It is anticipated that following this decision HMRC will close the enquiry, making amendments to the tax return to exclude claimed loss relief on the basis that the claim was not valid because it was part of a tax avoidance scheme similar to those of Icebreaker and Acornwood. It will then be for the taxpayer to either accept the amendments, or more likely appeal the closure notice. If the taxpayer makes such an appeal it will then be for him to prove that he was entitled to the claimed loss relief.
[1] On 19 February 2014, HMRC opened (or purported to open) an enquiry into the applicant's 2012/13 tax return. The letter stated that the enquiry was opened on a protective basis and while HMRC might later require information from the taxpayer, none was required at that time. On 15 July 2016, HMRC opened an enquiry into the applicant's 14/15 tax return. On 15 November 2016, the applicant made an application to the Tribunal to order HMRC to close the two enquiries. On 1 March 2017, HMRC closed the enquiry into the 14/15 return without making any amendment to that tax return.
[2] The application was made under s 28A Taxes Management Act 1970 (“TMA”) which provided as follows:
(1) An enquiry under section 9A(1) … is completed when an officer of the Board by notice (“a closure notice”) informs the taxpayer that he has completed his enquiries and states his conclusions.
In this section, “the taxpayer” means the person to whom the notice of enquiry was given.
(2) A closure notice must either –
a) state that in the officer's opinion no amendment of the return is required, or
b) make the amendments of the return required to give effect to his conclusions.
(3) A closure notice takes effect when it is issued.
(4) The taxpayer may apply to the tribunal for a direction requiring an officer of the Board to issue a closure notice within a specified period.
(5) Any such application is to be subject to the relevant provisions of Part 5 of this Act (see, in particular, section 48(2)(b)).
(6) The Tribunal shall give the direction applied for unless satisfied that there are reasonable grounds for not issuing a closure notice within a specified period.
[3] It appeared to be accepted by both parties that the appellant made a claim to loss relief arising out of the activities of Great Marlborough LLP. HMRC's case is that in doing so he had participated in a tax avoidance scheme, very similar to that considered by the FTT and Upper Tribunal in the various Icebreaker and Acornwood cases ( [2010] TC 00325; [2011] BTC 1,579; [2014] TC 03545; [2016] BTC 517; and [2017] BTC 513). I do not need to, nor do I make any findings of fact about the exact arrangements on which in any event I heard no...
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Martin
...intention to enquire into his return. HMRC did not request any information but said that they might require information later. In Märtin [2017] TC 05942, the appellant successfully applied to the FTT to order HMRC to close their enquiry within 30 days of the decision. HMRC only requested in......
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Märtin
...amendments to his 2014–15 return following the enquiry into Great Marlborough LLP's 2014–15 return. On 12 June 2017, the FTT (in Märtin [2017] TC 05942) ordered HMRC to close the 2012–13 enquiry. The FTT made no order in respect of the 2014–15 enquiry, finding that the enquiry was closed an......
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Benson
...Mr Benson, and the amounts, it was not yet possible to quantify the tax consequences.[23] In Price [2011] TC 01466 (at [40]) and Märtin [2017] TC 05942 (at [44]) this Tribunal had identified as the critical factual matters: why HMRC had not sought documents and information from the taxpayer......