Tinkler v Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 30 July 2021 |
| Neutral Citation | [2021] UKSC 39 |
| Year | 2021 |
| Court | Supreme Court |
[2021] UKSC 39
Lord Hodge, Deputy President, Lord Briggs, Lady Arden, Lord Burrows, Lady Rose
Supreme Court
Income tax – Whether taxpayer estopped by convention from denying that HMRC had opened a valid enquiry – Yes – Appeal allowed – TMA 1970, s. 9A and s. 15.
The Supreme Court overturned the Court of Appeal decision on estoppel by convention in Tinkler v R & C Commrs [2019] BTC 22, ruling that a taxpayer was estopped from denying the validity of an enquiry into his tax return where both he and HMRC had for a decade proceeded on the mistaken assumption that HMRC had opened a valid enquiry.
HMRC purportedly opened an enquiry into Mr Tinkler's 2003–04 tax return under TMA 1970, s. 9A. But as had been found by the FTT in Tinker [2016] TC 04960, the notice of enquiry had not been sent to Mr Tinkler's usual or last known place of residence or his place of business or employment pursuant to TMA 1970, s. 115 and therefore the notice had not been received by Mr Tinkler. Mr Tinkler's advisers, BDO Stoy Hayward (BDO), received a letter informing them of the enquiry and asking questions about the tax return, together with a copy of the notice of enquiry. BDO corresponded with HMRC on the basis that an enquiry had been opened, but ten years later, while preparing for an appeal hearing against a closure notice issued following the enquiry, Mr Tinkler argued that the closure notice was invalid because the initial notice of enquiry had been sent to the wrong address.
Lower courts had previously been decided that:
- the enquiry notice had not been received by Mr Tinkler and form 64-8 did not give BDO apparent authority to receive a notice of enquiry on a taxpayer's behalf;
- BDO had neither actual nor apparent authority to receive a s. 9A notice on behalf of Mr Tinkler; and
- Mr Tinkler was not estopped by convention from denying that HMRC had opened a valid enquiry.
HMRC appealed against the Court of Appeal's decision on estoppel, which the Supreme Court allowed.
Lord Burrows explained in his own words the principles of estoppel by convention, as outlined in R & C Commrs v Benchdollar Ltd [2011] BTC 36 and amended in Blindley Heath Investments Ltd v Bass [2015] EWCA Civ 1023, [2017] Ch 389.
- It is not enough that the common assumption is merely understood by the parties in the same way. It must be expressly or impliedly shared between them. Something must cross the line between the parties sufficient to manifest an assent to the assumption.
- The expression of the common assumption by the party alleged to be estopped (D) must be such that they may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the party raising the estoppel (C) an understanding that they expected C to rely upon it.
- C must in fact have relied upon the common assumption rather than merely upon C's own independent view of the matter.
- That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
- Some detriment must thereby have been suffered by C, or benefit accrued to D, sufficient to make it unconscionable for D to assert the true legal or factual position.
And in considering the first three principles, C must rely on the affirmation of the common assumption by D, and the latter must intend or expect that reliance.
Applying these principles to Mr Tinkler's case the Supreme Court decided that the fact that HMRC mistakenly represented to BDO that the address they sent the enquiry notice to was correct did not prevent HMRC from raising an estoppel by convention. BDO had indicated to HMRC that it too believed that a valid enquiry had been opened. Thereafter, HMRC relied on BDO's endorsement of the common assumption that the enquiry was valid. The Supreme Court also found that it was not unconscionable for HMRC to raise an estoppel.
Now this preliminary issue has been settled the substantive appeal against the closure notice can be progressed.
Malcolm Gammie CBE QC, Michael Jones QC, Nicholas Macklam (Instructed by HMRC Solicitors Office (Bush House)) appeared for appellant
Roger Thomas QC, Emma Pearce, (Instructed by Wedlake Bell LLP) appeared for respondent
[1] Estoppel by convention is notoriously difficult to pin down. It can arise in various contexts. Most commonly, it arises in relation to a contract between the parties. In that context, estoppel by convention may, for example, affect the obligations of the parties or be relevant to the interpretation of the contract. However, this case is concerned with estoppel by convention in relation to non-contractual dealings.
[2] As in the highly influential case of R & C Commrs v Benchdollar Ltd [2011] BTC 36 (“Benchdollar”), the non-contractual context with which we are concerned is dealings between HMRC and a taxpayer. In Benchdollar Briggs J held that estoppel by convention had been established by HMRC so as to prevent the employer taxpayers from relying on the expiry of a statutory limitation period, in relation to some, although not all, of HMRC's claims. In this case the focus is on estoppel by convention in relation to an enquiry under section 9A of the Taxes Management Act 1970 (“TMA”) by HMRC, who are the appellants, into a tax return of Mr Tinkler, who is the respondent. There are also elements of the law of agency to consider, in relation to the estoppel by convention, because Mr Tinkler engaged tax accountants and advisers, BDO Stoy Hayward (“BDO”), to deal with his tax affairs.
[3] The issues raised before the First-tier Tribunal (“FTT”), Upper Tribunal (“UT”), and the Court of Appeal ranged over a wider compass than estoppel by convention. But HMRC's only ground of appeal to this court is from the Court of Appeal's decision that Mr Tinkler was not estopped, under estoppel by convention, from denying that a valid enquiry under section 9A TMA had been opened. This judgment first examines the relevant statutory provisions, the facts, and the reasoning of the courts below, before turning to analyse in detail, and to apply, the law on estoppel by convention with particular reference to Benchdollar.
[4] In formulating this judgment, I have been greatly assisted by the work of commentators. These have included Elizabeth Cooke, The Modern Law of Estoppel (2000) especially pp 31–32; Spencer Bower: Reliance-Based Estoppel: The Law of Reliance-Based Estoppel and Related Doctrines, 5th ed (2017), (edited by Piers Feltham, Tom Leech QC, Peter Crampin QC, Joshua Winfield) especially chapter 8; Michael Barnes QC, The Law of Estoppel (2020) especially chapter 5; Chitty on Contracts, 33rd ed (2018), paras 4–108 to 4–115; Snell's Equity, 34th ed (2020), paras 12–011 to 12–016; Rory Derham, “Estoppel by Convention – Part I” (1997) 71 ALJ 860 and “Estoppel by Convention – Part II” (1997) 71 ALJ 976.
[5] Section 9A TMA relevantly provides:
(1) An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”) –
- to the person whose return it is (the taxpayer),
- within the time allowed.
(2) The time allowed is –
- if the return was delivered on or before the filing date, up to the end of the period of 12 months after the filing date; …
(3) A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 9ZA of this Act.
In the present case, where the filing date for the relevant return (for the tax year 2003/04) was 31 January 2005, HMRC had until 31 January 2006 to give a notice of enquiry under section 9A.
[6] Section 115 TMA sets out how a notice of enquiry may be given.
…
(2) Any notice or other document to be given, sent, served or delivered under the Taxes Acts may be served by post, and, if so given, sent, served or delivered to or on any person by the Board, by any officer of the Board, or by or on behalf of any body of Commissioners, may be so served addressed to that person –
- at his usual or last known place of residence, or his place of business or employment …
In line with this subsection, there is no dispute that the notice of enquiry could have been given if it was sent to Mr Tinkler's usual or last known place of residence. HMRC purported to do so by sending the notice to Mr Tinkler at an address at Heybridge Lane, Cheshire. The FTT found that this was not his usual or last known place of residence.
[7] On 11 January 2005, Mr Tinkler signed an engagement letter with BDO, appointing the firm as his “tax agent and adviser”. In that letter Mr Tinkler was asked to sign and return a form published by HMRC, Form 64-8, which authorised HMRC (then the Inland Revenue) to communicate with BDO regarding Mr Tinkler's tax affairs. Form 64-8 explained to the taxpayer as follows:
This authority allows us [the Inland Revenue] to exchange information about you with your agent, and to deal with them on any matters within the responsibility of the Inland Revenue. Once we have received your authority we will start sending letters and forms to your agent. But sometimes we need to send them to you as well as, or instead of, your agent.
[8] On 12 January 2005, BDO sent Mr Tinkler's completed Form 64-8 to HMRC. The Form 64-8 gave Mr Tinkler's address as Station Road, Appleby, Cumbria. This was the address of a company owned by Mr Tinkler. It was a business address not a residential address.
[9] Mr Tinkler's self-assessment tax return for the year 2003/04 (“the Return”) was provided to HMRC by the due date of 31 January 2005. The Return showed Mr Tinkler's address as c/o WA Developments Int Ltd at the Station Road address. As a result of the Station Road...
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