Richard Monks v The Commissioners for HMRC
[2023] UKFTT 853 (TC)
Anthony Dennison v The Commissioners for HMRC
2 May 2024
[2024] UKFTT 364 (TC)
First-tier Tribunal
A former solicitor argued that the tax office's investigation into his tax return was too late and that he was due a tax refund. The judge agreed that the investigation was late, meaning the extra tax he'd been asked to pay wasn't legally correct. The judge also said that even if the investigation had been timely, the solicitor wouldn't have been eligible for the tax refund because his expenses didn't meet the rules for the refund. So the tax office lost the case because of the timing of the investigation.
Key Facts
- •Mr. Dennison, a former solicitor, claimed post-cessation trade relief and argued that HMRC's enquiry notice was issued late.
- •HMRC denied the relief and disputed the timeliness of the notice.
- •The appeal had a complex procedural history, including a previous hearing and remission from the Upper Tribunal.
- •Mr. Dennison made payments to settle a High Court claim brought by former partners related to a conflict of interest involving shares in LRSL.
- •The key dispute centered on whether the amendment to Mr. Dennison's tax return and the subsequent enquiry notice were received within the statutory time limits.
- •HMRC claimed oral notice was given via a phone call, which Mr. Dennison disputed.
Legal Principles
A notice is deemed served by post if properly addressed, prepaid, and posted, unless the contrary is proved.
Section 7, Interpretation Act 1978
Time limits for amending tax returns and issuing enquiry notices are specified in the Taxes Management Act 1970.
Sections 9ZA and 9A, Taxes Management Act 1970
Post-cessation trade relief is available for qualifying payments made within 7 years of ceasing trade, as defined in the Income Tax Act 2007.
Sections 96 and 97, Income Tax Act 2007
The burden of proof lies on the party relying on the presumption of timely service by post.
Section 7, Interpretation Act 1978 (as interpreted by the Tribunal)
In deciding whether to admit additional evidence, the Tribunal must consider the overriding objective of dealing with cases fairly and justly and balance the competing interests of the parties. The Denton test may not always be the most appropriate approach.
Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, Rule 15; Denton v White [2014] EWCA Civ 90; Quah v Goldman Sachs International [2015] EWHC 759 (Comm)
Outcomes
Appeal allowed.
HMRC's enquiry notice was issued out of time, rendering the closure notice invalid. The Tribunal found that neither the postal presumption nor evidence of a phone call satisfied the timeliness requirements for the enquiry notice.
Post-cessation trade relief claim dismissed (obiter).
Even if the enquiry notice had been timely, Mr. Dennison's payments did not qualify for relief under section 97 Income Tax Act 2007 because they did not meet the definition of 'qualifying payments' for purposes of settling claims for defective work.