The Commissioners of HMRC v Jonathan Hitchins & Ors
[2024] UKUT 114 (TCC)
Jonathan Hitchins & Ors. v The Commissioners for HMRC
16 February 2023
[2023] UKFTT 127 (TC)
First-tier Tribunal
After eight years, the taxman was told to stop investigating the Hitchins brothers' taxes. The judge said the taxman already had enough information and was asking pointless questions.
Key Facts
- •Applicants (Jonathan, Jeremy, and Stephen Hitchins) applied under s28A Taxes Management Act 1970 (TMA) for closure notices on HMRC enquiries into their tax returns.
- •Enquiries, opened between 2014 and 2021, focused on offshore transactions and potential liabilities under Chapter 2, Part 13, Income Tax Act 2007 (ITA 2007) relating to transfers of assets abroad (ToAA).
- •HMRC's enquiries centered on a £40 million dividend from Robert Hitchins Group Ltd (RHG) and transactions involving the Foxseal and St Ledger companies, and Spanish properties.
- •HMRC's interpretation of the ToAA legislation and the factual sequence of events were disputed.
- •The Applicants argued that HMRC's continued queries were unreasonable and amounted to a fishing expedition.
- •The Tribunal considered previous HMRC enquiries, various information notices, and s748 ITA 2007 notices issued by HMRC.
- •A judicial review was applied for and refused by the High Court.
Legal Principles
Closure notice applications aim to balance HMRC's investigative powers with protection against unduly protracted enquiries.
Beneficial House (Birmingham) Regeneration LLP & Stanley Dock (All Suite) Regeneration LLP v HMRC [2017] UKFTT 801 (TC), BCM Cayman LP and others v HMRC [2017] UKFTT 226 (TC), Frosh and others v HMRC [2017] UKUT 320 (TCC), HMRC v Vodafone 2 [2006] STC 483, Eclipse Film Partners No 35 LLP v HMRC [2009] STC (SCD) 293, Jade Palace Limited v HMRC [2006] STC (SCD) 419, Steven Price v HMRC [2011] UKFTT 264 (TC), Andreas Michael v HMRC [2015] UKFTT 577 (TC), HMRC v Tower MCashback LLP [2011] UKSC 19
HMRC must show reasonable grounds for not issuing a closure notice; proportionality and the taxpayer's burden are key considerations.
Beneficial House (Birmingham) Regeneration LLP & Stanley Dock (All Suite) Regeneration LLP v HMRC [2017] UKFTT 801 (TC), Frosh and others v HMRC [2017] UKUT 320 (TCC)
A closure notice may be appropriate even if not all enquiries are fully pursued, provided an informed judgment is possible.
Eclipse Film Partners at [19]
Closure notices should ideally state the amount of tax due, even if it's an estimate.
Archer v HMRC [2018] STC 38
Outcomes
The Tribunal directed HMRC to issue closure notices within six weeks of the decision's release date.
HMRC failed to demonstrate reasonable grounds for refusing closure; outstanding questions were deemed unreasonable and amounted to a fishing expedition. The Tribunal found that HMRC had sufficient information to make an informed judgment and issue closure notices.