Redmount Trust Company Limited v The Commissioners for HMRC
[2023] UKUT 68 (TCC)
Pulak Rakshit & Ors v The Commissioners for HMRC
15 December 2023
[2023] UKFTT 1044 (TC)
First-tier Tribunal
People tried a clever way to avoid paying taxes on their house. The tax people said they didn't follow the rules and sent them a bill. The court decided the tax people followed the rules, and even if they made a small mistake, the people trying to avoid taxes should have known what the tax people meant. Therefore, the tax bill is valid.
Key Facts
- •Appeals against closure notices and discovery assessments for SDLT arising from residential property transactions.
- •Appellants used a marketed scheme to eliminate SDLT liability, replicating transactions in the *Project Blue* case.
- •Scheme involved a sale and leaseback arrangement with a Guernsey protected cell company (Vale).
- •Appellants accept the scheme was ineffective but challenge the validity of HMRC's actions.
- •HMRC issued enquiry notices in June 2011, followed by further correspondence and ultimately closure notices and discovery assessments in 2017.
- •Appellants argued HMRC did not open valid enquiries and discovery assessments were ineffective and/or out of time.
- •Vale withdrew its appeals, leaving the appellants' appeals to be considered.
Legal Principles
Validity of enquiry notices depends on whether a reasonable taxpayer would understand HMRC's intention to enquire into the relevant return(s).
[2023] UKFTT 01044 (TC), *HMRC v Mabbutt* [2017] UKUT 289 (TCC)
Estoppel by convention may prevent a taxpayer from challenging the validity of an enquiry if there was a shared assumption and reliance, causing detriment.
[2023] UKFTT 01044 (TC), *Tinkler v HMRC* [2021] UKSC 39
Discovery assessments require HMRC to show an officer concluded there was a possible insufficiency; this is a subjective test.
[2023] UKFTT 01044 (TC), *HMRC v Tooth* [2021] UKSC 17
Time limits for discovery assessments are generally four years, extending to six years for carelessness and twenty years in specific circumstances, including failure to file a return.
[2023] UKFTT 01044 (TC)
Section 75A FA 2003 applies to impose SDLT on a notional transaction where multiple transactions result in less tax than a direct transaction.
[2023] UKFTT 01044 (TC), *Project Blue Limited v HMRC* [2018] UKSC 30
Without prejudice privilege protects communications genuinely aimed at settlement; it does not apply to mere assertions of a party's case.
[2023] UKFTT 01044 (TC), *Galliford Try Construction Limited v Mott Macdonald Ltd* [2008] EWHC 603 TCC
Outcomes
Appeals dismissed.
HMRC's enquiry notices were valid; even if not perfectly clear, a reasonable taxpayer would have understood HMRC's intention to enquire into both returns. Estoppel did not apply. Discovery assessments were valid as a discovery was made and the 20-year time limit applied due to the appellants' failure to file a return for the notional transaction under section 75A.