Key Facts
- •Nigel Barklem invested in the Film 2K Partnership, a film partnership tax scheme.
- •Film 2K filed partnership tax returns claiming large losses, which Barklem claimed on his personal returns.
- •HMRC investigated and issued closure notices amending Film 2K's returns to remove the claimed losses.
- •Barklem, representing himself and six other investors, appealed the closure notices, which were upheld by agreement under s.54 TMA.
- •HMRC then amended Barklem's personal tax returns under s.28B(4) TMA, resulting in a substantial tax liability.
- •Barklem claimed declaratory relief arguing Film 2K was never a valid partnership, rendering the s.28B(4) notices invalid.
Legal Principles
Sideways tax relief is only available to partners in transparent partnerships carrying on a trade for profit.
Sections 380 and 381 of the Income and Corporation Taxes Act 1988 (ICTA 1988), ss. 381(4), 384(1) ICTA 1988
A notice of enquiry into a partnership return under s.12AC TMA is deemed to include a notice of enquiry under s.9A TMA into each partner's personal return.
Sections 12AC(6) and 9A TMA 1970
Section 28B TMA mandates amending partners' returns to reflect amendments made to a partnership return.
Section 28B TMA 1970
A s.54 TMA agreement upholding a decision without variation has the same effect as a judicial determination.
Section 54 TMA 1970
Challenges to s.28B(4) notices are usually made via judicial review, not Part 7 claims.
R (Amrolia) v Revenue and Customs Commissioners [2020] EWCA Civ 488; Knibbs v Revenue and Customs Commissioners [2019] EWCA Civ 1719
A finding that a partnership is not carrying on a business with a view to profit does not invalidate prior notices of enquiry or closure notices.
Revenue and Customs Commissioners v Inverclyde Property Renovation LLP [2020] UKUT 161 (TCC)
Outcomes
Claim struck out as an abuse of process.
The claim should have been brought as judicial review; the s.54 agreement upheld the closure notices, precluding a challenge; and the argument that s.28B(4) notices were invalid due to the lack of a partnership failed.