Tribunal Upholds Validity of HMRC Closure Notices and Discovery Assessments in SDLT Avoidance Scheme Case

Citation: [2023] UKFTT 1044 (TC)
Judgment on


The First-Tier Tribunal Tax Chamber case of Pulak Rakshit & Ors v The Commissioners for HMRC addresses a series of appeals against closure notices and discovery assessments concerning liabilities to Stamp Duty Land Tax (SDLT) arising from residential property transactions. These transactions were part of a marketed scheme aimed at eliminating potential liabilities to SDLT. This article deciphers the key topics discussed in the case, elucidating on the legal principles applied, and connects them with the relevant portions of the case summary provided.

Key Facts

The appellants engaged in a scheme attempting to avoid SDLT liabilities on acquisitions of residential properties by exploiting the provisions of the Finance Act 2003, particularly around sections 45(3) and 71A, with the intention that no SDLT would be payable. Upon realizing the ineffectiveness of the scheme following the Supreme Court’s decision in Project Blue Ltd v HMRC, the appellants contested HMRC’s conclusion notices and discovery assessments. The core of the appellants’ argument was the alleged lack of valid enquiry notices by HMRC into their land transaction returns, thus invalidating the closure notices, and the incorrect application of discovery assessments.

Several legal principles are central to this case:

  1. Validity of Enquiry Notices: It was contended whether HMRC’s letters constituted a valid notice of intention to enquire under paragraph 12 Schedule 10 FA 2003. The established objective test from Mabbutt was used to determine whether a reasonable taxpayer would understand HMRC’s intention to enquire into the returns given the context.

  2. Estoppel by Convention: HMRC argued that the appellants were estopped from denying the validity of the enquiry. The Supreme Court’s decision in Tinkler clarified the principles applicable for establishing estoppel by convention, specifically highlighting the necessity of a “crossing of the line” and assumption of responsibility by the party to be estopped.

  3. Discovery Assessments: The appellants challenged the validity of the discovery assessments, invoking the principle that HMRC carries the burden of proof for a discovery from Burgess. Additionally, the time limits for assessments as put forth in paragraph 31 Schedule 10 FA 2003 were relevant, alongside the interpretation of “notifiable transaction” under sections 76 and 77 of FA 2003, as discussed comprehensively in Project Blue.

  4. Jurisdiction of Tribunal: The concept that parties cannot confer jurisdiction on a tribunal where none exists was discussed, drawing upon legal precedent such as Essex County Council v Essex Incorporated Congregational Church Union.


The Tribunal concluded that the notices given by HMRC were sufficient to inform the appellants of the intention to enquire into both returns, thus rendering the closure notices valid. The argument for estoppel by convention was dismissed on the basis that the appellants never crossed the line to affirm a common assumption nor assumed responsibility for such an assumption. Regarding the discovery assessments, the Tribunal found that HMRC had made a discovery and thus issued valid assessments within the extended 20-year time limit since the appellants had not filed returns for the notional transactions as required under section 76(1) and 77(1)(d) of the FA 2003.


In Pulak Rakshit & Ors v The Commissioners for HMRC, the Tribunal applied established legal principles concerning enquiry notices, estoppel by convention, discovery assessments, and the jurisdiction of tribunals. The decisions drawn from relevant case laws emphasise the Tribunal’s reliance on prior determinations to arrive at its judgment, ultimately dismissing the appeals and upholding HMRC’s closure notices and discoveries assessments as valid within the statutory provisions of the Finance Act 2003. The key takeaway for legal professionals is the critical examination of the taxpayer’s actual understanding and conduct regarding HMRC’s intention to enquire and the stringent assessment of what constitutes a valid discovery under tax law.

Related Summaries