Jonathan Hitchins & Ors. v The Commissioners for HMRC
[2023] UKFTT 127 (TC)
The Commissioners of HMRC v Jonathan Hitchins & Ors
8 May 2024
[2024] UKUT 114 (TCC)
Upper Tribunal
HMRC investigated three brothers for tax avoidance for many years. A tax court said HMRC's investigation had gone on too long and was like searching for something without a proper reason, and ordered HMRC to stop. HMRC appealed but lost.
Key Facts
- •HMRC appealed an FTT decision directing them to issue closure notices under section 28A TMA for enquiries into the Respondents' (three brothers) self-assessment tax returns.
- •Enquiries related to potential income tax liability under the ToAA legislation (Chapter 2, Part 13 Income Tax Act 2007), specifically section 731 ITA.
- •The enquiries focused on a £40 million dividend distribution from RHG, a company with complex offshore structures.
- •The FTT found HMRC's continued enquiries amounted to a 'fishing expedition' due to lack of evidence linking the Respondents to the funds, despite the Respondents' refusal to provide certain information.
- •The enquiries spanned several years, with some initiated as early as 2014.
Legal Principles
In closure notice applications, the FTT must exercise a value judgment, balancing HMRC's investigative powers with the taxpayer's protection against undue delay. Reasonableness, 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), 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
The FTT should not determine the correctness of HMRC's interpretation of the law when considering a closure notice application.
Eastern Power Networks plc v HMRC [2021] 1 WLR 4742
A closure notice may be appropriate even if not all lines of enquiry are exhausted, provided the officer can make an informed judgment.
Eclipse Film Partners at [19]
Closure notices should state the amount of tax due (or an estimate).
Archer v HMRC [2018] STC 38
Outcomes
HMRC's appeal was dismissed.
The Upper Tribunal (UT) found the FTT's decision was within a reasonable range of conclusions and did not disclose any error of law. The UT held the FTT correctly applied the relevant legal principles, considered the evidence, and reasonably concluded that HMRC's continued enquiries were a 'fishing expedition' after an unduly prolonged period.