Appeals, disputes and investigations

Enquiry notice valid

The First-tier Tribunal (FTT) found that an enquiry notice into a gilt strip scheme was validly issued, despite the fact that the actual document was missing. The notices had been issued to a large group of taxpayers.

The taxpayer invested in a tax avoidance scheme based on gilt strips. In due course, HMRC disallowed the vast majority of the loss and informed him that he must repay almost £370,000 in a closure notice. The taxpayer appealed on the basis that the original enquiry notice was not valid.

The scheme related to the 2003/04 tax year. HMRC stated that they had issued an enquiry notice on 28 April 2005, but the taxpayer claimed that this was never issued, served, nor received. Due to his accountants representing many participants in the scheme, negotiations were carried on on behalf of the group as a whole. In June 2005, HMRC wrote to the accountants offering a sample agreement and the accountants sent back a list of individuals who wanted to accept this, including this taxpayer, in July. If the original notice was invalid, HMRC argued that this led to an estoppel by convention. The taxpayer had acted as though under enquiry, so could not back down from that position now.

The FTT found on the balance of probabilities that the original notice of enquiry was validly issued. HMRC did not have a copy of it nor a record of its position, but had other notes referring to it and notes on his record indicating that actions were taken at the time it should have been issued. The HMRC spreadsheet of affected taxpayers had a column for the date each was issued with a notice of enquiry, and there was an entry in his. Therefore the estoppel point did not arise.

Cattrell v HMRC [2024] UKFTT 67 (TC)

From Tax Update February 2024, published by Evelyn Partners LLP