Done fishing? HMRC forced to issue closure notice

by ETC Tax Experts | Apr 13, 2023 | HMRC compliance enquires, Tax Investigations, Andy Wood

HMRC closure notice – Introduction

In the recent case of J Hitchins and others v HMRC the taxpayers managed to reel in a big win.

They successfully applied to First-tier Tribunal (FTT) for directions for HMRC to issue closure notices. This was following HMRC’s ‘fishing expedition’ into their tax affairs.

The facts

The case centred around the Robert Hitchins Group Ltd (RHG), a business founded by the three brothers’ father in 1960.

By the time of HMRC’s current enquiries, the business was owned by a discretionary settlement in Guernsey via companies incorporated and resident in Bermuda.

In 2003, RHG paid a whopper of a £40m dividend, and in 2014, HMRC opened enquiries into the brothers’ returns. These enquiries focused mainly on whether the dividend could give rise to a charge under the transfers of assets abroad (TAA) provisions.

To cut the long story (which was part of the problem) short, the taxpayers applied for a direction requiring HMRC to issue closure notices. This was in respect of a total of 13 open enquiries into their SATR.

HMRC closure notice – Gutting the case

The applications were granted. It was noted that HMRC’s enquiries had been run to a point where it was reasonable for HMRC to make an “informed judgment” of the matter.

The FTT went further to suggest that HMRC’s questions did not have a reasonable basis. They also commented that they were on a “fishing expedition”.

Ouch!

The tribunal also disagreed with HMRC that if it was to issue closure notices now, they would be in vague and unhelpful terms.

According to the FTT, HMRC had sufficient information to be able to close its enquiries relating to the potential for a ToAA charge in respect of the distribution. FTT commented that the enquiries had “gone on for far too long,”. Whilst directing HMRC to issue closure notices within six weeks of the decision.

Catch of the day

This decision is good news for taxpayers and their advisers. Especially if you have been annoyed by the length of time enquiries can take before they are concluded.

With no time limit by which HMRC is required to conclude an enquiry, enquiries often become unfocused and protracted. But this is a reminder that taxpayers can apply to the FTT for a direction. Thus meaning HMRC to close its enquiry within a specified time period.

If you have any questions about a HMRC closure notice then please do get in touch.