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HMRC internal manual

Enquiry Manual

Working the Enquiry: Closure Applications: Consequences of Tribunal Decision

TMA 70/S28A(6)
FA 98/SCH 18/PARA 33(3)
TMA 70/SCH 1A/PARA 7(6)

The legislation does not give the tribunal the right to accept the self assessment as returned or to suggest any amendment to it. The tribunal should not express any view as to the completeness or otherwise of the return or quantify any figure to be included in the self assessment. They should simply, if they consider it appropriate, instruct the officer to complete the enquiry into the matters subject to the application by a specified date.

If you have no information or you have no grounds for considering that there is anything wrong with the return you may have to issue your final closure notice in the amount of the self assessment.

Following an application for a final closure notice the tribunal may instead direct you to issue a partial closure notice.

Your course of action should be influenced, but not determined, by the views the tribunal expressed at the hearing of the application. The comments of the tribunal may, for example, lead you to think that you would have little prospect of sustaining a higher HMRC amendment in any subsequent proceedings before them. But you should also remember that you will have the opportunity at any hearing to develop your arguments more fully, and that any decision they then take may itself be subject to appeal.

If you have some information or an indication that the self assessment may be incorrect you should:

  • ask the tribunal to allow at least 30 days (or a reasonable time) for you to consider the information in your possession
  • review any records in your possession
  • issue a partial or final closure notice in the appropriate figures if you are satisfied you can justify an amendment, and
  • where the tribunal instructs a final closure notice to be issued, follow the procedures for bringing the case to a close.

You should also make an immediate report to your Area Director (Compliance) or Grade 6 or 7 Compliance Manager who will decide whether a report should be made, see contact link.

If the tribunal directs you to issue a partial closure notice, you must

  • notify the taxpayer in writing by issuing a partial closure notice within the time specified advising that the enquiry into the matter is now formally completed
  • at the same time state your conclusions and make any relevant amendments to the return
  • base your conclusions and figures on whatever evidence you have found to support or challenge the accuracy of that matter (including any third party information). You do not have the right to require the taxpayer to produce any further information before stating your conclusions about the matter.

If the tribunal directs you to issue a final closure notice, you must

  • notify the taxpayer in writing by issuing a final closure notice within the time specified that the enquiry into the return is now formally completed
  • at the same time state your conclusions and make any amendments to the return
  • base your conclusions and figures on whatever evidence you have found to support or challenge the accuracy of the return (including any third party information). You do not have the right to require the taxpayer to produce any further information before stating your conclusions.

And where there is evidence of a liability to a penalty following the issue of either a partial or final closure notice you must

  • immediately start formal penalty proceedings
  • not delay and wait for the tax etc to be finalised before following the guidance at EM5200+.

Note: if appeals are received see ARTG2210.

Despite the fact that you may subsequently have further contact with the taxpayer or agent (for example, if the taxpayer wants to enter into a negotiated settlement or at the appeal hearing) you will not be entitled to make any further enquiries into the aspect or the return, depending on whether a partial or final closure notice has been issued.

Even in cases where we decide to appeal against the First-tier tribunal’s decision we will still have to complete the matter or enquiry within the time limit given. There is no scope for delaying completion simply because a further appeal is to be made.

However, if the Upper Tribunal overturns the First-tier tribunal’s decision to give a direction then the partial or final closure notice will fall as well and you will be able to continue with your enquiries. This should be done as quickly and effectively as possible.

A taxpayer can also appeal a point of law against a First-tier tribunal’s decision not to give a direction.

In accordance with the principle that a decision from a tribunal is taken to be correct, and to be respected, unless and until it is overturned on appeal, you are entitled to continue with your enquiries pending the taxpayer’s appeal to the Upper Tribunal. You should therefore proceed with the enquiry in the normal way.

If the taxpayer objects to the continuation of the enquiry on the basis of their pending appeal to the Upper Tribunal you should explain HMRC’s view as set out in the preceding paragraph. If the taxpayer continues to refuse to provide information then you should use the appropriate information powers, see CH20000+.