3 things you need to know about Enquiry Closure Notices

Most practitioners are probably familiar with the basics of enquiry work. However, I thought that I’d highlight three lesser known points about enquiry closure notices.

1) Can a closure notice be rescinded?

If HMRC unintentionally issue a closure notice in the wrong figures can they rescind it? Some computer software used by HMRC makes it all too easy for a closure notice to be generated automatically.

This happened in the case of Bristol and West plc.

On 30 October 2007 the HMRC Inspector dealing with an enquiry relating Bristol and West plc arranged for closure notices to be issued. These were issued automatically from a central location showing that no amendment was required. The Inspector realised the mistake but could not prevent the automatic printing and posting of the notices. So on the same day he emailed the company to advise of the mistake and to state that his conclusions would follow. A subsequent closure notice was issued detailing the amendment to the tax return and the revised tax. The Court of Appeal held that the original closure notices were not valid as the email immediately prior to the automatic posting of the Closure notice highlighted the error and so was part of the relevant factual context for interpreting the notices.

In reaching this point above the Judges held that a closure notice once issued cannot be withdrawn by HMRC. It was also specified that a closure notice must not only state that HMRC have completed their enquiries but also give their conclusions.

For more details please see CRC v Bristol and West plc [2016] EWCA Civ 397

2) Do we have to wait for HMRC to issue Closure notices?

Legislation at TMA 1970 s 28B(5) and FA 1998 SCH 18 Para 33 enables a taxpayer to apply to Tribunal to direct that HMRC issue a closure notice. This may be done more than once.

The reason you might want to consider doing this is if the enquiry is dragging on or if HMRC have been given all the information relevant to that return but still persist in asking further questions. In these situations the onus is on HMRC to demonstrate why the enquiry should continue.

It is worth considering applying for a Closure notice to be issued if you do not think that there are any reasonable grounds for the enquiry to continue. However, you should be aware that it might lead to HMRC making amendments prematurely, possibly without full knowledge of all the facts. It should also be noted that Tribunals are unlikely to agree to the issue of a Closure notice if there is outstanding information.

3) When is a Closure notice not issued?

If an enquiry is settled by contract settlement then a closure notice is not issued. The rationale for this is that the issue of such a notice starts the time limit for making penalty determinations, so if a taxpayer does not adhere to the terms of a contract settlement and HMRC decide to proceed formally they could be time barred from issuing penalties. Strictly you may insist on a closure notice being issued but it will have the effect of bringing all the outstanding liabilities into charge and debt recovery action may well be taken before the contract settlement has been agreed.

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