Judgment summary
Mr Anderson appealed against a discovery assessment for 2008-09 (£15,616.60), a discovery assessment for 2009-10 (£14,905.80, as varied on review), and a closure notice for 2010-11 (£21,380.40). These arose from his participation in arrangements marketed by Aston Management Ltd (AML), involving payments via an offshore employee benefit trust described as loans (paras 1-2).
The Tribunal found that HMRC validly discovered, under section 29 TMA 1970, that the full amount of the Loans ought to have been assessed to income tax for 2008-09 and 2009-10, and that the Assessments were made within the four-year time limit under section 34 TMA 1970 (paras 40-51). The Tribunal also found that HMRC had validly opened an enquiry into Mr Anderson's 2010-11 return on 23 November 2012, within the enquiry window under section 9A(2)(b), and that the Closure Notice issued on 20 March 2024 was validly issued under sections 28A(1B) and 28A(2) TMA 1970 (paras 52-57).
The Tribunal rejected Mr Anderson's arguments concerning mathematical inconsistencies, the 2019 Morse Review, HMRC's complaint resolution letter, and alleged abuse of process (paras 58-94).
The Tribunal also considered whether HMRC were estopped by convention, per Tinkler v HMRC [2021] UKSC 39, from relying on the Closure Notice, given an HMRC caseworker's erroneous email of 4 April 2023 stating that no enquiry had been opened for 2010-11. The Tribunal found the doctrine was not engaged because Mr Anderson had not suffered sufficient detriment and there had been no subsequent mutual dealing between the parties in reliance on the erroneous statement (paras 95-126).
The appeal was dismissed and the Assessments and Closure Notice were confirmed (para 127).
Background
Mr Anderson took part in arrangements marketed by Aston Management Ltd (AML), an Isle of Man company, under which he entered an employment contract with AML, received a low PAYE-taxed wage, and the balance of his earnings was paid to an offshore employee benefit trust (the AML EBT), which made interest-free payments to him described as loans, not expected to be repaid (paras 2, 10).
His reported PAYE earnings from AML were £7,731 (2008-09), £11,593 (2009-10) and £7,987 (2010-11). Forms P11D showed Loans of £56,199 (2008-09), £55,398 (2009-10) and £71,395 (2010-11) (paras 11-12).
Mr Anderson did not file self-assessment returns for 2008-09 or 2009-10. He filed a return for 2010-11 on 24 May 2012, and HMRC opened an enquiry into that return on 23 November 2012 (paras 13-17).
HMRC issued a discovery assessment for 2008-09 on 4 March 2013 and for 2009-10 on 16 December 2013. Both were appealed shortly after issue, and there followed a delay of some eight or nine years, which HMRC explained as awaiting the outcome of RFC 2012 plc v Advocate General for Scotland [2017] UKSC 45 (Rangers) and Hoey v HMRC [2022] EWCA Civ 656 (paras 19-21).
On 4 April 2023, an HMRC caseworker incorrectly told Mr Anderson by email that no assessment or enquiry existed for 2010/11. HMRC issued the Closure Notice for 2010-11 on 20 March 2024. Following a statutory review, the 2009-10 assessment was reduced by £7,253.40 to £14,905.80 (paras 22-28).
Core dispute
Mr Anderson accepted that the Loans were taxable as employment income but challenged the Assessments and Closure Notice on procedural and quantum grounds. He argued that HMRC's claims were mathematically incoherent and procedurally flawed, that HMRC failed to comply with statutory limitations including consequences of the 2019 Morse Review, that there were inconsistencies in HMRC's calculations, that HMRC's complaint resolution required re-evaluation of all tax years, and that HMRC's conduct constituted an abuse of process warranting strike-out (para 39).
A further issue arose as to whether HMRC were estopped by convention, following Tinkler v HMRC [2021] UKSC 39, from relying on the Closure Notice, because an HMRC caseworker had wrongly told Mr Anderson on 4 April 2023 that no enquiry existed for 2010-11 (paras 95-98).
The key questions for the Tribunal were whether the Assessments and Closure Notice were validly issued, whether Mr Anderson was overcharged, and whether estoppel by convention was engaged.
Court findings
The Tribunal found that HMRC made a valid 'discovery' for the purposes of section 29(1) TMA 1970 for both 2008-09 and 2009-10, applying Charlton v HMRC [2012] UKUT 770 (TCC), HMRC v Tooth [2021] UKSC 17, and Hoey v HMRC [2021] STC 792, and that the Assessments were made within the four-year time limit under section 34 TMA 1970 (paras 41-51).
It found that HMRC validly opened an enquiry into Mr Anderson's 2010-11 return on 23 November 2012, within time under section 9A(2)(b), and that the Closure Notice issued on 20 March 2024 satisfied section 28A(2) TMA 1970, there being no statutory time limit for closing an enquiry absent an application under section 28A(4) (paras 52-57).
The Tribunal accepted HMRC's explanation, from Officer Dixon, that the original 2009-10 assessment had erroneously applied a flat 40% rate to the Loans without regard to Mr Anderson's actual circumstances, an error corrected on review (paras 62-64). It rejected submissions that this, or other alleged inconsistencies, undermined the validity or reliability of HMRC's figures (paras 58-76).
It held that the 2019 Morse Review did not invalidate the Assessments or Closure Notice, since these were made under HMRC's normal assessment and enquiry powers rather than the loan charge mechanism (paras 77-82). It found the Tribunal had no jurisdiction to enforce HMRC's complaint resolution promises (paras 83-86), and rejected the abuse of process submission, citing HMRC v Hok Ltd [2012] UKUT 363 (TCC) and Foulser v HMRC [2013] UKUT 38 (TCC) (paras 87-94).
On estoppel by convention, applying Tinkler v HMRC [2021] UKSC 39 and the principles in HMRC v Benchdollar Ltd [2009] EWHC 1310 (Ch), the Tribunal found that Mr Anderson had not suffered sufficient detriment and there had been no subsequent mutual dealing in reliance on the caseworker's erroneous statement, so the fourth and fifth Benchdollar principles were not satisfied and the doctrine was not engaged (paras 104-121). It also found Mr Anderson had been on notice of the ongoing enquiry through HMRC letters in 2013, 2016 and 2022 (paras 116-117).
Outcome
The Tribunal confirmed the Assessments for 2008-09 (£15,616.60) and 2009-10 (£14,905.80, as varied), and the Closure Notice for 2010-11 (£21,380.40), and dismissed the appeal (para 127).
The decision recorded the parties' right to apply for permission to appeal within 56 days pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (para 128).
Major issues / areas of contention
- Whether the discovery assessments for 2008-09 and 2009-10 were validly made under section 29 TMA 1970
- Whether the closure notice for 2010-11 was validly issued under sections 28A(1B) and 28A(2) TMA 1970
- Whether Mr Anderson was overcharged by the Assessments or the Closure Notice
- Whether the 2019 Morse Review invalidated assessment of loans made before 9 December 2010
- Whether HMRC's conduct amounted to an abuse of process warranting strike-out under Rule 8(3)(c) of the Tribunal Rules
- Whether the doctrine of estoppel by convention, per Tinkler v HMRC, prevented HMRC from relying on the Closure Notice following an erroneous caseworker email stating no enquiry existed