Judgment summary
This is an appeal against a case management decision of the First-tier Tribunal (Tax Chamber) released on 18 June 2024, in which the FTT gave HMRC permission to amend its Statement of Case (1).
The amendment asked the FTT, when dealing with quantum, to vary Mr Gwyn-Jones' self-assessment to reflect an income tax liability on a dividend that was not mentioned or amended for in the original closure notice (1). Mr Gwyn-Jones argued the dividend was outside the scope of the appeal and that the FTT lacked jurisdiction to permit the amendment (2).
The Upper Tribunal (Judge Jeanette Zaman and Judge Mark Baldwin) dismissed the appeal, holding that the foreign dividend income fell within the 'matter in question' before the FTT (3, 75).
Background
HMRC opened an enquiry in December 2007 into Mr Gwyn-Jones' residence status for the tax year 2005/6 (5). HMRC concluded he was UK resident and issued a closure notice on 30 November 2016, estimating tax due and increasing his liability from £1,097.01 to £47,029,339.82 (5).
Mr Gwyn-Jones gave notice of appeal to the FTT on 27 October 2017, describing the dispute as 'Capital Gains Tax' and seeking to overturn the residence finding (6). On 20 May 2021 his advisers disclosed financial statements for Gort Holdings Ltd (GHL), a Guernsey company, referring to a dividend of £16,000,000 paid in the period ended 31 May 2006, which HMRC say was paid into Mr Gwyn-Jones' Guernsey bank account on 22 December 2005 (7). Mr Gwyn-Jones reserved the right to argue that no dividend was paid or that any dividend was not chargeable to UK tax (7).
On 19 January 2023 HMRC applied to amend their Statement of Case to seek to vary the self-assessment to include income tax on the £16,000,000 dividend (referred to as the 'Foreign Dividend'), alongside capital gains tax, on the basis that this gave effect to the closure notice's conclusion that Mr Gwyn-Jones was UK resident and chargeable on his worldwide income and gains (8).
The FTT granted permission for the amendment, relying on Daarasp LLP v HMRC [2021] UKUT 87 (TCC) and rejecting arguments that the dividend fell outside the scope of the appeal because it was not referred to in the closure notice or the grounds of appeal (9-15). The FTT accepted evidence from Officer Tracey Bedlington that the closure notice was intended to capture all worldwide income and gains, and that her request to Mr Gwyn-Jones' adviser to identify income and gains was made on that basis (13, 14).
Core dispute
The issue was whether the 'matter to which the appeal relates', within the meaning of section 49I Taxes Management Act 1970, extended to income tax on the Foreign Dividend, given that the closure notice did not amend the self-assessment to reflect any dividend income and made no reference to dividend income at all (1, 2, 27).
Mr Gwyn-Jones submitted that the amendments made by HMRC in a closure notice define the subject matter of an appeal, that the FTT cannot use section 50(7) to bring into charge an item of income never mentioned in the closure notice, and that permitting the amendment would allow HMRC improperly to circumvent the statutory framework for enquiries, closure notices and discovery assessments, including their applicable time limits (29, 31, 34).
HMRC submitted that they were not seeking to amend the closure notice itself, but were asking the FTT to exercise its own power under section 50(7), and that, properly construed in its factual context, the closure notice's conclusion was that Mr Gwyn-Jones was UK resident and chargeable to tax on all his worldwide income and gains, which necessarily included the Foreign Dividend (39, 41, 45).
Court findings
The Upper Tribunal held that section 31(1)(b) TMA 1970 permits an appeal against 'any conclusion stated or amendment made' by a closure notice, and that the FTT's unchallenged construction of the closure notice was that its conclusion was that Mr Gwyn-Jones was UK resident and chargeable to tax on all his worldwide income and gains (60, 65). Given the indivisible nature of that conclusion, an appeal against the residence conclusion necessarily brought into question the income and gains chargeable if he were UK resident (65).
The Tribunal reviewed Investec Asset Finance plc v HMRC [2020] EWCA Civ 579 and Orsted West of Duddon Sands (UK) Ltd v HMRC [2025] EWCA Civ 279, noting that the authorities do not support a narrow construction of 'the matter to which an appeal relates' or 'matter in question', that the subject matter of an appeal may be broader than the particular conclusion and amendments in the closure notice, and that the FTT's power under section 50(7) is not constrained by which specific entries HMRC amended in the closure notice (58, 66-67).
The Tribunal rejected the submission that a valid closure notice is only valid for the specific sources of income identified, finding no support for that proposition in R (Archer) v HMRC [2017] EWCA Civ 1962, and holding that such a submission was contrary to Orsted (68). It also rejected the argument that allowing the amendment circumvented the statutory framework for enquiries, closure notices and discovery assessments, holding that where a taxpayer appeals, the statutory scheme itself permits the FTT, within the limits of the matter in question, to increase the taxpayer's liability under section 50(7) (72-74).
Outcome
The Upper Tribunal concluded that the FTT did not make an error of law in finding that the Foreign Dividend was within the scope of the appeal, and that the FTT accordingly had jurisdiction to grant HMRC permission to amend their Statement of Case (75).
The appeal was dismissed (76).
Major issues / areas of contention
- Whether the scope of an appeal under section 49I TMA 1970 ('the matter to which an appeal relates') is limited to the specific amendments HMRC made in a closure notice.
- Whether the FTT had jurisdiction to permit HMRC to amend its Statement of Case to seek income tax on a dividend not referred to or amended for in the closure notice.
- Whether the closure notice's conclusion on UK residence, properly construed in context, extended to all worldwide income and gains including the Foreign Dividend.
- Whether permitting HMRC's amendment amounted to an impermissible circumvention of the statutory framework governing enquiries, closure notices and discovery assessments.
- The relationship between the FTT's power under section 50(7) TMA 1970 to increase an assessment and the amendments actually made by HMRC in a closure notice.
- The application and consistency of the Court of Appeal decisions in Investec Asset Finance plc v HMRC and Orsted West of Duddon Sands (UK) Ltd v HMRC to an income tax closure notice appeal under section 31(1)(b) TMA 1970.