An important new judgment of the First-tier Tax Tribunal in Harold Hugh Collinson v Commissioners for Her Majesty's Revenue & Customs [2010] UKFTT 165 (TC) has decided that HMRC had no reasonable grounds for not issuing a Closure Notice in order to bring the HMRC investigation to a conclusion.

The decision

The decision concerned an application made by Mr Collinson for a direction that a Closure Notice be issued in respect of an enquiry which was opened nine years ago on 5 January 2001. Mr Collinson had invested in a tax efficient product, a relevant discounted security. Mr Collinson had made a claim to HMRC for a loss incurred of £436,082 as a result of his investment in this product.

HMRC had vigorously contested that the investigation should be brought to an end. They argued that Mr Collinson had not provided all the information which HMRC had requested. The information HMRC had requested was, however, legally privileged and the taxpayer had properly refused to provide it. HMRC also argued that they were entitled to delay issuing a Closure Notice as the schemes involved were generic tax avoidance schemes that were being looked at as a whole by the Anti-Avoidance group of HMRC.

The Tribunal did not accept HMRC's arguments. In the Tribunal's view, HMRC had had a very lengthy period of time in which to bring the investigation to a conclusion and there was no reasonable ground for not issuing a Closure Notice.

RPC comments

This decision is welcome news for taxpayers who have invested in tax efficient products and have had to wait many years before HMRC are prepared to complete their enquiry.

Where HMRC refuse to bring an enquiry to an end, taxpayers can apply to the Tax Tribunal for a direction requiring HMRC to issue a Closure Notice within a specified period. The issue of a Closure Notice brings an enquiry to an end and enables the taxpayer to achieve finality and certainty.

Whether the Tax Tribunal will direct HMRC to issue a Closure Notice will depend upon the individual circumstances of the case in question, but taxpayers in similar circumstances should consider adopting a proactive approach to compel HMRC to close their enquiries quickly and without undue delay.