In Jörg Märtin v HMRC [2017] UKFTT 488 (TC), the First-tier Tribunal (FTT) directed HMRC to close its inquiry as it had taken no action in three years.


Jörg Märtin (the taxpayer) claimed loss relief arising out of the activities of Great Marlborough LLP (the partnership). HMRC alleged, that in doing so, the taxpayer had participated in a tax avoidance scheme, similar to that considered by the FTT and the Upper Tribunal in the various Icebreaker and Acornwood cases.1

In February 2014, HMRC purported to open an inquiry into the taxpayer’s 2012/13 tax return. HMRC’s letter stated the inquiry was opened on a protective basis and while it might later require information from the taxpayer none was required at that time. Later, in July 2016, HMRC opened an inquiry into the taxpayer’s 2014/15 tax return on the same basis.

Apart from some letters passing between the parties, no progress was made with either inquiry. Accordingly, on 15 November 2016, the taxpayer made an application to the FTT under section 28A, TMA 1970, for a direction that HMRC close both inquiries.

In response to that application, on 16 January 2017, HMRC opposed the closure of the 2012/13 inquiry and presented the taxpayer with a long list of information and documents which it required from him. As at the date of the hearing of the application, the taxpayer had not provided the requested information and documents.

On 1 March 2017, HMRC wrote to the taxpayer notifying him that it had closed the inquiry into the 2014/15 tax return. It made no amendment to his 2014/15 return. However, the taxpayer did not accept that HMRC had actually closed the 2014/15 inquiry, because HMRC had indicated it might make later amendments following its inquiry into the partnership’s 2014/15 tax return.

The taxpayer applied to the FTT for a direction under section 28A, TMA 1970, that HMRC close its inquiries.

The FTT had to determine the following two issues:

• whether the FTT had jurisdiction with respect to the 2014/15 inquiry, and

• whether HMRC had reasonable grounds to keep the 2012/13 inquiry open.

FTT’s decision

The taxpayer’s application was granted.

With regard to the first issue, the FTT held that HMRC’s letter of 1 March 2017 fulfilled the necessary requirements contained in section 28A(1) and (2)(a) TMA 1970. Whilst the letter indicated there might be later amendments, it clearly stated these would be as a result of the inquiry in respect of the partnership. Section 28B(4), TMA 1970, entitles HMRC to amend a partner’s return following an inquiry into a partnership tax return. The 2014/15 inquiry was therefore closed and the FTT had no jurisdiction to prevent an amendment being made.

With regard to the second issue and the 2012/13 inquiry, the FTT was of the view that the information and documentation requested by HMRC was relevant and not an excessive request. The FTT commented that the taxpayer’s failure to provide the information and documentation would ordinarily be sufficient “reasonable grounds” to refuse to issue a direction requiring HMRC to issue a closure notice, even in circumstances where the tax at stake is quantified, as it was here. However, the taxpayer had argued that whilst the information was relevant it was too late for HMRC to request it as nearly three years had elapsed since the inquiry was opened. The critical issue was, therefore, whether HMRC’s information request was too late.

HMRC attempted to justify, in its submissions, why its officers had failed to request any information for over three years. However, there was no written or oral evidence before the FTT from any HMRC officer. The FTT concluded that HMRC’s three year delay in making the information request was not justified and the closure application was granted.


The legislation does not provide a time limit by which HMRC is required to conclude an inquiry and it is not uncommon for inquiries to become protracted. A long running inquiry can be commercially disruptive, time consuming and expensive, particularly if HMRC issues a number of information requests during the course of the inquiry. There will, therefore, be occasions when a taxpayer decides that an inquiry has gone on for long enough and wishes to bring it to an end. Increasingly, taxpayers are adopting a more proactive approach and are seeking an appropriate direction from the FTT requiring HMRC to issue a closure notice.

The legislation provides that the FTT “shall” direct that HMRC issues a closure notice within a specified period unless satisfied that there are “reasonable grounds” for not issuing a closure notice. There is therefore a presumption that an application should be granted unless HMRC is able to demonstrate that there are reasonable grounds to refuse it.

Rather surprisingly in the present case, no HMRC officers gave evidence, despite some of them being present at the hearing. In the absence of evidence, the FTT concluded that there were no reasonable grounds for refusing the taxpayer’s application.

HMRC clearly considered this an important case as it was represented by leading counsel and three junior counsel. The taxpayer represented himself.

Given the importance HMRC appears to attach to this case, it would not be surprising if it sought to appeal the decision to the Upper Tribunal.

A copy of the decision can be found here