Taxpayer's appeal succeeds as HMRC failed to open enquiry in time

In Richard Monks v HMRC [2023] UKFTT 853 (TC), the First-tier Tribunal (FTT) held that HMRC's enquiry into the taxpayer's tax returns was out of time. Although HMRC had posted a letter opening an enquiry into the taxpayer's returns within the permitted time limit but the taxpayer did not receive that letter in time.

Background

Richard Monks filed his tax return for 2019/20 on 29 January 2021. On 27 January 2022, HMRC posted a letter to Mr Monks informing him that it was opening an enquiry into that return under section 9A, Taxes Management Act 1970 (the enquiry notice). HMRC enclosed with its letter a schedule requesting certain information and documents. Due to non-compliance with this request, on 3 March 2022, HMRC issued an information notice to Mr Monks pursuant to paragraph 1, Schedule 36, Finance Act 2008 (the information notice).

Mr Monks disputed the validity of the enquiry notice, claiming that it had not been received until 1 February 2022, and was therefore out of time. He also questioned the necessity of the information requested by HMRC. 

Mr Monks appealed both the enquiry notice and the information notice to the FTT, citing HMRC's failure to adhere to its own guidance to post enquiry notices at least 7 days before the expiry of the deadline and to telephone a taxpayer prior to issuing an enquiry letter shortly before the expiration of the time limit for doing so.

FTT decision

The appeal was allowed in part. The FFT held that the enquiry was out of time but the information notice was valid.

Before the FTT, HMRC provided evidence of postage of the enquiry notice and argued that this confirmed the validity of the enquiry. Regarding the necessity of the requested documents and information, HMRC said that it suspected Mr Monks had not declared all of his income.

The FTT found that the enquiry notice was not delivered in time and there was therefore no valid enquiry. Mr Monks had produced his telephone at the appeal hearing which showed that he had taken six photographs of the enquiry notice at 16:40 on 1 February 2022. The FTT accepted Mr Monks' evidence that he telephoned his professional advisor as soon as he received the enquiry notice and that his mail was opened every day and any mail relating to his financial affairs was immediately sent to his adviser.

With regard to the information notice, the FTT concluded that HMRC had reason to suspect that Mr Monks' self-assessment was insufficient and therefore HMRC was entitled to request the information it had done in the information notice so that it could check Mr Monks' tax position and make an informed decision about whether and what, to assess. The FTT concluded that HMRC's requests were proportionate and the information was reasonably required.

Comment 

This case highlights the importance of carefully checking whether notices received from HMRC are within the relevant statutory time limits. It also demonstrates the importance of contemporaneous evidence as to when the enquiry notice was actually received by Mr Monks which enabled him to rebut the presumption in section 7, Interpretation Act 1978, that the enquiry notice was deemed to have been delivered to Mr Monks when it would have been delivered ‘in the ordinary course of post’.

The decision can be viewed here.