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Tribunal orders HMRC to close its enquiry

04 January 2023. Published by Liam McKay, Senior Associate

In Newpier Charity Ltd v HMRC [2022] UKFTT 373 (TC), the First-tier Tribunal (FTT) granted the taxpayer's application for a direction requiring HMRC to issue a closure notice on the basis that there were no reasonable grounds to maintain HMRC's enquiry into the taxpayer's claim to charity tax relief.


Newpier Charity Ltd (NCL), is a registered charity. In 1988, it bought shares in Berisford International plc (the Berisford shares). The purchase was funded by a loan from Citibank NA (Citi) of £11,630,967. 

In July 1990, Citi called in the loan which, together with interest, was then in the sum of £11,731,742.16. The Berisford shares were sold for £6,142,500. The shortfall of £5,359,254 was settled by third-party guarantors. 

The guarantors were initially Joyana Holdings Ltd (JHL). However, in April 2012, NCL's obligations to JHL were assigned and in April 2015 there was a further assignment of NCL's obligations to Ambertown Ltd (Ambertown), at which time the balance said to be due was £6,894,064.02. 

In June 2018, NCL filed its corporation tax return for the accounting period ended 30 June 2017. The accounts, on which the return was based, included payments of £821,000 reducing NCL's creditors balance to Ambertown. The payments were viewed by NCL’s trustees as payments made wholly for the purposes of the charity and as such, tax relief was available in respect of them.

In June 2019, HMRC opened an enquiry into the return and requested information as to the nature of certain expenditure and the payments made to Ambertown. HMRC's position was that it was necessary for it to satisfy itself as to the identity of the recipients and the nature and purpose of the payments made. In addition, the information and documentation requested was needed in order to establish whether the income had been applied for charitable purposes.

NCL claimed that the information and documents requested were unavailable and, in any event, were irrelevant to HMRC's enquiry. It argued that it was unreasonable for HMRC to expect information and documentation relating to transactions that had occurred more than 20 years earlier to be available and that, as HMRC had no power to assess for such periods, the documents and information could not be reasonably required. 

Accordingly, in February 2022, NCL applied to the FTT for a direction under section 28A(4), Taxes Management Act 1970, requiring HMRC to issue a closure notice in respect of its enquiry.  

FTT decision

The application was granted. 

The FTT accepted that HMRC had concerns as to the legitimacy of NCL's claim to charity tax relief, and that a number of those concerns were reasonable and might justify the continuation of the enquiry. 
However, the FTT noted NCL's contention that the further information and documentation requested was not available due to the effluxion of time or because it never existed in the first place. The FTT observed that NCL's position had been definitively stated in two witness statements containing statements of truth.

In those circumstances, and applying the balancing exercise referred to by the Upper Tribunal in Frosh & Another v HMRC [2017] UKUT 320 (TCC), the FTT was satisfied that there were no reasonable grounds to maintain the enquiry and that HMRC must instead decide matters on the information and documentation it held. The FTT observed that HMRC was capable of making an informed judgment as to the quality of the information provided to it and whether it justified the claim to charity tax relief on the payments made. The FTT also commented that if HMRC considered, in the absence of the further information and documentation, that its concerns justified a conclusion that the payments were not eligible for charity tax relief, it could close the enquiry on that basis. In substance, the position was no different to any other closure notice where HMRC was not satisfied, on the evidence available to it, as to a taxpayer's entitlement to a relief or deduction.

Accordingly, the FTT directed that HMRC issue a closure notice within four weeks. 


One of the keenest areas of contention between HMRC and taxpayers is the length of time that enquiries take before they are concluded. Once an enquiry has been commenced by HMRC there is no statutory time period within which it must be concluded and it is not uncommon for enquiries to become long running and protracted. Such enquiries can be commercially disruptive, time consuming and expensive, especially if HMRC issue a number of information requests during the course of the enquiry.  

There will, therefore, be occasions when a taxpayer decides that an enquiry has gone on for long enough and wishes to bring it to an end, as occurred in this case. This decision is a reminder that in appropriate circumstances, taxpayers should consider adopting a similar proactive approach and seek a direction from the FTT requiring HMRC to issue a closure notice. 

The decision can be viewed here.