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HMRC to issue "Partial Closure" notices

By Gabelle LLP

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HMRC published a consultation document on 18 December 2014 and invited comments from professional firms and bodies on the new proposed power to speed up the conclusion of certain aspects of an enquiry. The new power would allow HMRC to make a referral to the Tribunal with a view to issuing a closure notice in respect of one or more aspects of an ongoing enquiry.

On 28 September 2015 HMRC published a summary of responses to this consultation.

The consultation document detailed the areas considered to cause problems and constraints within the current enquiry framework, including:

  • Flexibility – the framework can be inflexible, creating delays in settling more complex enquiries.
  • Complexity – long-running enquiries involving complex technical areas and significant amounts of tax can prevent resolution of more straightforward issues.
  • Equity – ‘representative cases’ selected by HMRC when attempting to resolve an issue through litigation tend to be more straightforward, involving the one issue at stake; cases involving multiple issues benefit from being less likely to be selected for litigation.

As a means of alleviating these problems, the Government put forward a proposal to refer one or more areas of dispute within a wider tax enquiry to the Tribunal with a view to achieving early resolution of those aspects. Any tax found to be due by the Tribunal in respect of those aspects would become payable, whilst other aspects of the tax enquiry would remain open. This was deemed necessary, as the UK tax system had become significantly more complex since the inception of Self-Assessment.

The responses to the proposal focussed in the main on the following areas:

Power for referral not held by HMRC alone

While the majority of respondents were in favour of the proposed changes, it was felt by many that there should be a level playing field and that both HMRC and the taxpayer should have the power to take individual matters to the Tribunal. This was particularly pertinent in those cases where the taxpayer did not feel that HMRC were progressing matters at an acceptable pace.

Practical implications of the changes

There were a number of suggestions and comments made regarding how the proposed legislation might work in practice. These included a query as to how tax might be computed on a standalone issue in isolation to other ongoing matters which were yet to be resolved. Also, whether the onus of proof should lie with the party requesting closure on the specific point, or the appellant.

It was considered by many that the appeal and payment processes would require further consideration.


The respondents also made HMRC aware of their concerns surrounding the issue of safeguards, which were considered insufficient to ensure that the power would be used appropriately by HMRC. Suggestions included a de-minimis level of tax at stake below which the new provisions would not apply. Others proposed that the safeguards should be built into the legislation rather than simply included within the HMRC operational guidance. This follows HMRC’s recent refusal to accept that their guidance could be relied on.

Next steps

The general consensus from respondents was that the current enquiry process was in need of improvement in relation to a more straightforward and timely means by which certain aspects of an enquiry could be closed down.

HMRC have proposed that they introduce a partial closure power with the intention to develop a number of alternative models before further consultation is sought. It is likely that the legislative changes will not be introduced until Finance Bill 2017.

Published October 2015