The taxpayer was a Greek national ordinarily resident in the United Kingdom but considered himself to be domiciled in Greece. In his self assessment tax returns for 2014–2015 and 2015–2016, he claimed the remittance basis in his self assessment returns for the years 2014–2015 and 2015–2016 as a non-UK domicile so that he would only be liable to pay UK tax on income and gains to the extent that they were remitted to the UK. He was not required, and did not, set out the amount of tax that would have been payable on his taxable income and gains had he not made the remittance basis claim. Having opened an enquiry into the tax returns under section 9A of the Taxes Management Act 1970 focusing solely on the taxpayer’s claim to be non-domiciled, the revenue concluded that the taxpayer was domiciled in the UK for the relevant period. It thereafter issued a taxpayer information notice under paragraph 1 of Schedule 36 Finance Act 2008 requiring the taxpayer to provide the information it considered necessary to close their enquiries on that aspect of his returns. The taxpayer submitted that the issue of whether a remittance basis claim was valid could be regarded as a matter in its own right under section 28A(1A) of the 1970 Act such that the revenue could issue a partial closure notice (“PCN”) to notify the taxpayer that the officer had completed his enquiry into that matter, with the issue of the amount of tax payable being a separate matter capable of being subject to a further closure notice once other issues had been resolved. The taxpayer claimed that it was sufficient for the purposes of section 28A(2) as to the requirements of a PCN for it to state the revenue’s conclusion that the claim was disallowed and for amendments to be made to the return “to give effect to” that conclusion for the purposes of subsection (2)(b) by simply removing the remittance basis claim from the return. In response, the revenue maintained that “matter” in section 28A(1A) had to mean a matter in respect of which it could issue a final closure notice (“FCN”) if it were the only issue being enquired into. To meet the legislative intent of the PCN regime of achieving finality on the subject matter of the PCN by securing the early payment of tax brought into charge, the quantum of the tax payable was not a discrete matter for the purposes of section 28A which could be the subject of a separate PCN. Rather, the amendments to the return “required to give effect to” the officer’s conclusion within the meaning of section 28A(2)(b) had to include a calculation of any tax payable. Otherwise, the matter would not be closed due to the revenue not having all relevant information and a PCN could not therefore be issued. On the taxpayer’s application, the First-tier Tribunal accepted the position of the taxpayer and directed that the revenue had the power and could be required to issue a PCN concluding the enquiry on domicile and the validity of the remittance basis without needing to specify the amount of tax due. It was sufficient to simply set out the revenue’s denial of the claim on the remittance basis. On the revenue’s appeal, the Upper Tribunal, applying a purposive construction of section 28A as a whole, reached the contrary conclusion having held that the revenue could not issue a PCN on the remittance basis claim without stating the amount of tax that would be due following its decision on domicile. The taxpayer appealed on the ground that the First-tier Tribunal was correct in its decision albeit for differing reasons than those stated by that tribunal.
On the taxpayer’s appeal—
Held, appeal dismissed. (1) The purpose of an enquiry under section 9A of the Taxes Management Act 1970 was to ascertain what was required in the return to enable the correct calculation of the tax payable in the taxpayer’s self–assessment. That enquiry, or aspect of it, ended with the issue of a closure notice, either a FCN or a PCN. In either case, there were two express statutory requirements of a closure notice. The first, under section 28A(1), required the revenue to state its conclusions. The second, under section 28A(2), was that the closure notice should either (a) state that no amendment of the return was required or (b) make the amendments of the return required to give effect to the conclusions. The statutory scheme did not distinguish between PCNs and FCNs, whether in section 28A(2) or at all. The closure notice should achieve the required amendments of the return in both cases. By section 28A(3) they both took effect when issued and had or were capable of having substantive tax effects at that point (paras 56, 60, 61, 62, 83, 84, 85).
(2) As to the meaning of “matter” in the expressions “any matter to which the enquiry relates” and “enquiries into that matter” in section 28A(1A), a remittance basis claim was capable of being a “matter” arising in the course of an enquiry as a matter of ordinary language. However, “matter” in that provision did not simply bears its ordinary meaning and its meaning had be more limited having regard to the statutory scheme and context in which it appeared. A conclusion removing a taxpayer’s entitlement to claim the remittance basis without quantifying the tax thereby brought into charge did not provide any finality on the substantive tax effect of that conclusion. Separating those two issues had the potential to prejudice both the revenue’s collection powers by permitting delay in providing documents and information relating to quantification and to prevent it from continuing to enquire into the quantification issue until the resolution of any appeal against the PCN. When having regard to the language and purpose of section 28A in its statutory context, taking account of the existence of section 28ZA concerning the referral of questions during enquiry, together with the legislative means by which PCNs were introduced and the weight of precedent authority, an issue could only be a “matter” for the purposes of section 28A(1A) if was the only issue being enquired into and the revenue could issue a valid FCN in respect of it. That approach respected the legislative scheme that treated PCNs and FCNs without distinction. It was consistent with a PCN, like a FCN, “taking effect” when issued in circumstances where it was difficult to see how a conclusion on the validity of a claim could be described as “taking effect” without determining the tax consequences and making an assessment. That approach also achieved the finality of early resolution of one or more discrete matters at the enquiry stage, together with accelerating payment of any tax due in consequence of the matter determined and avoided the unnecessary fragmentation of a single dispute into multiple “matters” that would frustrate the purpose of the statutory scheme. The “matter” in the present case for the purposes of section 28A(1A) was the taxpayer’s claim to benefit from the remittance basis of taxation and his domicile was relevant to and a constituent element of that “matter”. On the question as to what a section 28A(2)(b) compliant PCN was required to address in order for the enquiry into that matter to be closed and a valid PCN issued, where the revenue’s conclusion on the validity of the matter enquired into had computational consequences for the tax return and self-assessment contained within it, the PCN had to give effect to the conclusion by amending the taxpayer’s self-assessment, such as in the present case by bringing the income and gains into charge and assessing the tax payable in consequence. That achieved the desired early resolution and finality on a discrete aspect of an enquiry and enabled earlier payment consequent on the amendments to the self-assessment made by the PCN to give effect to the revenue’s conclusion. That analysis did not mean that a PCN always had to make amendments to the return by specifying the tax payable in order to give effect to the revenue’s conclusion, irrespective of the nature and effect of the revenue’s conclusion. Plainly, the amendments necessary would depend on the matter in issue and on the conclusion. In the present case, the revenue’s conclusion that the taxpayer had been UK-domiciled in the relevant tax years and was precluded from claiming the remittance basis of taxation in those years meant that it could not give effect to that conclusion without further necessary information to enable amendments to his tax returns, which included an assessment of the tax brought into charge. Consequently, a valid PCN could not be issued in accordance with the requirements in section 28A(2)(b). Accordingly, the revenue lacked the power to issue the PCN concerning the taxpayer’s domicile and remittance basis claim without assessing the increased tax due as a consequence of that conclusion (paras 65, 73–78, 82, 83, 84, 85).
Kevin Prosser QC and Barbara Belgrano (instructed by Ince Gordon Dadds LLP) for the taxpayer.
Akash Nawbatt QC and Sebastian Purnell (instructed by Treasury Solicitor) for the revenue.