“66 Restriction on relief unless trade is commercial (1) Trade loss relief against general income for a loss made in a trade in a tax year is not available unless the trade is commercial. (2) The trade is commercial if it is carried on throughout the tax year— (a) on a commercial basis, and (b) with a view to the realisation of profits of the trade. (3) If at any time a trade is carried on so as to afford a reasonable expectation of profit, it is treated as carried on at that time with a view to the realisation of profits. (4) If the trade forms part of a larger undertaking, references to profits of the trade are to be read as references to profits of the undertaking as a whole...”
“29 Assessment where loss of tax discovered. (1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment— (a) that an amount of income tax or capital gains tax ought to have been assessed but has not been assessed, (b) that an assessment to tax is or has become insufficient, or (c) that any relief which has been given is or has become excessive, the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax. (2) Where— (a) the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, and (b) the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed, the taxpayer shall not be assessed under that subsection in respect of the year of assessment there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made. (3) Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above— (a) in respect of the year of assessment mentioned in that subsection; and (b)... in the same capacity as that in which he made and delivered the return, unless one of the two conditions mentioned below is fulfilled. (4) The first condition is that the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf… (5) The second condition is that at the time when an officer of the Board— (a) ceased to be entitled to give notice of his intention to enquire into the taxpayer’s return under section 8 or 8A of this Act in respect of the relevant [F2year of assessment]; or (b) in a case where a notice of enquiry into the return was given— (i) issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) above relates, or (ii) if no such partial closure notice was issued, issued a final closure notice, the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above. (6) For the purposes of subsection (5) above, information is made available to an officer of the Board if— (a) it is contained in the taxpayer’s return under section 8 or 8A of this Act in respect of the relevant year of assessment (the return), or in any accounts, statements or documents accompanying the return; (b) it is contained in any claim made as regards the relevant year of assessment by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim; (c) it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer F10... ; or (d) it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above— (i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or (ii) are notified in writing by the taxpayer to an officer of the Board. (7) In subsection (6) above— (a) any reference to the taxpayer’s return under section 8 or 8A of this Act in respect of the relevant year of assessment includes— (i) a reference to any return of his under that section for either of the two immediately preceding chargeable periods; F12... (ii) where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any partnership return with respect to the partnership for the relevant year of assessment or either of those periods; and (b) any reference in paragraphs (b) to (d) to the taxpayer includes a reference to a person acting on his behalf.” (a) that an amount of income tax or capital gains tax ought to have been assessed but has not been assessed, (b) that an assessment to tax is or has become insufficient, or (c) that any relief which has been given is or has become excessive, (a) the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, and (b) the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed, (a) in respect of the year of assessment mentioned in that subsection; and (b)... in the same capacity as that in which he made and delivered the return, (a) ceased to be entitled to give notice of his intention to enquire into the taxpayer’s return under section 8 or 8A of this Act in respect of the relevant [F2year of assessment]; or (b) in a case where a notice of enquiry into the return was given— (i) issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) above relates, or (ii) if no such partial closure notice was issued, issued a final closure notice, the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above. (a) it is contained in the taxpayer’s return under section 8 or 8A of this Act in respect of the relevant year of assessment (the return), or in any accounts, statements or documents accompanying the return; (b) it is contained in any claim made as regards the relevant year of assessment by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim; (c) it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer F10... ; or (d) it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above— (i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or (ii) are notified in writing by the taxpayer to an officer of the Board. (a) any reference to the taxpayer’s return under section 8 or 8A of this Act in respect of the relevant year of assessment includes— (i) a reference to any return of his under that section for either of the two immediately preceding chargeable periods; F12... (ii) where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any partnership return with respect to the partnership for the relevant year of assessment or either of those periods; and (b) any reference in paragraphs (b) to (d) to the taxpayer includes a reference to a person acting on his behalf.”
“(6) If, on an appeal notified to the tribunal, the tribunal decides— … (c) that the appellant is overcharged by an assessment other than a self-assessment, the assessment or amounts shall be reduced accordingly, but otherwise the assessment or statement shall stand good.” … (c) that the appellant is overcharged by an assessment other than a self-assessment, the assessment or amounts shall be reduced accordingly, but otherwise the assessment or statement shall stand good.”
“(1) An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”) – (a) To the person whose return it is (“the taxpayer”), (b) Within the time allowed. (2) The time allowed is – (a) If the return was delivered on or before the filing date, up to the end of the period of twelve months after the day on which the return was delivered.” (a) To the person whose return it is (“the taxpayer”), (b) Within the time allowed. (a) If the return was delivered on or before the filing date, up to the end of the period of twelve months after the day on which the return was delivered.”
“The conditions therefore embody two tests: a test of commerciality, and a profits test...broadly speaking [the profits test] requires the trade to have been carried on with a view to making profits.”
“... considerations of profitability cannot be divorced from an assessment of the commerciality of the business. In my judgment it is wrong to regard the profitability and commerciality tests in the legislation as mutually exclusive, and they necessarily overlap to an extent which will vary from case to case.”
‘on a commercial basis’
“I was not shown any authority in which the court has considered the expression "on a commercial basis", but it was suggested that the best guide is to view ‘commercial’ as the antithesis of ‘uncommercial’ A trade may be conducted in an uncommercial way either because the terms of the trade are uncommercial or because the way in which the trade is conducted is uncommercial in other respects (for instance, the hobby Art Gallery or Antique Shop where the opening hours are unpredictable and depend simply on the owner's convenience)…”
“…The distinction is between the serious trader who, whatever his shortcomings in skill, experience or capital, is seriously interested in profit, and the amateur or dilettante. There will no doubt be many difficult borderline cases … for the commissioners to decide; and such borderline cases could as well occur in Bond Street as at a car boot sale.”
“It seems to us that the serious interest in a profit is at the root of commerciality.”
“96 ‘Commercial’ and ‘with a view to profit’ are two different tests but that does not mean that profit is irrelevant when considering whether a trade is being carried on on a commercial basis. The reference in Wannell v Rothwell to the serious trader who is seriously interested in profit is not only relevant to deciding whether a person is a serious trader or an amateur or dilettante. We consider that the FTT were right when they said, at [253], that the serious interest in a profit is at the root of commerciality. We also consider they were correct in regarding “profit” in the context of commerciality as a real, commercial profit, taking account of the value of money over time, and not simply an excess of income over receipts. 97. The FTT were, in our view, right to conclude that a trade that involved transactions that were intended to produce a loss in net present value terms, with no compensating collateral benefits, was not conducted on a commercial basis. No-one who was seriously interested in running a business or trade on commercial lines would pay£10 for an income stream with a net present value of£7 unless there were some good reason to do so. Of course in this case the reason why the partnerships were willing to do this was because they believed that tax relief would be available to the partners.”
“(1) The relevance of profitability to the commerciality test The UT dealt with this question at [96] and [97] of the UT Decision …”
“…In my judgment it is wrong to regard the profitability and commerciality tests in the legislation as mutually exclusive, and they necessarily overlap to an extent which will vary from case to case. I therefore see no error of law in the approach which the FTT adopted to this question, and I agree with the observations of the UT in [96] and [97] of the UT Decision, quoted above.”
“46. ... I agree that a trade can fail the commerciality limb in different ways. This is indeed what Robert Walker J says in Wannell v Rothwell where he refers to a trade being uncommercial either because the terms of trade are uncommercial, the prices not covering the costs, or because of the way the trade is conducted in other respects. So I agree that a trader can fail the commerciality limb either because of a lack of commercial organisation (Mr Maugham’s class 1A) or because of a lack of any interest in making money (Mr Maugham’s class 1B). But I do not think it follows that as long as the trade is sufficiently organised and the trader hopes to make a profit (Mr Maugham’s class 2) that is always enough. Let us assume that a trade is well organised. The question whether such a trade is being carried on on commercial lines is not to my mind answered simply by pointing to a hope by the trader to make profits. A trade run on commercial lines seems to me to be a trade run in the way that commercially-minded people run trades. Commercially-minded people are those with a serious interest in profits, or to put it another way, those with a serious interest in making a commercial success of the trade. If therefore a trade is run in a way in which no-one seriously interested in profits (or seriously interested in making a commercial success of the trade) would run it, that trade is not being run on commercial lines. 47. That is in effect what we said in the UT in Samarkand at [97], which has been endorsed by Henderson LJ in the Court of Appeal. If that is right, it is not I think an answer to point to the hope of the trader that profits will nevertheless be made. In other words the concept of a trade carried on on commercial lines has an objective element to it, and cannot be satisfied by proof merely that the trade is well organised and that the trader had a purely subjective hope or desire to make a profit.”
‘with a view to the realisation of profits’
“(a) the test requires some element of purpose, intention or contemplation. That is apparent from the word “view” and the approach to it by other courts and tribunals. (b) whether or not a taxpayer has a subjective intention depends on all the evidence: a mere assertion of intention may not be enough; (c) The test does not require an overriding objective of making profit or its pursuit to be the main or predominant purpose of the activity. As Lord Hoffmann said in Dextra, had that been intended Parliament would no doubt have used such expressions “which are by no means unfamiliar in tax legislation”. (d) Thus the existence of other hopes or intentions in the conduct of the business need not prevent the carrying on of the business having a view of profit. (e) Having an intention to make profit is not enough; the taxpayer must conduct the business with a view to profit. The nature of the conduct of the business is relevant. The test is about how the trade is carried on and how the taxpayer intends to carry it on. That focuses on the activities of the business and their possible future income, and that focus is a counterweight to a purely subjective analysis of the taxpayer’s motives or hopes. (f) A “view” looks to the future – to the intentions as to the conduct of the business and the results which will flow from it. The taxpayer’s intentions as to the conduct of the business are part of the subjective elements of the test. (g) Dextra indicates that there may be some objective element in “with a view to” although in a different statutory context. In the present context “profit” has a meaning independent of what the taxpayer considers it to be: that indicates an objective element in the test: an assessment of whether the intended conduct of the business has a realistic possibility of delivering a profit… (h) As a result, if the conduct or intended conduct of the business is such that there is no realistic possibility of profit, the business cannot be said to be carried on with a view to profit, no matter what the subjective intentions of the taxpayer as to profit are. (i) That objective test is, however, about whether the conduct is such as to give a realistic possibility of profit, not about whether it is businesslike or commercial. (j) If the conduct of the business is such that it is inevitable or almost certain that a profit will be made that will be the carrying on of the business with a view of profit…. (k) Between the two extremes, no realistic possibility of profit and almost inevitable profit, there is a hinterland in which the hopes and expectations of the taxpayer will be a significant factor and where the flexibility of the phrase “with a view to” permits the weighing of the subjective intentions of the taxpayer as to the financial results (not the “profit”) of the business and the likelihood of the intended conduct and so those results yielding a profit.”
“No business is certain to succeed, and the making of a loss, or of only modest profits, is not necessarily an indication that its proprietor has not pursued the trade on commercial lines. But if, as Mr Blair demonstrated, it can be shown that at the moment the business was started the prospect of recovering the capital invested, even without a surplus, was dependent on the realisation of an unrealistically high profit with the consequence that loss was, if not certain, then much more probable than not, it does not seem to us that it can fairly be said that those embarking on the trade can have entertained a serious profit motive, and their claim to have intended to conduct the trade on commercial lines must, at the least, be doubtful. The amateur may be content to make a loss since the pleasure of the activity is reward in itself; the ordinarily prudent commercial person would not enter into a partnership whose business was more likely than not to result in a loss.”
“It is true that these provide that if a trade is carried on so as to afford a reasonable expectation of profit, then the profit limb is deemed to be satisfied (s. 384(9) ICTA and s. 66(3) ITA). But it does not follow that if there is no reasonable expectation of profit, the profits limb cannot be satisfied. What is required by s. 384(9) ICTA/s. 66(2)(b) ITA is that the trade is carried on “with a view to the realisation of profits in [or of] the trade”
“332... Nugee J was considering a different test in that case, and was not deciding whether an objective override formed part of the “with a view to profit” test in s 863 ITTOIA, or indeed what was meant by “realistic possibility”
“344. In determining whether there is the requisite subjective intention, all the evidence must be considered. As mentioned in Gestmin v Credit Suisse at [22] which we have cited at [342] above, contemporaneous documentary evidence will always be highly relevant. Objective evidence is also relevant and, depending on the context, it may be significant. This may include evidence about whether there was, in fact, a real potential for, or likelihood of, profit. This is not because there is an objective test or override. Rather, the potential for profit is one part of the evidence that may be relevant to determine whether the requisite subjective intention exists. 345. Where the intention being tested is that of experienced businessmen, the lack of any realistic potential for or likelihood of profit on an objective basis may call into question whether there is a (subjective) view to profit. Experienced businessmen of course take risks, and different individuals will be willing to take differing levels of risk, but businessmen will generally seek to satisfy themselves that the risks are worth taking for the potential return on capital employed, at least if they are risking their own funds. The dynamics may differ where it is someone else's money that is at risk of being lost. HMRC repeatedly submitted that this was a case where the investment was being made with other people's money, namely that of the Exchequer in the form of the monies that the investors expected to receive from HMRC by way of tax repayments. And the extent of the risk taken may depend not only on the risk appetite of the investors but on the degree to which the individuals making the decisions are answerable for any failure, or incentivised by success.”
“340. In our view, that approach, and indeed any mathematical approach, is not correct. The test is a qualitative rather than a quantitative one and it would be wrong to prescribe a minimum percentage of probability of profit. The question is whether there is a real and serious intention to make a profit. As noted at [344] and [345] below, the likelihood of profit may be an element of relevant evidence, but no more.”
“2017/2018Costs Required by the Estate 1. Contract Labour£5270 – Roadside tree removal£360 should have been allocated to the estate and not the shoot. Due to health & Safety regulations an outside contractor was employed to do this. Hedge cutting£4910 costs would still be required. 2. Equipment Hire£90 – Digger hire for digging drainage ditches 3. Wages£28726 – 60% from shoot would automatically go to the estate as Keeper would still be employed due to estate maintenance, trespassing, pest control, help for tenants 4. Pension£210 - 60% from shoot would automatically go to the estate as Keeper would still be employed due to estate maintenance, trespassing, pest control, help for other tenants 5. Rent and Rates£4642 - 60% from shoot would automatically go to the estate as Keeper would still be employed due to estate maintenance, trespassing, pest control, help for tenants. Contractual obligation to keeper to provide accommodation and council tax 6. Water Rates£383 – Cost included for Gamekeepers Cottage£133 and Bretby Park Farm£250 . Less costs due to not rearing the birds and not using Bretby Park Farm for catering. 7. Insurance£377 - would still be required to cover directors liability and employers liability. 8. Motor and Tractor Expenses£9222 - Estate vehicle would still be needed as would the tractor. Keeper cannot be expected to use his own vehicle as off road needed and also a Polaris to access more inaccessible areas and the tractor is needed for jobs such as muck lifting, towing mower, mowing, timber work and transportation of timber. 9. Telephone£2444 – Part of Keepers contractual obligations for security etc and Bretby Park Farm phone lines would still be required as it is used by owner for estate work purposes. 10. Management Charge£5000 – Contribution to office costs would still be required to cover payroll, administration costs 11. Accountancy Fees£2588 – Fees will still be payable 12. Depreciation£6350 – Estate vehicles would still be required. Depreciation for stable doors was also included in shoot when this should be an estate cost£1153 . 13. Hire Purchase Charge£939 - still required as Polaris needed to access certain areas of the estate Total Cost Required by Estate£66,241 – this only includes 60% of the total Keeper costs as 40% is already paid by the estate Exceptional Items£90 – Digger hire for digging drainage ditches£5000 – Contribution to office costs would still be required to cover payroll, administration costs£2588 – Fees will still be payable£939 - still required as Polaris needed to access certain areas of the estate Exceptional Items 1. Feedstuffs£9482 – Higher usage of wheat of 88.8T – normal usage around 30T (196% increase). Exceptional 51.2T£7270 average cost£145 . Last delivery in February of 15.8T (£2212 ) should have been included in the next year. No explanation as to why costs so high other than unreliable keeper who had received a verbal warning re appearance in previous season and had accident while intoxicated. 2. Birds & Eggs£6325 – Keeper had to buy additional 5500 day old partridges in October due to disease in birds –please refer to point 3 below and see the usually large veterinary bills. The shoot wasn’t in a bird flu exclusion zone but clearly given the need for an autopsy and vets visits we had an issue 3. Veterinary & Medication£2051 – due to diseased birds and autopsy cost Costs are normally under£100 per year (1951% increase compared to average cost in other years) 4. Contract Labour£4800 – Additional cost to cover Keeper after accident. (December – March)The allocation for the replacement keeper was 100% to the shoot and not allocated 60/40 as the keepers wages. This is due to minimum shoot cover (working 30hrs per week) until a replacement permanent keeper could be employed. There was an underkeeper employed who covered the estate work as he was full time and the replacement keeper only worked 30hrs rather than the contractual 48hrs a week of the head keeper who he was covering 5. Light & Heat£3750 – High usage of gas bottles. 171 used compared to 64 in 2018/19 season (167% higher). Average cost£37.50 –100 bottles exceptional usage - due to the keeper being off sick it was impossible to know why the usage was this high. 6. Legal & Professional Fees£4551 – Exceptional costs relating to Keeper accident Total Exceptional Costs£30,959 Without exceptional costs and other costs being allocated to the estate the profit would have been£10,549 ”
“30. The business was the traditional mix of a traditional Scottish landed estate and consisted of a blend of agriculture (in-hand and let farms), woodland and forestry management and related sporting interests, and the letting of cottages and other properties within the estate either to estate workers or to others. The letting of some of the cottages provides a good illustration of the fact that the management of the various activities on the Estate was integrated and strategically prudent, e.g. the provision of accommodation at reasonable or low rents to attract good workers or occupants who had skills which might one day be deployed on the Estate. The Estate work force was not rigidly divided so that each member worked exclusively on only one particular estate activity although it is likely that some carried out much the same activity all the time. They did not report to the Trustees but to Lord Balfour. Lord Balfour's secretary was involved in administrative aspects of all activities of the estate which required secretarial services. As with Lord Balfour himself, there were no demarcation lines except for administrative purposes to reflect the fact that Lord Balfour's interest until November 2002 was as liferenter and not as owner of the Estate. Thus, Trust accounts were kept. The Trust was separately registered for VAT. Whatever the accountancy treatment, Lord Balfour was entitled to the fruits or profits of the Estate's business activities. 31. It seems to me plain on the evidence that Lord Balfour used the trust assets as part of the overall business enterprise carried on by him for gain at Whittingehame Estate. Indeed, given the nature of a traditional Scottish landed estate, it would be difficult to do otherwise. Sections 49 and 110 of the 1984 Act are applicable, as is the reasoning in Fetherstonaugh & Ors(Finch) v IRC1984 STC 261 at 269j-270h, and 274g-h. In his capacity as liferenter (until November 2002) Lord Balfour has to be treated as beneficially entitled to the property in which the liferent interest then subsisted. That was, essentially, the whole Estate. The fact that the trust was a separate entity from Lord Balfour does not mean that there had to be two separate businesses. The existence of these two entities required certain administrative accounting procedures but such procedures do not of themselves create two separate businesses. 32. In reaching these conclusions on the facts, I have taken into account Scales v George Thompson & Co Ltd 1927 13 TC 83 cited by the Appellants, where the issue was, for the purposes of Income Tax liability, whether the underwriting activities carried on by the taxpayer company, was a separate trade, profession or vocation to that of ship owning. The detailed facts do not matter. However, the approach of Rowlatt J, which is instructive, was to consider whether the conduct of the two businesses were interlaced or dovetailed into each other. Here, it can readily be concluded that various activities on the Estate are interlaced or dovetailed. The letting of farm cottages to employees or to persons who could otherwise be of benefit to the Estate is but one example.”
“49. We are not persuaded that Judge Reid misinterpreted Scales (Inspector of Taxes) v George Thompson & Co Ltd (1927) 13 TC 83. While it is correct that in that case one company ran two businesses and one of the businesses, underwriting, was held to be a separate business, the relevance of the case was in the approach which Rowlatt J adopted in assessing whether there were separate businesses. He looked not to the method of financial book-keeping but to whether there was any '... inter-connection, any interlacing, any interdependence, any unity at all embracing those two businesses ...' (see 13 TC 83 at 89). In para [32] of his decision, Judge Reid looked to the approach and not the particular facts. There was thus no need to distinguish the facts. In the context of Lord Balfour's management of a traditional landed estate, using the assets made available to him by the liferent, we have no difficulty in seeing why Judge Reid ascertained in the established facts the needed interlacing and dovetailing of activities.”
“37. In our judgment, no new information, of fact or law, is required for there to be a discovery. All that is required is that it has newly appeared to an officer, acting honestly and reasonably, that there is an insufficiency in an assessment. That can be for any reason, including a change of view, change of opinion, or correction of an oversight.”
“(1) The test in s 29(5) is applied by reference to a hypothetical HMRC officer not the actual officer in the case. The officer has the characteristics of an officer of general competence, knowledge or skill which include a reasonable knowledge and understanding of the law. (2) The test requires the court or tribunal to identify the information that is treated by s 29(6) as available to the hypothetical officer at the relevant time and determine whether on the basis of that information the hypothetical officer applying that level of knowledge and skill could not have been reasonably expected to be aware of the insufficiency. (3) The hypothetical officer is expected to apply his knowledge of the law to the facts disclosed to form a view as to whether or not an insufficiency exists (Moses LJ, Lansdowne [69]; Patten LJ, Sanderson [23]). We agree therefore with Mr Firth that the test does assume that the hypothetical officer will apply the appropriate level of knowledge and skill to the information that is treated as being available before the level of awareness is tested. The test does not require that the actual insufficiency is identified on the face of the return. (4) But the question of the knowledge of the hypothetical officer cuts both ways. He or she is not expected to resolve every question of law particularly in complex cases (Patten LJ, Sanderson [23], Lansdowne [69]). In some cases, it may be that the law is so complex that the inspector could not reasonably have been expected to be aware of the insufficiency (Moses LJ, Lansdowne [69]; Patten LJ, Sanderson [17](3)). (5) The hypothetical officer must be aware of the actual insufficiency from the information that is treated as available by s 29(6) (Auld LJ, Langham v Veltema [33]–[34]; Patten LJ, Sanderson [22]). The information need not be sufficient to enable HMRC to prove its case (Moses LJ, Lansdowne [69]) but it must be more than would prompt the hypothetical officer to raise an enquiry (Auld LJ, Langham v Veltema [33]; Patten LJ, Sanderson [35]). (6) As can be seen from the discussion in Sanderson (see [23]), the level of awareness is a question of judgment not a particular standard of proof (see also Moses LJ in Lansdowne [70]). The information made available must 'justify' raising the additional assessment (Moses LJ, Lansdowne [69]) or be sufficient to enable HMRC to make a decision whether to raise an additional assessment (Lewison J in the High Court in Lansdowne[2010] EWHC 2582 (Ch) ,[2011] STC 372 , at [48]).”
“(d) it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above - (i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or (ii) are notified in writing by the taxpayer to an officer of the Board.” (i) could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or (ii) are notified in writing by the taxpayer to an officer of the Board.”
“78 The correct construction of s 29(6)(d)(i) is that it is not necessary that the hypothetical officer should be able to infer the information; an inference of the existence and relevance of the information is all that is necessary. However, the apparent breadth of the provision is cut down by the need, firstly, for any inference to be reasonably drawn; secondly that the inference of relevance has to be related to the insufficiency of tax, and cannot be a general inference of something that might, or might not, shed light upon the taxpayer's affairs; and thirdly, the inference can be drawn only from the return etc. provided by the taxpayer. 79 As we have described, the balance provided by s. 29 depends on protection being provided only to those taxpayers who make honest, complete and timely disclosure. That balance would be upset by construing s. 29(6)(d)(i) too widely. Inference is not a substitute for disclosure, and courts and tribunals will have regard to that fundamental purpose of s. 29 when applying the test of reasonableness.”
“22. An enquiry, begun by way of an enquiry notice, is concluded by a closure notice. The closure notice comprises two elements: (1) A statement of the officer’s conclusions; and (2) A statement of what, if anything, must be done to give effect to those conclusions. 23. The whole point of tax returns and enquiries into them is to ensure that the public interest in taxpayers paying the correct amount of tax is met. To that end, HMRC must have an appropriate ability to examine the return, but the taxpayer must have a fair opportunity to challenge (by way of appeal) either (i) the conclusions of HMRC or (ii) the manner in which those conclusions have been given effect to (by way of amendments to the return). As can be seen fromsection 28A of the Taxes Management Act 1970 , a closure notice quite clearly contains – and must contain – both elements; equally, as section 31(1)(b) of the same Act provides, an appeal lies against both “any conclusion stated” or any “amendment made”. 24. It is important to appreciate that the conclusions of a closure notice are distinct from the amendments that may arise out of those conclusions. Obviously, there is a nexus between the two – the amendments implement the conclusions reached – but they are very different things. The conclusions in a closure notice consist of a statement why the taxpayer’s return is incorrect (if it is), whereas the amendments set out how the return must be corrected in order to give effect to those conclusions. A closure notice must state the officer’s conclusions; and having issued a closure notice, HMRC has no power to amend the relevant return other than to give effect to the conclusions: Bristol & West at [24]; Investec at [51].”
“(5) It is desirable that the statement by the officer of his conclusions should be as informative as possible: Tower MCashback at [83]; Fidex at [42]. Furthermore, notices are given at the conclusion of an enquiry, and must be read in context. It will be rare for a notice to be sent without some previous indication during the enquiry of the points that have attracted the officer’s attention: Tower MCashback at [84]; Fidex at [42], [45]; Lavery at [37]. That said, a narrowly drawn closure notice – properly construed – cannot be widened by reference to the scope of the enquiry which preceded it: Lavery at [34]. (6) It is not appropriate to construe a closure notice as if it were a statute: Fidex at [51]; Lavery at [28]. The ordinary rules of construction apply to closure notices, and the question of construction is a mixed question of fact and law: the identification of the relevant circumstances and context in which the document is to be construed is a question of fact, whilst the meaning of the document – construed within that context, as found – is a question of law: Lavery at [36]. Essentially, when approaching the question of construction, it is appropriate to consider how the reasonable recipient of the notice, standing in the shoes of the taxpayer, would have construed it: Lavery at [42].”
“…we must bear in mind that it is perfectly possible for the consequential adjustment in a closure notice itself to be in error, in that it fails to articulate the adjustment required by the conclusion articulated by the officer.”
“Description Sideways loss relief claimed from the Woodland Shoot Our conclusion No sideways loss relief is due on the losses arising from the Woodland Shoot Reason for our conclusion The loss arising from the Woodland Shoot does not meet the requirements ofSection 66 Income Tax Act 2007 …”