Paul Baxendale-Walker v The Commissioners for HMRC [2026] UKFTT 676 (TC)

[2026] UKFTT 00676 (TC)

Case No TC 09877

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 22 September 2022

Date Judgment date: 12 May 2023

By remote video hearing

Appeal reference: TC/2021/19603

PROCEDURE – strike out application – application for closure notice – whether discharged bankrupt has standing to apply – whether a purely personal right – no – strike out application granted

Before

TRIBUNAL JUDGE ANNE FAIRPO

Between

PAUL BAXENDALE-WALKERAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

Joseph Howard, Counsel, instructed by Morrisons Solicitors for Appellant

Zubair Chaudhry, litigator of HM Revenue and Customs’ Solicitor’s Office for Respondents

DECISION

Introduction

[1]The appellant, Mr Baxendale-Walker, applied to this Tribunal for a closure notice pursuant to s28A(4) Taxes Management Act (TMA) 1970, in respect of open enquiries in respect of tax years ended 5 April 2008 and 5 April 2016 (inclusive).

[2]HMRC applied to strike out the application for the closure notice on the basis that Mr Baxendale-Walker does not have legal standing to bring the application. It was this application which was the subject of the hearing and this decision.

[3]The appeal and application made reference to other matters which were either agreed not to be in dispute or otherwise withdrawn and so are not considered here.

Relevant background

[4]Mr Baxendale-Walker was declared bankrupt on 11 July 2018. The relevant enquiries were opened and notified to him before that date. He is subject to a ten-year Bankruptcy Restriction Order made by the High Court for the period of 10 March 2020 to 9 March 2030.

Submissions

[5]HMRC contended that Mr Baxendale-Walker does not have legal standing to bring the Closure Notice application and that, instead, it would be for his Trustee in Bankruptcy to make such an application.

[6]Mr Baxendale-Walker contends that the right to apply for a Closure Notice is a personal right which did not pass to his Trustee in Bankruptcy.

Tax legislation

[7]Mr Baxendale-Walker contended that s28A TMA 1970 stated that the ‘taxpayer’ may apply, and s9A TMA 1970 defined ‘the taxpayer’ as the person whose return was subject to the notice of enquiry. The relevant notices of enquiry had been given to Mr Baxendale-Walker personally, as they pre-dated his bankruptcy. Further, s28A(7) states that it is the person to whom the notice of enquiry is given that has the right to appeal to the tribunal for a final closure notice.

[8]It was submitted that the standard statutory position is therefore that Mr Baxendale-Walker personally has standing to apply for a final closure notice unless the right to make such an application has vested in the Trustee in Bankruptcy or the position is overridden by bankruptcy legislation.

[9]HMRC contended that Taxes Management Act 1970 could not be relied upon in isolation to determine whether a discharged bankrupt has the right to make the application. There are no specific provisions in TMA 1970 regarding the effect of bankruptcy on tax proceedings and it is therefore necessary to consider the law of bankruptcy in order to establish the correct position (Ahajot (Count Artsrunik) v Waller (Inspector of Taxes) [2004] STC (SCD) 151, at [27- 29]).

Bankruptcy legislation

[10]HMRC contended that the right to apply for a closure notice had vested in Mr Baxendale-Walker’s Trustee in Bankruptcy. They submitted that the bankrupt’s estate, which vests in the Trustee without conveyance immediately under s306 IA 1986, included any chose in action such as the right to apply for a closure notice. On such vesting, the bankrupt is relieved of any interest in their property and any liability for their debts (Heath v Tang [1993] 1 W.L.R. 1421 CA (Civ Div)).

[11]As Mr Baxendale-Walker could have no interest in the pre-bankruptcy estate, as a discharged bankrupt, and any outstanding tax for the relevant periods could only be paid out of those assets, it was submitted that he had no standing to apply for a closure notice. Further, as s28A(5) TMA 1970 provides that an application under s28A(4) is subject to the same procedure as an appeal, HMRC contended that the right to bring an application for a closure notice also vested in the Trustee.

[12]It was submitted that, as the issue of a closure notice would crystallise a debt, only the Trustee has standing to apply for a closure notice. This followed from the decision in Ahajot which noted that ‘The trustee has sole responsibility for determining the debts outstanding and for accepting or challenging them. Accordingly, it is normally the trustee who should continue any existing proceedings or start new proceedings’ ([29]). The same point was also made in Re GP Aviation Group International Ltd

[2013] EWHC 1147 (Ch)

[13]HMRC submitted that it was well-established that a bankrupt should not be able to exercise or influence any control over the pre-bankruptcy estate. If a bankrupt were able to apply for the issue of a closure notice, it would enable them to exercise control over the estate in a way which was not consistent with interpretation of bankruptcy legislation and case law. Bankruptcy case law is clear that the Trustee is required to administer the estate according to their discretion to achieve the best return for the creditors. If the bankrupt is concerned as to the administration of that estate, the protection and appropriate course of action is to ask the court to intervene rather than to make an application which would bind the Trustee.

[14]Mr Baxendale-Walker argued that the right to make an application had not vested in the Trustee in Bankruptcy. This was on the basis that the right to apply for a final closure notice under s28(4) TMA 1970 was a bare and personal right which did not constitute “property” for the purposes of s436 IA 1986. That right was therefore not part of Mr Baxendale-Walker’s “bankrupt’s estate” and so the application did not constitute proceedings relating to property in the bankrupt’s estate for the purposes of paragraph 2 of Schedule 5 IA 1986.

[15]Mr Baxendale-Walker contended that it was clear from case law that various personal rights and right of appeal do not vest in the Trustee in Bankruptcy. In particular, the decision in Re GP Aviation Group International expressly held that a ‘bare right of appeal’ was not a chose in action and did not constitute property within a bankrupt’s estate.

[16]It was submitted that the scheme of the bankruptcy legislation was intended to ensure that the bankrupt is divested of any power which would enable them to diminish the assets of the estate, and as such any such rights which would have that effect are exercisable by the Trustee only. It was contended that the enquiry, and thus the right to apply for a closure notice, was not property vested in the estate as it was a statutory procedure for gathering information and not an asset of the estate.

[17]In support of these contentions, Mr Baxendale-Walker also referred Griffiths v Civil Aviation Authority [1996] 5 WLUK 379, an Australian decision, which concluded that a Trustee in Bankruptcy did not have power to appeal a decision of that authority to vary the terms of an aviation licence. The licence was not transferable and so had not vested in the Trustee. It was submitted that the same principle applied here, that the right to apply under s28A TMA 1970 was not transferable and so could not be vested in the Trustee.

Personal rights

[18]Mr Baxendale-Walker further argued that the enquiries were personal as, following bankruptcy of a taxpayer, the enquiry process could only ask personal questions of the taxpayer as any books and records pass to the Trustee and any questions relating to such books and records can be asked of the Trustee. Accordingly, as this was personal to the bankrupt, any right of application for a closure notice under s28A TMA 1970 should be interpreted as remaining with the taxpayer so that they can ask for such questioning to stop.

[19]HMRC accepted that Heath v Tang was authority for the principle that a bankrupt could bring an appeal in respect of entirely personal matters, but submitted that these enquiries were not personal in that context. Discussion Tax legislation

Discussion

[20]The parties were generally in agreement that TMA 1970 alone does not provide a resolution to this question and that it is necessary to consider the effect of bankruptcy legislation and case law to determine whether Mr Baxendale-Walker has standing to bring this application.

Bankruptcy legislation

[21]Paragraph 2, Schedule 5, Insolvency Act (IA) 1986 provides that the Trustee in Bankruptcy has “[p]ower to bring, institute or defend any action or legal proceedings relating to the property comprised in the bankrupt’s estate”.

[22]The “bankrupt’s estate” is defined in s283 IA 1986 as ‘(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and (b) any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling with the preceding paragraph.”

[23]“Property” is defined in s483 IA 1986 as including “money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property”.’

[24]Re GP Aviation Group International was referred to by both parties. This decision considered (inter alia) whether the right to appeal against a tax liability constituted the property of a company in liquidation. At [31] the decision notes that ‘a bare right to appeal is not property within the meaning of s.436 of the IA’ but the judge then goes onto say that ‘A right of appeal available to a bankrupt is one that the bankrupt loses locus to bring or maintain once he or she is adjudicated bankrupt because the only assets out of which the underlying liability can be met have vested in the trustee and not because the right is a chose that vests in the trustee. The trustee has a statutory right (but not the obligation) to exercise any right of appeal that the bankrupt might have had as and from the moment at which the bankrupt is made the subject of a bankruptcy order.’

[25]I note however that the context of this statement was that ‘[i]ntroducing an entirely artificial concept of property for the purpose of concluding that an office holder can assign a right of appeal without being able to assign the liability that goes with it may have all sorts of unintended consequences for the conventional approach in relation to personal orders that it is entirely unnecessary to create’ (at [32]).

[26]Accordingly, I do not consider that Re GP Avation Group International provides significant assistance in determining whether or not the right to apply for a closure notice remains with a bankrupt taxpayer. The decision relates to the question of whether or not a right of appeal which was exercisable by the administrator could be transferred to the former directors of the company in circumstances where the transfer of the right of appeal would not also transfer the liability to tax associated with that right of appeal. There was no question that the right of appeal in question was exercisable by the administrator rather than the directors.

[27]That is somewhat different to the question of whether it is the Trustee or the bankrupt who has standing to apply for a closure notice. Accordingly, the decision that a bare right of appeal, separated from its associated liability, is not property within the meaning of s436 IA 1986 does not mean that a bankrupt has the right to apply for a closure notice.

[28]I note also that at [31] in the same decision, HHJ Pelling stated that a right of appeal vests with a Trustee in Bankruptcy ‘because the only assets out of which the underlying liability can be met have vested in the trustee and not because the right is a chose that vests in the trustee’. It was contended that the enquiry, and thus the right to apply for a closure notice, was not property vested in the estate as it was a statutory procedure for gathering information and not an asset of the estate.

[29]However, in this case, the effect of the closure notice would be that a tax liability would be crystallised. This would be a debt against the bankrupt’s estate and so would be a responsibility of the Trustee rather than the bankrupt. To the extent that the decision in Re GP Aviation Group International is relevant to a right to apply for a closure notice, I consider that it supports the contention that the right to make such an application lies with the Trustee of a bankrupt and not with the bankrupt personally.

Personal nature of the rights

[30]Mr Baxendale-Walker argues, in effect, that he is personally affected by the ongoing enquiry and has a right to ‘defend’ himself by making the application for a closure notice. HMRC disagree, on the basis that the enquiries are not personal.

[31]The decision in Griffiths, referred to by Mr Baxendale-Walker, described the aviation licence which was the subject to the potential proceedings as being of no value or use to the creditors of the bankrupt estate, as the Trustee in bankruptcy could not make use of the licence. The decision concluded that the licence was therefore ‘completely personal … and … held no interest for the estate whatsoever’. It was also noted that ‘a construction of the [Australian] Act which denies to a bankrupt the enjoyment of rights which do not affect the value of the bankrupt’s estate or the administration of the estate is to be avoided’ (emphasis added).

[32]Given that this is an Australian case it is not binding precedent but, bearing in mind the similarities in the relevant legislation, I consider it is useful to note the caveat in the quotation: that the bankrupt was allowed to pursue the relevant appeal because it did not impact on the bankrupt’s estate either in terms of value or in terms of administration. Indeed, the decision in Griffiths noted that ‘the purpose [of the Act is focussed] upon rights the exercise of which will adversely affect or delay the administration of the estate. It is these rights which fall within the definition of “property”’.

[33]The decision in Heath v Tang (at pp1423-4), referred to by both parties, considered ‘actions seeking relief such as injunctions against the bankrupt personally which do not directly concern his estate. They can still be maintained against the bankrupt himself and he is entitled to defend them and, if judgement is adverse, to appeal.’ This principle has been applied to matters being brought against a bankrupt such as injunctions against acts which would amount to copyright breach, thus stopping the bankrupt from taking a particular course of action, or actions in respect of defamation, assault and similar which would have a significant personal impact on the bankrupt if undefended (notably, imprisonment).

[34]I consider that the key point in Griffiths and Heath v Tang is that these described matters which ‘held no interest whatsoever’ or ‘which do not directly concern’ the bankrupt’s estate, including the administration of the estate. The issue of a closure notice would crystallise a debt against the bankrupt’s estate and so would hold interest for, and would directly concern, the bankrupt’s estate. It would also affect the administration of the estate as it would require the Trustee to consider litigation in respect of the resulting tax assessments on a timetable which arises as a result of actions by the bankrupt rather than decisions by the Trustee.

[35]The personal impact on Mr Baxendale-Walker of, potentially, having to respond to questions is also somewhat less significant than the impact of (for example) potential imprisonment. I also note that no evidence of any continuing actual personal questions was provided.

[36]Given the potential impact on the Trustee, and the bankrupt estate and its administration, I consider that the right to apply for a closure notice is not, therefore, within the scope of proceedings which may be brought by a bankrupt. It is, rather, a situation in which ‘the supervision of the insolvency administration by the bankruptcy judge protects the bankrupt from injustice which might otherwise be caused by his inability to bring proceedings outside the bankruptcy jurisdiction’ (Heath v Tang p1424).

Decision

[37]Mr Baxendale-Walker does not, for the reasons set out above, have standing to apply to this Tribunal for a closure notice in respect of the relevant enquiries. As he does not have standing, it follows that this Tribunal does not have jurisdiction to hear his application and must strike out the proceedings under Rule 8(2)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.

[38]HMRC’s application to strike out his application for a closure notice is therefore granted.

Right to apply for permission to appeal

[39]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. ANNE FAIRPO TRIBUNAL JUDGE Release date: 12 May 2023