Robin Houldsworth v The Commissioners for HMRC

On 6 February 2023, the respondents (“HMRC”) made an application to the Tribunal to strike out the third ground of the appellant’s Amended Grounds of Appeal (“Ground 3”) under Rule 8(2)(a) or, in the alternative under Rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (as amended) ("the Rules").

The appeal relates to a Closure Notice issued on 8 June 2018 in respect of the year ended 5 April 2005 (“the Relevant Tax Year”) which concluded that the appellant was resident in the UK during that year and therefore chargeable to tax in the UK on certain dividends.

It is not in dispute that in 2005 the appellant’s employer adopted arrangements whereby employees who would have been paid bonuses were awarded shares in a company which subsequently paid dividends. The amount of dividends brought into charge by the Closure Notice is £1,309,500 and the additional tax is £323,528.32.

I had the benefit of a hearing bundle extending to 928 pages, a Skeleton Argument for the appellant extending to 32 pages and 83 paragraphs and a Skeleton Argument for HMRC extending to 17 pages and 60 paragraphs.

On the morning of the hearing it transpired that HMRC had lodged a copy of section 49I Taxes Management Act 1970 (“TMA”) and a copy of the decision in Shinelock Limited v HMRC [2023] UKUT 107 (TCC) (“Shinelock”). Neither I nor the appellant’s representatives had received those so they were forwarded to us.

With the consent of the parties, the hearing was conducted by video link using the Tribunal's video hearing system. Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

I annex at Appendix 1 copies of the provisions of the Taxes Management Act 1970 (“TMA”) upon which the parties relied.

In terms of section 8 TMA, on 8 November 2007, HMRC issued a notice to the appellant requiring him to file a self-assessment tax return (“SATR”) for the Relevant Tax Year. The SATR was filed on 30 May 2008 and on 19 0ctober 2008, HMRC opened an enquiry into that return under section 9A TMA.

Correspondence ensued but, in the absence of the provision of relevant information, ultimately HMRC issued an Information Notice in terms of Schedule 36 Finance Act 2008 on 26 October 2015 and a response was provided. There then followed fruitless correspondence between HMRC and the appellant’s agent. In July 2017, HMRC wrote to the appellant stating that they had had no replies from the agent since a meeting on 25 May 2016.

There was no response so the Closure Notice was issued on 8 June 2018 under section 28A(1B) and (2) TMA. That Closure Notice completed the enquiry. It was very brief and simply stated the conclusion that the appellant was resident in the UK in the Relevant Tax Year and thus the dividends were taxable. The consequential amendments had been made to reflect the charge to tax.

On 6 July 2018, under section 31 TMA, the agent then appealed the Closure Notice and sought postponement of the tax which was the subject of the amendment made by HMRC.

On 15 August 2019, HMRC issued a View of the Matter letter and, in terms of section 49A(2)(6) TMA, offering a review of the “matter in question” and that was accepted on 13 September 2019.

On 10 October 2019, HMRC issued the Review Conclusion letter (“the Review”) upholding the decision to issue the Closure Notice.

The Notice of Appeal to the Tribunal was dated 22 January 2020 and was therefore out of time, but HMRC did not object to the late appeal so it has proceeded. The Grounds of Appeal were simply that: “The reasons for appeal are on the grounds of the fact (sic) the individual was a non UK resident for the year 2004/2005.”

HMRC subsequently made a successful application for Further and Better Particulars.

On 22 December 2021, the appellant lodged the Amended Grounds of Appeal.

The first Ground of Appeal, which was that no valid notice had been issued under section 8A TMA, was withdrawn on 17 January 2023.

The second Ground of Appeal (“Ground 2”) is that the appellant was not UK resident during the Relevant Tax Year.

Following HMRC’s application for strike out of Ground 3 (“the Application”), on 22 March 2023, the Tribunal directed the appellant to lodge representations in answer and a detailed response (“the Response”) was lodged on 18 April 2023.

That reads:

“Ground 3: Abuse of Power

Further/or in the alternative the Appellant had a legitimate expectation that in assessing whether he was non-UK resident for tax purposes during the year ended 5 April 2005, the Respondents would adhere to the terms of their published guidance in paragraph 2.2 of the Respondents’ publication IR20”.

The appellant then quoted paragraphs 2.2 to 2.5 of IR20 and I annex a copy thereof at Appendix 2. IR20 was the guidance published by the Inland Revenue entitled “Residents and non-residents Liability to tax in the United Kingdom”.

It was then argued that:

In summary, in the Application, HMRC’s primary argument was that the proper forum for a challenge such as that posed by Ground 3 is by means of judicial review in the High Court and the Tribunal does not have jurisdiction to consider legitimate expectation. The alternative argument was that the appellant had no reasonable prospect of succeeding on the ground that he had a legitimate expectation based on the wording of the guidance set out in IR20.

At the outset of the hearing, having read the Bundle, I pointed out what appeared to be not insignificant areas of factual dispute. I was concerned that if there was a dispute as to whether, on the facts, the appellant had ever been non-resident, then, to paraphrase, it would be a “chicken and egg” argument on legitimate expectation. If the appellant had never been non-resident, as averred by HMRC, he could never have had a legitimate expectation that HMRC’s guidance IR20 would help him.

After an adjournment, Mr Randle intimated that, having taken instructions, and given that there remained a dispute in relation to the facts in relation to residence, he had decided not to pursue the argument based on Rule 8(3)(c) of the Rules that Ground 3 had no reasonable prospect of success.

Therefore, he was pursuing only the argument on jurisdiction, ie he relied only on Rule 8(2)(a) of the Rules.

Since there is only limited common ground between the parties, and to provide some context for the discussion that follows, the factual dispute can briefly be described as:-

In the Amended Grounds of Appeal, the appellant narrated a number of “facts and matters” in support of Ground 2, and those, together with other matters referred to in the Response and in correspondence, can be summarised as follows:

I have put in parenthesis the information HMRC relied upon in other documents but in the Review, HMRC argued that:

It was argued for the appellant that:

HMRC contend that on a proper consideration of the case law the Tribunal has no jurisdiction to consider Ground 3. The Tribunal has no jurisdiction unless the legislation expressly makes provision for public law grounds to be considered.

The Court of Appeal in Beadle v HMRC [2020] EWCA Civ 562 (“Beadle”) determined that where the venue for challenge of an enforcement decision is a statutory tribunal it should be assumed to include a right to challenge on public law grounds unless the provisions giving rise to the right to appeal excludes such a challenge (paragraph 44). However, at paragraph 45 the Court of Appeal argued that express words in statutory scheme should not necessarily be looked at in isolation when considering whether public law grounds should be excluded. That might be the implication “when the relevant statutory scheme is construed as a whole and in light of its context and purpose…”.

Mr Randle argued that in Henryk Zeman the Tribunal indicated that similar logic must apply in circumstances where the appellant is technically a claimant as, in substance, they are defending an enforcement action by HMRC.

Having said that, he then relied upon the later cases of Caerdav Ltd v HMRC [2023] UKUT 00179 (TCC) (“Caerdav”) and Hoey v HMRC [2022] EWCA Civ 656 (“Hoey”) for the proposition that the starting point is that appeal grounds concerning public law arguments should be pursued in judicial review proceedings rather than in the Tribunal unless the statutory context indicates otherwise.

He quoted from Hoey at paragraph 132 where the Court of Appeal said:

“The question of jurisdiction can only be determined by reference to the particular statutory scheme in question that governs the tax tribunal’s jurisdiction.”

He pointed out that the Upper Tribunal in Caerdav had cited with approval the decision in HMRC v Noor [2013] UKUT 71 (TCC) (“Noor”) which had confirmed that the Tribunal had no judicial review function. He argued that that had also been approved in Metropolitan International Schools v HMRC [2019] EWCA Civ 156 (“MIS”).

His interpretation of paragraphs 20 and 21 of MIS was that the Court of Appeal:

“went further by indicating that, in circumstances where the legislation did not expressly provide for it, it was ‘highly improbable’ that parliament intended the FTT to have jurisdiction to consider legitimate expectation….”.

Accordingly, the Tribunal has no jurisdiction to consider legitimate expectation unless expressly provided for in the legislation. It had been pointed out at paragraph 51 in Caerdav that MIS had not been considered in Henryk Zeman, so, to the extent that Henryk Zeman suggested otherwise, it was wrongly decided.

The statutory language upon which Henryk Zeman turned was permissive and not mandatory because in that case HMRC had had a discretion. There is no such discretion in the statutory provisions relating to residence (sections 334 and 335 Income and Corporation Taxes Act 1988 (“ICTA”) or in the relevant provisions of the TMA (sections 28A, 31 and 50). I annex at Appendix 3 the text of those ICTA provisions.

He relied upon paragraph 97 in Alway Sheet Metal v HMRC [2017] UKFTT 198 (TC) (“Alway”).

He too referenced GC but arguing that the Supreme Court had not disapproved the Special Commissioners’ finding that they should “apply the law rather than the guidance”.

Lastly, he referred to Hankinson v HMRC [2009] UKFTT 384 (TC) (“Hankinson”) at paragraph 26 where the Tribunal had said:

“26.

The statutory and common law relating to residence and ordinary residence fall within our jurisdiction, but the application of the guidance and practice set out in IR20 does not.”

but he acknowledged that in the later case of Daniel the Tribunal had said, in the context of alleged negligent behaviour, at paragraph 9 that the Tribunal “would not normally be able to allow an appeal on the basis that an appellant had met the conditions for establishing non-UK residence set out in HMRC’s publication IR20.”

I have set out the procedural history and the sections of the TMA that are relevant in this appeal.

The Application was predicated upon the basis that in residency cases, HMRC does not have a discretion in that:

As I have noted at paragraph 39, HMRC also relied upon section 31 TMA.

Whilst it was accepted for the appellant that section 334 ICTA states that an assessment is mandatory if a taxpayer is resident in the UK, section 128 Finance Act 195 is expressed in equally mandatory words in that a taxpayer who is not resident shall not be charged to tax.

There is no statutory definition of residence albeit, as Mr Randle pointed out, there are some statutory provisions relating thereto. Mr Soares pointed to Lord Wilson at paragraph 13 of GC where he said that in the absence of such a definition taxpayers and their advisers had to turn to case law and “importantly” HMRC guidance.

Mr Soares argued that because the concept of residence was “vague” there must be a fundamental discretion both in deciding whether or not the appellant was UK resident and then whether to assess in terms of the statutory scheme.

Mr Afzal later argued that residence does not exist in the abstract. The “matter under appeal” in terms of section 31 TMA was the amount of tax “due” and IR20 goes to the issue as to whether the dividends were taxable and thus the tax due.

It is common ground that the appeal was made to the Tribunal in terms of section 49G TMA and that section 49I TMA defines the “matter in question” as being the “matter to which an appeal relates” for the purposes of sections 49A to 49H TMA.

An area of dispute between the parties is what that might be. I will revert to that.

Mr Afzal pointed out that section 49I does not define the subject matter of an appeal to HMRC in terms of section 31 TMA. Section 31 relates to an appeal of a Closure Notice or an amendment made thereby, and of course in this case there was an amendment which brought the tax into charge.

The appellant specifically and particularly relies upon the internal review procedure. That was created by Article 3 and Schedule 1 Paragraphs 5, 30 of the Transfer of Tribunal Functions and Revenue and Customs Appeals Order SI 2009/56 with effect from 1 April 2009.

As can be seen, Mr Soares and Mr Afzal placed considerable reliance upon the terms of the Review arguing that consideration of IR20 was central to HMRC’s decision and therefore was one of the matters in question; hence my narrative at paragraph 29 above.

In terms of the TMA, in oral submissions, Mr Soares focussed upon Sections 9A, 31, 49A and 49E.

It was argued for the appellant that:

Mr Randle’s starting point was that section 28A(2) made it explicit that the Closure Notice must state the conclusion and make the amendment. It does.

Section 31 TMA then permits a taxpayer to appeal that mandatory conclusion and/or amendment to HMRC and, if there is a review, then the taxpayer can “notify the appeal” to the Tribunal in terms of section 49G(4) TMA. The Tribunal will then determine the matter in question. The appeal is that which was appealed to HMRC, ie the conclusion in the Closure Notice and/or the amendment which is, of course, the tax due. Section 50(6) and (7) TMA then permit the Tribunal to reduce or increase the assessment (amendment) or it remains “good”.

Some of the arguments advanced were less straightforward to resolve than others.

I had no hesitation in rejecting the argument for the appellant that I should have in mind Rule 2 of the Rules when adjudicating on jurisdiction. The central question as to whether the Tribunal does or does not have jurisdiction is the subject of a binary decision which must be addressed and determined at the hearing of a strike out application. Either the Tribunal has jurisdiction, or it does not: HMRC v Woodstream Europe Ltd [2018] UKUT 398 (TCC) at paragraphs 15 and 16.

At paragraph 12 of the Application, HMRC referred to Daniel v HMRC [2014] UKFTT 173 (TC) (“Daniel”) where Judge Nowlan and Mrs Farquharson had said that the Tribunal “would not normally be able to allow an appeal on the basis that an appellant had met the conditions … set out in … IR20”, albeit there were exceptional circumstances where IR20 could be considered.

However, the appellant argued that in fact Daniel was authority for the proposition that the Tribunal will entertain a case based on IR20. Certainly in that appeal, as it states at paragraph 123, “Everything in the present case revolves around a fair interpretation of the terms of IR20 …”. It did. However, that was not because the Tribunal was deciding upon residence but rather it was considering whether or not there had been “negligent conduct”. For the appellant to succeed in that case, he would have had to have been able to establish that he had a tenable view that he had satisfied the tests in IR20. I do not accept that Daniel is of any assistance in this appeal.

I do accept the argument that Lord Wilson used what Mr Soares described as “very strong” and “very emphatic” language at paragraph 21 of GC when describing IR20. However, I do not accept that, as a sequitur, I should find that every taxpayer, including the appellant, should be able to rely upon IR20. That is a very broad assertion indeed.

Quite apart from anything else, in that paragraph, Lord Wilson stated that a multifactorial inquiry was not required in a particular taxpayer’s case. However, at paragraph 45 he found that for an “ordinarily sophisticated taxpayer” reading IR20, the general requirements in the guidance “demanded - and might well in practice generate - a multifactorial evaluation of his circumstances on the part of the Revenue albeit subject to appeal”.

Further, it should be noted that those observations were made in a context where the taxpayers had sought judicial review of determinations that they were UK resident for tax purposes. Those appeals were dismissed.

Mr Randle is entirely correct in saying that the Supreme Court in GC had not disapproved the Special Commissioners’ approach which had been to apply the law rather than the guidance. Indeed, at paragraph 80, Lord Mance not only stated that but said that the decision of the Special Commissioners was “full and very clearly reasoned”.

Mr Soares and Mr Afzal argued that “It is clear that KSM Henryk Zeman is sound law and has been followed in subsequent cases” with Mr Afzal going so far as to say that Shinelock was a red herring. I will revert to Shinelock.

Firstly, the comments of the Upper Tribunal in Henryk Zeman in relation to jurisdiction are obiter dicta and therefore are not binding on me. Further, there is no evaluation of the language adopted in the statutory scheme with which I am concerned.

In Henryk Zeman the appeal related to section 73(1) VATA which is a “may” provision, not a “shall” provision. The appeal was made under section 83(1)(p) VATA which did not ex facie appear to oust the Tribunal’s jurisdiction. The Tribunal noted that the scope of section 83(1)(p) VATA is wider than that of section 83(1)(c) VATA.

Section 73 VATA is a discretionary, and to best judgment, matter. The amendment (assessment) in this appeal was neither discretionary nor to best judgment. Certainly it turned on whether or not the appellant was UK resident, but that is a matter for proof in the substantive appeal, but if he was, and it is for him to prove that he was not, then there is a liability to tax.

Although it is a First-tier Tribunal decision and therefore only persuasive, I agree with Judge Amanda Brown KC and Mrs Sonia Gable in Drinks and Food UK Ltd v HMRC [2023] UKFTT 00979 (TC), which dealt with a different statutory scheme, where they argued at paragraphs 143 to 146 that:-

“143.

…Finally, and in light of the Court of Appeal decision in David Beadle v HMRC [2020] EWCA Civ 562, (Beadle) and subsequent decisions of the Upper Tribunal, it is not clear that the decision [Henryk Zeman] is soundly reached.

144.

In Beadle the Court of Appeal confirmed that the tax tribunals have no inherent judicial review jurisdiction but concluded that in the context of an enforcement decision (i.e. a decision to assess for tax or penalty) there is a presumption that a taxpayer will be able to challenge the decision on public law grounds save where the scope for challenging alleged unlawful conduct has been circumscribed by the relevant statutory scheme. In the context of enforcement action the question will be whether the statutory scheme in question excludes the ability to raise a public law defence in proceedings which are dependent on the validity of the underlying administrative act (see paragraph 44 in particular).

145.

In the case of The Executors of David Harrison (Deceased) and others v HMRC [2021] UKUT 273 (TCC) (Harrison) the Upper Tribunal confirmed that in the context of an enforcement decision a challenge on public law grounds was permissible unless the statutory scheme precluded such a challenge. However, in the context of other (non-enforcement) decisions of HMRC clear words are required within the statutory language to permit the taxpayer to challenge the reasonableness of HMRC’s decision on appeal. The UT considered that there was no strong presumption against the FTT having power to consider public law arguments in a non-enforcement appeal; rather it was a question of statutory construction (see paragraphs 34 – 36).

146.

The Upper Tribunal has affirmed that position in Caerdav Ltd v HMRC [2023] UKUT 179 (TCC).”

Before moving on to Caerdav, it is worth pointing out that at paragraph 36 of Harrison the Upper Tribunal indicated that it “overstates matters” to say that the Tribunal does not have the power “to consider public law arguments to the effect that HMRC have exercised discretion wrongly, with that strong presumption being rebutted only with clear words or necessary implication”. It is “simply a matter of statutory construction”.

Both parties had referred to paragraphs 152 and 153 of Caerdav but since paragraph 151 references MIS, upon which Mr Randle also relies, it is appropriate to quote all three paragraphs, namely:-

“151.

…The starting point as to the FTT’s jurisdiction to consider legitimate expectation arguments is as correctly recorded by the FTT at [196] in the arguments on behalf of HMRC:

196.

Further, Mr Duffy argues that the matter is, in any event, covered by the Court of Appeal authority Metropolitan International Schools v HMRC [2019] EWCA Civ 156 (“MIS”) which was not considered in Henryk. MIS concerned whether section 84(10) VATA enabled MIS to advance a legitimate expectation claim in the context of appeals to the First-tier Tribunal rather than by way of judicial review. The Court of Appeal considered Noor at [19] where Newey LJ said:

“19.

Secondly, the School’s interpretation of section 84(10) of the VATA would appear to imply that public law arguments could routinely be advanced in appeals to the FTT. That would clearly be the case where HMRC had rejected a legitimate expectation claim in advance of the decision under appeal, but other public law arguments could presumably also be put forward. Where, say, it had been suggested to HMRC that it should take a particular matter into account, and HMRC had announced before making an assessment that it did not consider it appropriate to do so, it could be suggested that the assessment depended on a prior decision that could be impugned on public law grounds.

20.

That would be a very surprising result. In Revenue and Customs Commissioners v Noor [2013] UKUT 71 (TCC), [2013] STC 998, the UT (Warren J and Judge Bishopp) held, departing from views expressed by Sales J in Oxfam v Revenue and Customs Commissioners [2009] EWHC 3078 (Ch), [2010] STC 686, that “the right of appeal given by s 83(1) [of the VATA] is an appeal in respect of a person’s right to credit for input tax under the VAT legislation” and that the FTT did “not have jurisdiction to give effect to any legitimate expectation which [the taxpayer] may be able to establish in relation to any credit for input tax” (paragraph 87). The UT observed:

“a person may claim a right based on legitimate expectation which goes behind his entitlement ascertained in accordance with the VAT legislation (in that sense); in such a case, the legitimate expectation is a matter for remedy by judicial review in the Administrative Court; the FTT has no jurisdiction to determine the disputed issue in the context of an appeal under s 83 (paragraph 87.)”

In the UT’s view, a number of features “point strongly to the conclusion that Parliament did not intend to confer a judicial review function on the VAT Tribunal or the FTT in relation to appeals under s 83 of the VATA 1994” (paragraph 78). The UT noted that the Tribunals, Courts and Enforcement Act 2007 conferred a judicial review function on the UT but not the FTT (paragraph 29) and that the approach Sales J had favoured would have conferred a very extensive judicial review jurisdiction on the FTT “without any of the procedural safeguards, in particular the filter of permission to bring judicial review, and time-limits to which ordinary applications for judicial review in the Administrative Court are subject” (paragraph 76). The UT also cited this passage from the judgment of Nicholls LJ in an income tax case, Aspin v Estill [1987] STC 723 (at 727):

“The taxpayer is saying that an assessment ought not to have been made. But in saying that, he is not, under this head of complaint, saying that in this case there do not exist in relation to him all the facts which are prescribed by the legislation as facts which give rise to a liability to tax. What he is saying is that, because of some further facts, it would be oppressive to enforce that liability. In my view that is a matter in respect of which, if the facts are as alleged by the taxpayer, the remedy provided is by way of judicial review.”

152.

The starting point is therefore that appeal grounds which concern public law arguments should be pursued in judicial review proceedings rather than before the FTT. However, we, like the FTT, accept that the FTT may have jurisdiction to consider appeal grounds based on public law arguments (such as legitimate expectation) depending on the statutory provisions under consideration. (Emphasis added)

153.

Thus, the statutory context is key, as the UT in Henryk explains”.

I have added emphasis because whether or not there is jurisdiction in any case turns on the language of the relevant legislation and the nature of HMRC’s act or discretion; hence the conflicting arguments about discretion or the lack thereof. At paragraphs 154 and 155 of Caerdav, the Upper Tribunal went on to point out that, as the Upper Tribunal in Henryk Zeman had found, there is a discretion inherent in section 83(1)(p) VATA when read together with section 73 VATA, as it must be. However, there is no discretion conveyed by section 83(1)(c) VATA.

Before turning to the statutory context, I address Mr Randle’s argument about MIS. The quotation from the Upper Tribunal in Caerdav does not include paragraph 21 of MIS but the First-tier Tribunal did quote it. It reads:

“21.

Mr Ramsden did not attempt to persuade us that the UT was wrong in Noor. Were, however, his contentions as to the ambit of section 84(10) of the VATA well-founded, it would seem that the FTT had, after all, a wide jurisdiction to rule on public law issues and, in particular, legitimate expectation claims. The jurisdiction would, moreover, have been conferred through a provision introduced in response to the Corbitt decision (viz. section 84(10)) (“by the back door”, as Miss Mitrophanous would say), rather than under section 83, the main appeals section. Further, legitimate expectation (and, seemingly, other public law) arguments could be raised in the FTT without any need to satisfy the requirements as to obtaining permission and time limits that govern applications for judicial review (see CPR 54.4 and 54.5). It is highly improbable that Parliament intended this when it enacted what has now become section 84(10).”

I accept the argument that paragraphs 20 and 21 of MIS, when read together, might go as far as Mr Randle suggests, ie that where there is no express provision it is highly improbable that Parliament intends the Tribunal to have jurisdiction to consider legitimate expectation. However, I caveat that by saying that not only is it nevertheless possible but the level of improbability would depend on the statutory provision(s) in question. MIS was considering a different statutory provision to those with which I am concerned. In that case, where it was dealing with “prior decisions”, it would have indeed have been highly improbable. I do not think that it is a statement of general application.

It is not for me to find that, in that context, Henryk Zeman was wrongly decided. MIS simply was not considered. Mr Randle’s MIS point was not argued for the appellant in that case presumably since the argument there was that the statutory scheme did make express provision.

Lastly, on MIS, I observe that at paragraph 24 the Upper Tribunal stated:

“24.

….A decision as to whether, for example, it was “oppressive to enforce that liability” (to quote from the judgment of Nicholls LJ in Aspin v Estill) would, it seems to me, appropriately be the subject of judicial review proceedings rather than an appeal to the FTT.”

I say that because, in essence, the appellant in this appeal is arguing that it would be oppressive to apply a multi-factorial approach, being the statutory position, rather than rely on IR20.

Many of the cases to which I was referred related to the statutory scheme in the VATA and not the TMA. Although it is a First-tier Tribunal decision, and therefore of persuasive authority only, Mr Randle relied on Judge Richards, as he then was, at paragraph 87 of Alway Sheet Metal [2017] UKFTT 198 (TC) (“ASM”). Judge Richards pointed out that the Tribunal’s jurisdiction had to be determined by reference to the statutory provisions governing the appellant’s appeal “as the Tribunal is a creature of statute with no inherent jurisdiction”. I agree and, in any event, that appeared to be common ground.

However, I record the point to give context because Judge Richards went on to state that that where an appellant had appealed to HMRC in terms of section 31 TMA, the Tribunal’s powers on an appeal thereafter are set out in section 50 TMA and he discussed section 50 TMA (see paragraphs 82 and 89 below).

At paragraph 95 he found that the relevant principles are set out in the Upper Tribunal’s decision in Noor at paragraph 87 which reads:-

“In our view, the FTT does not have jurisdiction to give effect to any legitimate expectation which Mr Noor may be able to establish in relation to any credit for input tax….In contrast, a person may claim a right based on legitimate expectation which goes behind his entitlement ascertained in accordance with the VAT legislation (in that sense); in such a case, the legitimate expectation is a matter for remedy by judicial review in the administrative court; the FTT has no jurisdiction to determine the disputed issue in the context of an appeal under s83.”

Lastly, at paragraph 97 of ASM, which Mr Randle described as being a key paragraph, Judge Richards stated that:

“There is no material difference between the right of appeal set out in s31 of TMA 1970 … and that set out in s83(1)(c) of the Value Added Tax Act 1994. All the statutory provisions confer a right of appeal against specified HMRC decisions and none makes any reference to matters other than the statutory provisions dealing with the taxes concerned. If Parliament did not intend s83(1)(c) to give the Tribunal jurisdiction to consider matters other than a person’s right to credit under VAT legislation, I see no reason why Parliament could have intended it to consider, on an appeal under s31 of TMA 1970 … questions of … legitimate expectation which go beyond the relevant statutory provisions. If anything, the provisions of s50(6) and s50(7) of TMA 1970 make this even clearer in the context of this appeal than it was in the VAT appeal being considered in Noor, as those sections emphasise that the Tribunal’s focus should be on the amount of the assessments being made and leave no room for a consideration of whether considerations of legitimate expectation … prevent HMRC from making the assessments”.

As I have indicated at paragraph 74 above, in both Caerdav and Henryk Zeman, the Upper Tribunal found that section 83(1)(c) was limited in scope.

Mr Randle went on to refer to Judge Fairpo’s decision in Saxton 4X4 Limited v HMRC [2019] UKFTT 9 (TC) stating that she had endorsed Judge Richards’ reasoning. What she did do was to state at paragraph 23 that she agreed with Judge Richards that “there is no material difference in the rights of appeal”. I agree with both Judges.

Although it is an old case, section 50 TMA was also a focus of attention in Aspin v Estil [1987] STC 723 and at paragraph 47 in Henryk Zeman the Upper Tribunal noted that the Court of Appeal had found that, at first instance, the jurisdiction “was only to see whether the assessment had had been properly prepared in accordance with statute” and that the remedy was judicial review. At paragraph 48 the Upper Tribunal noted that:-

“In Aspin, given the limitation in section 50…it is not surprising that Nicholls LJ considered that they had no power to set aside a liability which arose under the legislation”.

As can be seen, it was argued for the appellant that because there was no statutory definition of residence that must import some concept of discretion on the part of HMRC. It is not as simple as that. For example, in the context of whether someone is self-employed for tax purposes, HMRC have produced guidance and both HMRC and taxpayers look at what are known as the “badges of trade” and those are not conclusive. Case law is also relevant but what it comes down to is whether a taxpayer is liable to tax or not. That is a question of fact, as each case turns on its own facts as is the case with residence.

As Lord Dunedin pointed out in Whitney v Commissioners of Inland Revenue [1925] UKHL TC 10 88 “Liability does not depend on assessment….But assessment particularises the exact sum which a person liable has to pay”.

Whilst I note Mr Soare’s argument that “residence” is a vague concept, I do not accept that that imports into the statutory scheme any discretion in relation to assessment. The assessment arises once liability has been established and in this case it is as a result of the Closure Notice and section 50 TMA gives the Tribunal power only to reduce or increase it.

I note the appellant’s argument at paragraph 44(6) of the Skeleton Argument that section 50 TMA was not relevant to the question of reliance on IR20 because it was only the final stage in the appeals procedure ie after the Review which had looked at IR20 in detail. However, I agree with Judges Richards and Fairpo that that section is very relevant. It is an integral part of the statutory scheme.

Mr Randle relied on paragraphs 40, 57 and 64 of Shinelock. In that appeal the Upper Tribunal set out at paragraph 40 the relevant statutory framework which was sections 49B, C, E, F and G and I and section 50 of TMA.

Of course Shinelock was dealing with entirely different facts and a different area of tax law but I do not accept Mr Afzal’s argument that Shinelock is a “red herring”. Those provisions of the TMA are the same provisions with which this appeal is concerned.

At the heart of the arguments for the appellant are the assertions that not only is IR20 “the matter in question” in this appeal but that it is so because the Review referred to it at length (which it did) and that the statutory review provisions in the TMA expressly require the Tribunal to consider public law principles (essentially because the Review considered IR20).

I observe that the Upper Tribunal recorded at paragraph 44 of Shinelock that it had been argued for the appellant before the First-tier Tribunal that the correspondence after the Closure Notice was issued was relevant to the meaning of “the matter in question”, that alternatively the Review Conclusion Letter had widened the scope of HMRC’s view of the matter and that section 50 TMA was irrelevant; not dissimilar arguments to those advanced in this instance. Those arguments were not accepted.

At paragraph 57 of Shinelock the Upper Tribunal considered and approved their decision in Daarasp & Another v HMRC [2021] UKUT 87 (TCC) (“Daarasp”) pointing out that that decision had set out ten principles which could be drawn from the leading authorities in relation to the issue of “the matter in question” in a Closure Notice. It is the case that those appeals came to the Tribunal with neither appellant having requested a statutory review. There was a statutory review in Shinelock.

Of the ten principles only numbers (1) - (3), (6) and (8) - (10) were quoted in Shinelock but, for completeness, I include all ten. I have added some emphasis for the reasons set out below.

The ten principles are –

In passing I observe that in Daarasp at paragraph 24 the Upper Tribunal made it clear that although there is a nexus between the conclusions in a Closure Notice and the consequential amendments implementing the conclusions, the two are distinct.

The Closure Notice was very brief and the decision was to the effect that it had been concluded that the appellant was UK resident for the year ended 5 April 2005 and that the dividends received by the appellant were liable to UK tax. The officer amended the tax return in line with her decision to the effect that the total tax due was £326,402.46. There was no reference to IR20.

The arguments prior to, and at, the hearing had focussed on the Review. In their Statement of Case at paragraph 14 HMRC stated that:-

“The Closure Notice was issued on 8 June 2018, bringing the tax due on dividends received into charge. A covering letter was included with the Closure Notice informing the Appellant that, contrary to how he had self-assessed in his tax return, HMRC considered him to be resident in the UK for the tax year 2004-2005.”

That is consistent with the appellant’s apparent understanding of the Closure Notice which can be seen from paragraphs 2 and 3 of the Amended Grounds of Appeal which read:-

“2.

By the Closure Notice the Respondents informed the Appellant that they had completed a purported enquiry into the Appellant’s tax return for the year ended 5 April 2005 and purported to amend the Appellant’s tax return to include an additional amount of taxable income for the year in question in the amount of £323,528.32.

3.

The Closure Notice indicates that the additional amount of taxable income was included on the basis that the Respondents had concluded that the Appellant was UK resident during the year ended 5 April 2005 and was therefore liable to UK income tax in relation to certain dividends received…”

In this instance, in terms of section 31(1)(b) TMA the appellant is undoubtedly appealing the amendment which is the assessment of tax due in the sum of £323,528.32. The conclusion that the appellant was UK tax resident is also appealed.

The simple fact is that, as the original Notice of Appeal indicated (see paragraph 14 above), the appellant understood that the issue was whether or not he was UK resident in the Relevant Tax Year. IR20 is not mentioned in the Closure Notice and it may or may not have featured as a reason for the conclusion that the appellant was UK resident.

In his reply submissions Mr Afzal argued that the Review had not broadened the scope of “the matter in question” because it must have been considered when arriving at the conclusion in the Closure Notice. That argument is met by the first three principles in Daarasp which apply.

It is clear that HMRC complied with the terms of section 28A TMA and concluded that the appellant was non-resident and the officer made the consequential amendment. That is what was appealed to HMRC in terms of section 31(1)(b) TMA. It is clear from the eighth principle enunciated in Daarasp (see emphasis in paragraph 96(8) above) that that was the matter in question at that stage.

Messrs Soares and Afzal argued that the appellant had exercised its discretionary right in terms of section 49A(2) TMA and that the Review had complied with the provisions of section 49E TMA (and in particular sections 49A (2) and (4)) with HMRC deeming it appropriate to consider IR20 in detail. They argue that the “matter in question” was not restricted to the conclusion and amendment in the Closure Notice ie the provisions of section 31(1)(b) TMA.

Mr Soares had focussed at some length on the terminology in the Review and the references to IR20. The Skeleton Argument was in large part predicated on the terms of the Review and what HMRC had considered.

Mr Randle placed particular reliance on paragraph 64 of Shinelock which reads:

“To the extent that the FTT additionally considered … that the scope of ‘the matter in question’ could be altered by the subsequent review process, we would disagree. The scope of the closure notice was to be determined, in context, at the time it was issued on the basis of the understanding of a reasonable recipient standing in the shoes of the taxpayer. Subsequent discussions …might conceivably be relevant as shedding light on the nature of such an understanding at that time [of the Closure Notice] but they would not retrospectively extend the scope of the matter in question”.

Whilst I certainly accept, as is argued for the appellant, that section 49I does not, and cannot define section 31 TMA nevertheless I agree with Mr Randle that it does refer to section 49A which, in subsection (1) states that the section applies where a notice of appeal has been given to HMRC. That can only be in terms of section 31 TMA and the subject matter of that appeal is limited thereby to the conclusion and/or amendment in the Closure Notice. That is the matter to which the appeal relates.

Although Mr Afzal urged me to consider Shinelock to be a “red herring”, not only do I disagree but I agree with the Upper Tribunal at paragraph 64 in Shinelock. The scope of the “matter in question” is limited to the conclusion and amendment included in the Closure Notice. The eighth principle in Daarasp then makes it clear that the Tribunal’s jurisdiction is restricted, in terms of section 50 TMA, to deciding whether or not the appellant has been overcharged to tax.

The statutory scheme with which this appeal is concerned is not the same as that considered in Henryk Zeman. Both Caerdav and Shinelock are relevant to consideration of this issue.

In summary, the appeal provision in this statutory scheme, namely section 50 TMA is not dissimilar to section 83(1)(c) VATA and in particular relates to the amount of the amendment resulting from the conclusion in the Closure Notice. It is not a discretionary provision.

For the reasons set out above, Ground 3 is struck out and the Application is allowed.

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.

shall, if his ordinary residence has been in the United Kingdom, be the assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and

shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains, whether they arise from property in the United Kingdom or elsewhere, or from any allowance, annuity or stipend, or from any trade, profession, employment or vocation in the United Kingdom or elsewhere.