In B & K Lavery Property Trading Partnership v HMRC [2015] TC04637 the First Tier Tribunal (FTT) refused an application to strike-out HMRC’s argument in an appeal against a closure notice, finding that HMRC could rely upon an argument before the FTT which it had not referred to in the closure notice.

Background and facts

  • The appellant purchased two properties in 2007 and 2008
  • By 5 April 2010 the market value of the properties had fallen significantly
  • The partnership's tax return for 2009/10 included a deduction of almost £7.9 million relating to a net realisable value adjustment in respect of the two properties
  • HMRC enquired into the return and removed the adjustment on the basis that neither of the following conditions were met:
    • The trading stock issue: the properties must be trading stock rather than investment assets
    • The commencement of trade issue: the partnership must be carrying on a trade as opposed to investment activities for the year concerned
  • The conclusion in the enquiry closure notice referred only to the commencement of trade issue
  • The appellant appealed to the FTT
  • HMRC’s skeleton argument submitted to the FTT focused only on the trading stock issue
  • The appellant requested that the case be struck out on the grounds that the FTT did not have jurisdiction to consider HMRC's argument as it related to an issue which was not part of the closure notice


  • The FTT considered the provisions of TMA 1970 s 28B and found that there is no prescribed form of a closure notice.  

  • The FTT also found that the conclusion paragraph does not need to refer to reasons for the notice being issued. 

  • The FTT noted that when a taxpayer must satisfy a number of conditions in order to be eligible for a relief, HMRC only need to to determine that one of those conditions had not been met; they would not have to consider any other other conditions.

  • The enquiry notice would therefore conclude that the taxpayer is not eligible for relief because one of the conditions was not satisfied; this would not be a concession that any of the other conditions were satisfied.

  • In the case at hand, HMRC had at no point conceded the trading stock point and taking into account all relevant correspondence, it was therefore still part of the subject matter of the enquiry despite not being specifically referred to in the closure notice.

  • The FTT considered that the conclusion in the enquiry notice was that the partnership was not entitled to make the valuation adjustment; the commencement of trade issue was a reason for that conclusion but need not be the sole reason.

Links and small print:

See our guide: Closure rules: responses to consultation document

Case reference: B & K Lavery Property Trading Partnership [2015] UKFTT TC04637

Legislation: TMA 1970 s28B