In B&K Lavery Property Trading Partnership v HMRC [2016] UKUT 0525 the Upper Tribunal (UT) rejected an application to strike out an appeal on the grounds that HMRC had raised an argument not included in their closure notice.

A closure notice has to state both HMRC’s conclusions and the amendments resulting from them.  The jurisdiction of the First Tier Tribunal (FTT) on any appeal is then limited to the conclusions stated.

  • The appellant is a partnership which bought two properties in 2007 and 2008.
  • In April 2010 the value of these had dropped significantly, and the partnership claimed a deduction for a £7.9m ‘realisable value adjustment’ in respect of them.
  • Following an enquiry HMRC refused this deduction.
  • The closure notice indicated that this was because the partnership had not commenced a trade.

The taxpayer appealed to the First Tier Tribunal (FTT):

  • In their skeleton argument HMRC dropped the commencement of trade argument, and focused instead on whether the properties were held as trading stock.
  • The appellant applied for the case to be struck out on the grounds that this argument was not included in the closure notice.

The FTT refused the strike out application and allowed HMRC to amend their statement of case.

The UT has now upheld this decision, finding that:

  • A closure notice has to be read in the context of the underlying enquiry in order to understand its meaning.
  • The fact that an enquiry has not been limited to a specific issue needs to be taken into account when determining the scope of a closure notice
  • The FTT was correct to conclude that, in this case, the conclusion in the closure notice was simply that the revaluation adjustment was disallowed:
    • The enquiry notice and correspondence were not limited to the trading argument.
    • HMRC did not concede the trading stock point at any time during the enquiry.

The UT therefore rejected the taxpayer’s appeal and upheld the FTT’s decision to reject their strike out application.


At the end of their decision the UT noted that, although it didn’t impact their decision, the taxpayer had made their strike out application under the wrong set of tribunal rules.  As a result, if they had been successful their own appeal would have been struck out entirely: not the result they might have wanted!

Instead they should have either:

  • Gone ahead with the appeal, which would have been found in their favour if HMRC had conceded the only conclusion in the closure notice; or
  • Made an application for the FTT to bar HMRC from taking any future part in proceedings as their case had no reasonable prospect of success.

A cautionary tale which highlights the importance of getting the details right when appealing or making applications to the tribunals.


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Case reference: B&K Lavery Property Trading Partnership v HMRC [2016] UKUT 0525