HMRC is taking years to deal with my enquiry, what can I do?

First of all, it is worth noting that there is no legal requirement for HMRC to complete tax enquiries and investigations within a set timescale. As such, enquiries can sometimes go on for many years (in some cases we have seen cases open for 15 years remaining open even after the taxpayer has passed away). Of course the lack of certainty over the process and little oversight as to how the enquiries are being dealt with can be very stressful and it is useful to understand options for the taxpayer to move things along.

Assuming you have asked HMRC to close the enquiry and the department has either not replied or advised that the enquiry is still ongoing, you can consider applying to the Tax Tribunal for a closure notice.

Closure notices
A closure notice is a letter from HMRC stating that the enquiry is closed and the result of the enquiry, namely that there are no amendments or what the amendments to the return are and giving effect to them. If the conclusions are not clear or if the letter does not state that HMRC has concluded its enquiries then the letter is not a closure notice.

HMRC can also issue a partial closure notice, where a particular aspect of the enquiry (e.g. review of a director’s loan account in a corporation tax enquiry) is closed. Tax relating to the area in question becomes due when the partial closure notice is issued. This is a cash flow issue; one of HMRC’s argument for partial closure notices was that taxpayers dragged out enquiries in order to delay paying the taxes.

Conversely however, if a taxpayer believes that an enquiry has continued ‘too long’ and that HMRC has the information it needs to conclude matters, then they can apply to the Tribunal to direct that HMRC issues a (partial) closure notice within a specified timeframe.

Applying to Tribunal
A taxpayer can apply to the First Tier Tax Tribunal at any point during an enquiry to request that HMRC issues a closure notice. On such an application, the tribunal must direct HMRC to issue a closure notice unless HMRC can show there is a good reason not to.

The usual tribunal procedures and timelines apply once the appeal has been notified to tribunal. When making the appeal, although the onus is on HMRC to give good reasons why the request should be denied, it is worth bearing in mind the following considerations arising from previous applications:

• whether HMRC has sufficient information to be able to determine the tax liability if there is one;
• how long HMRC has had the information for;
• has the enquiry been conducted such that the HMRC officer is at the point where s/he can reasonably make an informed decision on the matter in question. The officer does not need to have explored in detail every single transaction.

Bear in mind that if HMRC is directed to issue a closure notice, this does not mean that the amounts in the notice will be £nil or in accordance with the taxpayer’s arguments. What it will do however is then give the taxpayer the opportunity to appeal against HMRC’s decision.

This could be useful if for example, the taxpayer feels as though their arguments may have simply bee dismissed during the enquiry and would be better heard by a tribunal (which again can go either way) or if they have a reasonable belief that HMRC is fishing for irrelevant information.

Some taxpayers are happy to wait for an enquiry to reach its natural conclusion as ‘tax deferred is tax saved’ so the actions taken will depend to a great extent on the client.

Closure notices are a useful tool for taxpayers and this is one of the areas we will be looking at in more detail at our Tax Conference 2024.

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