Tinkler v Revenue & Customs

Factual and Procedural Background

This appeal concerns whether the Respondents ("HMRC") gave a valid notice of enquiry under section 9A of the Taxes Management Act 1970 ("TMA 1970") to the Appellant ("Plaintiff") regarding their intention to enquire into the Plaintiff's 03/04 self-assessment tax return ("the Return"). HMRC contended that valid notice was given by sending a copy of the notice to the Plaintiff's accountants, Company A. The Upper Tribunal ("UT") found in favor of HMRC on this issue, reversing the First-tier Tribunal's ("FTT") decision. The Plaintiff appeals this decision. Alternatively, HMRC argued that if no valid notice was given, the Plaintiff was estopped by convention from denying otherwise. The UT found against HMRC on this issue, reversing the FTT's decision, prompting a cross-appeal by HMRC.

The Plaintiff had engaged Company A as his tax agent and adviser via an engagement letter, which included signing a form (Form 64-8) authorizing HMRC to communicate with Company A regarding the Plaintiff's tax affairs. The Plaintiff's address was changed on HMRC's system without his knowledge to an address where he no longer resided. HMRC sent the notice of enquiry to that incorrect address and also sent a copy of the notice to Company A for information. The Plaintiff never received the notice. Company A responded to HMRC's enquiries under the assumption that a valid enquiry was underway. The Plaintiff challenged the validity of the notice and the subsequent Closure Notice issued by HMRC, which amended the Return and disallowed certain losses. The FTT held that notice was valid if received by an agent with actual or apparent authority, found Company A did not have such authority, but held an estoppel by convention prevented the Plaintiff from denying the enquiry. The UT upheld the FTT's conclusion on notice to an agent but rejected the estoppel finding. The Plaintiff appeals the UT decision, and HMRC cross-appeals on the estoppel issue.

Legal Issues Presented

1. Whether valid notice of a section 9A enquiry was given by sending a copy of the notice to Company A.
2. If not, whether the Plaintiff is estopped by convention from denying that HMRC had opened a valid enquiry.

Arguments of the Parties

Plaintiff's Arguments

• Company A did not have actual or apparent authority to receive a notice of enquiry on the Plaintiff's behalf.
• Even if Company A had such authority, notice under section 9A must be given to the taxpayer personally and cannot be given to an agent absent an express agreement with HMRC.
• Even if notice could be given to an authorized agent, the copy notice provided to Company A was for information only, was not purporting to be a section 9A notice, and therefore was not valid notice.
• The Form 64-8 and related guidance, including a linked website, expressly limit the authority given to agents by stating that formal notices of enquiry must be sent to the taxpayer, not the agent.
• It would be unfair and contrary to the agreed framework for HMRC to give notice only to the agent while representing to the agent that the taxpayer had been directly notified.

Respondents' (HMRC) Arguments

• The Plaintiff's reliance on the guidance notes and website is misplaced; the broad authority granted in Form 64-8 includes authority to receive notices of enquiry.
• Apparent authority depends on representations made by the principal (the Plaintiff) to HMRC, not on HMRC's own statements in the guidance material.
• The statement relied on by the Plaintiff does not expressly limit notices of enquiry to the taxpayer alone.
• HMRC routinely sends notices of enquiry to both the taxpayer and their agent, indicating that the authority includes receiving such notices.
• Company A's communications with HMRC acknowledged and participated in the enquiry, evidencing the assumption of its authority.
• It would be unconscionable for the Plaintiff to deny the enquiry given Company A's conduct and HMRC's reliance on it.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the statutory framework under sections 9A and 115 of the Taxes Management Act 1970 regarding the giving of notice of enquiry. It considered whether the notice sent to Company A constituted valid notice to the Plaintiff.

The court analyzed the engagement letter and Form 64-8 signed by the Plaintiff, which authorized Company A as his agent for dealing with HMRC. The form granted broad authority to act on any matters within HMRC's responsibility but included specific limitations, notably that some formal notices, including notices of enquiry, must be sent to the taxpayer personally and not the agent. This limitation was supported by a linked HMRC website page incorporated by reference.

The First-tier Tribunal had found that Company A did not have apparent or actual authority to receive a notice of enquiry because of this limitation, and that the copy notice sent to Company A was for information only and not a valid notice under section 9A. The Upper Tribunal disagreed on the authority issue but rejected the estoppel argument.

On appeal, the court agreed with the FTT's interpretation that the Form 64-8 and related guidance limited Company A's authority such that it did not extend to receiving a formal notice of enquiry. The copy notice sent to Company A was not a valid notice as it was not headed as a section 9A notice, was marked "for information," and did not request Company A to pass the notice to the Plaintiff.

The court further held that Company A lacked both actual and apparent authority to receive the notice of enquiry. Apparent authority requires the third party to rely on a representation of authority made by the principal, which was not established here.

Regarding estoppel by convention, the court considered established principles requiring a shared assumption clearly communicated and relied upon, with detriment and unconscionability. The court found that the assumption of a valid enquiry was induced by HMRC's misrepresentation and that Company A did not assume responsibility for that assumption. Company A's conduct was consistent with reliance on HMRC's assertion rather than an independent assumption of authority. The court found no unconscionability in allowing the Plaintiff to deny the validity of the enquiry given HMRC's fault in sending the notice to the wrong address and inducing the mistaken assumption.

The court rejected HMRC's cross-appeal on estoppel, agreeing with the UT that estoppel by convention did not apply to prevent the Plaintiff from denying that a valid enquiry had been opened.

Holding and Implications

The appeal is allowed.

The court held that no valid notice of enquiry under section 9A TMA 1970 was given to the Plaintiff because the notice sent to the Plaintiff’s agent, Company A, was not effective as Company A lacked apparent or actual authority to receive such notice. Furthermore, the Plaintiff was not estopped by convention from denying the validity of the enquiry, as the mistaken assumption of a valid enquiry was induced by HMRC's misrepresentation and there was no unconscionability in allowing the Plaintiff to rely on the true legal position.

The direct effect is that the Closure Notice and any conclusions based on the purported enquiry are invalid. No new legal precedent beyond the application of existing principles was established.