Kyte v Revenue And Customs

A tax settlement is governed by ordinary contractual principles. The court construes the parties’ communications objectively, in their relevant context, and considers whether they disclose offer, acceptance, certainty and completeness. A computation of tax supplied by HMRC may be an invitation to treat rather than an offer, particularly where it requires taxpayer information and forms part of an ongoing statutory settlement process. A response indicating willingness to proceed, while requesting a settlement deed and proposing payment terms, may be a counter-offer or further negotiation rather than acceptance. A settlement is not binding where essential matters, including payment date and scope of the release, remain insufficiently precise or where the parties objectively intend a further document to conclude the agreement.

The claimant participated in the Scion tax mitigation scheme and sought declarations that correspondence between his accountants and HMRC had created a binding settlement contract on 12 January 2016. HMRC had supplied calculations of the tax said to be payable and the claimant’s accountant replied that the claimant wished to proceed, requested a settlement deed and asked whether payment could be made over nine months.

The claim concerned whether the correspondence amounted to a concluded contract, whether its terms were sufficiently certain and complete, and whether the parties intended to remain subject to contract. The claimant also relied on an implied payment term and on HMRC’s published settlement material.

1. Claim dismissed. The email of 4 January 2016 was not an offer. Objectively construed in context, it supplied calculations forming part of HMRC’s settlement process. It was an invitation to treat, not promissory language or language of commitment.
2. Even assuming that the email was an offer, the reply of 12 January 2016 was equivocal. The request for a settlement deed and the question about payment over nine months showed that further terms remained to be negotiated. A payment date was an essential term of an offer to pay money. The response was therefore a counter-offer or part of continuing negotiations, rather than an acceptance.
3. The correspondence was insufficiently certain and complete. The calculation of interest to 31 January 2016 was more likely a convenient calculation date than an agreed payment date. The scope of the settlement and the release of the claimant’s tax liabilities were also insufficiently precise. The general expression that the claimant’s tax affairs would be brought up to date did not cure that defect.
4. There was no legal bar to HMRC entering into a binding tax settlement. The ordinary law of contract applied, but the relevant context included HMRC’s statutory functions, the complex tax-enquiry framework and the parties’ dealings. The same words may have different contractual effects in different contexts.
5. The request for a settlement deed was independently inconsistent with a concluded agreement. It indicated that the parties intended a further document to give the agreement additional formality. The alleged acceptance was therefore subject to contract, or otherwise was not the final step towards a binding agreement.