Tinkler v Commissioners for Her Majesty’s Revenue and Customs

Estoppel by convention in non-contractual dealings requires a shared assumption manifested across the line between the parties, an assumption of responsibility for the other party’s reliance, actual reliance, subsequent mutual dealings, and sufficient detriment or benefit to make resiling unjust.

The party raising the estoppel may have initiated the mistake or induced it by a careless misrepresentation. Estoppel may also operate where no contract or transaction exists. It cannot defeat mandatory statutory protection, but may operate where the statute permits the parties to agree how a procedural requirement is satisfied.

HMRC sent notice of an enquiry into a taxpayer’s return to an address which was neither his usual nor his last known residence. His authorised tax advisers received a copy, responded on the basis that a valid enquiry existed, supplied information and continued dealing with HMRC. HMRC consequently allowed the statutory period for issuing another notice to expire.

The First-tier Tribunal upheld the enquiry on actual-knowledge and estoppel grounds. The Upper Tribunal dismissed the taxpayer’s appeal on agency grounds but rejected estoppel: [2018] UKUT 73 (TCC); [2018] STC 2295. The Court of Appeal held that the advisers lacked authority to receive the formal notice and that estoppel was not established: [2019] EWCA Civ 1392; [2019] 4 WLR 138.

HMRC appealed only on whether estoppel by convention prevented the taxpayer from denying that a valid enquiry under section 9A of the Taxes Management Act 1970 had been opened.

1. Disposition. The Supreme Court unanimously allowed HMRC’s appeal. Lord Burrows gave the principal judgment, with which Lord Hodge, Lady Arden and Lady Rose agreed. Lord Briggs agreed with Lord Burrows and added observations concerning reliance and responsibility. The taxpayer and his advisers were estopped from denying that HMRC had opened a valid enquiry.
2. The governing principles. The five principles stated in Revenue and Customs Comrs v Benchdollar Ltd [2009] EWHC 1310 (Ch), subject to the amendment in Blindley Heath Investments Ltd v Bass [2015] EWCA Civ 1023, correctly stated the law for non-contractual dealings. The parties must expressly share a common assumption through words or conduct which cross the line between them. The party to be estopped must objectively intend or expect that its conduct will strengthen or influence the other party’s reliance. There must then be actual reliance connected with subsequent mutual dealings and sufficient detriment or benefit to make resiling unjust.
3. Application. The advisers’ letters and subsequent conduct manifested their belief that a valid enquiry existed. They expressly relied on the enquiry when explaining why the return could not be amended. HMRC thereafter relied, as the advisers must have expected, on their affirmation of the shared assumption. HMRC suffered detriment because it did not issue a replacement notice before the statutory deadline. It would be unconscionable to permit the taxpayer to deny the enquiry’s validity after years of dealings and where invalidity would produce a substantial tax repayment.
4. Responsibility for the mistake. HMRC had carelessly sent the notice to the wrong address and had impliedly misrepresented that a valid enquiry had been opened. Those matters did not prevent estoppel. A party’s initiation of the mistake, carelessness or misrepresentation does not ordinarily bar estoppel by convention once the other requirements, particularly detrimental reliance, are established.
5. Agency and mutual dealings. Although the advisers lacked authority to receive the formal notice, they had wide apparent authority to conduct the enquiry and to affirm that it was valid. Their actions and beliefs were therefore attributable to the taxpayer. A contract or transaction was unnecessary. The exchange of questions and answers and the eventual closure notice constituted subsequent mutual dealings.
6. Statutory protection. The estoppel did not impermissibly outflank section 9A of the Taxes Management Act 1970. Unlike the mandatory tenant protection considered in Keen v Holland [1984] 1 WLR 251, the tax legislation permitted agreement about the method of giving notice. Estoppel based on the parties’ assumption that a permissible method had been used did not undermine the statutory purpose. The court left open whether the taxpayer’s actual knowledge, without estoppel, would itself have satisfied the notice requirement.

1. United Kingdom Supreme Court: In [2021] UKSC 39, unanimously allowed HMRC’s appeal and reversed the Court of Appeal’s determination on estoppel by convention.
2. Court of Appeal: In [2019] EWCA Civ 1392; [2019] 4 WLR 138, allowed the taxpayer’s appeal and rejected HMRC’s estoppel case. It held that the tax advisers lacked authority to receive the formal enquiry notice and had not assumed responsibility for HMRC’s mistaken assumption.
3. Upper Tribunal: In [2018] UKUT 73 (TCC); [2018] STC 2295, dismissed the taxpayer’s appeal because it held that the advisers could receive the notice. It nevertheless rejected estoppel by convention.
4. First-tier Tribunal: Dismissed the taxpayer’s preliminary challenge. It held that actual knowledge was sufficient and, alternatively, that estoppel by convention prevented denial of the enquiry’s validity.