Arshad Mahmood v The Commissioners for HMRC

Permission to appeal should be granted only where the proposed ground is arguable, has a realistic prospect of success, and identifies a material error of law.

Under section 28 A(2)(b) of the Taxes Management Act 1970, a closure notice itself may amend a taxpayer’s return. The appeal is against the conclusions stated or amendment made by the closure notice, not against a subsequent tax calculation or statement of account. Evidence concerning matters irrelevant to that issue cannot establish an error of law. A tribunal need not address every item of evidence or submission where it gives adequate reasons for its decision.

The applicant sought permission to appeal the First-tier Tribunal’s decision concerning a capital gains tax assessment and penalty arising from property disposals. The First-tier Tribunal dismissed his challenge and refused permission to appeal. The Upper Tribunal had initially refused permission on paper, but reconsidered the application orally.

The applicant ultimately challenged only the conclusion that the closure notice amended his self-assessment return. He argued that the return had not been amended, that the closure notice was invalid, and that later tax calculations and account entries were unreliable. The central issue was whether any proposed ground disclosed an arguable material error of law with a realistic prospect of success.

1. Permission refused. The applicant failed to show any arguable material error of law in the First-tier Tribunal’s decision.
2. Section 11(1) of the Tribunals, Courts and Enforcement Act 2007 requires a realistic prospect that the proposed ground would establish a material error of law. The Upper Tribunal and First-tier Tribunal were bound by R (otao Archer) v HM Revenue & Customs [2017] EWCA (Civ) 1962. Under section 28 A(2)(b) of the Taxes Management Act 1970, the closure notice itself amended the return.
3. The First-tier Tribunal’s conclusion on that point was determinative. Accordingly, evidence about whether the return was separately amended, including later versions of the return, tax calculations and statements of account, was irrelevant to the appeal.
4. There was no separate right of appeal against a tax calculation or a self-assessment statement of account. The statutory appeal was against a conclusion stated or amendment made by the closure notice. Bristol & West Plc v HMRC [2016] EWCA Civ 397 concerned whether a closure notice could be suspended and did not assist the applicant.
5. HMRC was entitled to exercise its judgment on the material available when closing the enquiry. No rule required a formal and accurate valuation in the closure notice. The notice clearly intended to amend the return, and a reasonable reader would understand it as charging the total capital gain.
6. The First-tier Tribunal was not required to refer to every piece of evidence or every submission. The principles described in Volpi v Volpi [2022] EWCA Civ 464 applied. There was also no basis to interfere with the finding that HMRC officers had been honestly attempting to answer questions put to them.

• First-tier Tribunal (Tax Chamber): dismissed the appeal concerning the capital gains tax assessment and penalty. Permission to appeal was refused on 16 May 2024.
• Upper Tribunal (Tax and Chancery Chamber): permission was refused on paper on 3 October 2024 and, following oral reconsideration, refused again.