HMRC posted the notice opening an enquiry into Mr Tinkler’s 2003/04 return to a house he had left, and he never received it. His accountants nevertheless dealt with HMRC for years on the shared assumption that a valid enquiry was under way. The Supreme Court held that he was estopped from denying, after the time for a fresh notice had passed, that the enquiry had been validly opened.
The notice and the wrong address
Under section 9A of the Taxes Management Act 1970, an officer may enquire into a return only by giving the taxpayer notice within the time allowed. Mr Tinkler’s 2003/04 return was filed by 31 January 2005, so an enquiry had to be opened by 31 January 2006. A notice may be posted to the taxpayer’s usual or last known residence, or to his place of business or employment.
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Mr Tinkler had appointed BDO as his tax agent and had given HMRC an updated correspondence address. The enquiry notice was nevertheless sent to a former home.
Mr Tinkler did not receive that letter. HMRC also sent a copy to BDO with questions about his return. The Supreme Court proceeded on the basis that neither letter itself constituted a valid statutory notice.
The shared assumption
BDO responded that it would answer the questions and raised an omitted loss. It expressly explained that it could not amend the return because the return was already under enquiry. That communication mattered because it went beyond silently sharing a mistaken assumption.
The dealings continued on the footing that an enquiry was open. On 30 August 2012 HMRC issued a closure notice rejecting the loss and confirming the £701,990.96 shown on the original return. Only in January 2015, shortly before the tribunal hearing, did Mr Tinkler add the objection that no valid notice had been given, so the closure notice was invalid.
The courts below
The First-tier Tribunal held that BDO had no authority to receive an enquiry notice, but that knowledge of the enquiry before the deadline was enough and that estoppel by convention also prevented Mr Tinkler from denying that a valid enquiry had been opened. The Upper Tribunal disagreed with those reasons, though his appeal still failed. It held that BDO did have authority to receive the notice, that knowledge from another source could not cure a badly addressed notice, and that estoppel was unavailable both because it would undermine section 9A and because its requirements were not met.
The Court of Appeal allowed Mr Tinkler’s appeal. It held that Form 64-8, read with a linked website page, required a formal enquiry notice to go to the taxpayer rather than the agent. HMRC did not appeal that conclusion, so the Supreme Court proceeded on the basis that neither letter was itself a valid notice. On estoppel, Hamblen LJ, with whom Sir Bernard Rix and McCombe LJ agreed, held that HMRC had induced the shared mistake by misrepresenting that notice had been given to Mr Tinkler, that BDO had never endorsed that statement, and that it was not unconscionable to resile from an assumption for which HMRC were to blame.
Why the estoppel was made out
HMRC’s only appeal was on estoppel by convention. Lord Burrows, with whom Lord Hodge, Lady Arden and Lady Rose agreed, affirmed the principles stated by Briggs J in Revenue and Customs Comrs v Benchdollar Ltd, as later amended. The assumption must be communicated across the line between the parties: a private mistake held by each is not enough. The person to be estopped must have assumed some responsibility, by conveying that he expected the other to rely on his acceptance of the assumption. The other must actually have been influenced by that, in connection with later mutual dealings, and the reliance must make it unjust to insist on the true position.
The Court accepted that HMRC’s letter impliedly misrepresented that the enquiry was being validly opened. Unlike the Court of Appeal, it held that this was largely irrelevant. Estoppel is not barred merely because the party relying on it started the mistake, was careless, or induced it by a misrepresentation. BDO’s letter of 6 July did more than repeat HMRC’s statement. By saying that the return was already under a section 9A enquiry, and by later answering HMRC’s questions, BDO affirmed the assumption. BDO had apparent authority to conduct the enquiry even though it could not receive the notice. Had the notice been defective, HMRC could reasonably have expected BDO to say so.
HMRC relied on that affirmation by sending no further notice before 31 January 2006. If the enquiry were invalid, the closure notice would fall with it, and Mr Tinkler would stand to gain some £635,000. That detriment was enough. HMRC’s carelessness was not unconscionable conduct of a kind that would bar the estoppel. Lord Briggs agreed, adding that BDO’s affirmation mattered because HMRC could reasonably be expected, once BDO had subscribed to the assumption, not to check before time ran out that notice had been properly served.
The two further objections
The Court rejected the argument that the estoppel arises only from a contract or similar transaction. These were mutual dealings: questions, answers and a closure notice. The duty to pay tax comes from statute; the estoppel concerned the procedure for determining the amount. The Court did not decide whether this estoppel can itself create a cause of action.
It also rejected the analogy with Keen v Holland. There, statute gave agricultural tenants a protection which the parties could not contract out of, so estoppel could not do what a contract could not. Section 9A requires notice, but the Act does not insist on only one method of giving it, and the parties could have agreed a method, including notice to the advisers. An estoppel treating the enquiry as valid did not defeat the statutory purpose. Once Mr Tinkler or his assistant knew of the enquiry in November 2005, there was in any event no purpose in shielding him from it. The Court left open whether that knowledge would, without an estoppel, itself have satisfied section 9A.
Verdict: The Supreme Court unanimously allowed HMRC’s appeal. On these dealings, Mr Tinkler was estopped from denying that a valid enquiry had been opened. The Court left open whether actual knowledge by itself would have satisfied the statutory notice requirement.
Source: Tinkler v Commissioners for Her Majesty’s Revenue and Customs [2021] UKSC 39
