The First-tier Tribunal (FTT) has refused to strike out the entirety of a taxpayer's appeal against a closure notice issued by HM Revenue and Customs (HMRC), finding that the issue of whether the taxpayer could make a claim for Business Asset Disposal Relief (BADR) was within its jurisdiction.
The taxpayer had been the sole director and 60 per cent shareholder of a waste management company that had been voluntarily wound up. He had received a capital distribution of £986,413 in March 2021, during the liquidation process, but had not included it in his self-assessment return for the 2020/21 tax year. HMRC enquired into the return and subsequently issued a closure notice assessing him to Capital Gains Tax (CGT) of £194,272 on the distribution. He appealed the closure notice to the FTT. HMRC applied to strike out the appeal.
He claimed that he was entitled to BADR on the capital gain. He stated that his brother, who had owned the other 40 per cent of the company, had received a capital distribution on the same date and had obtained BADR. He also claimed that HMRC had duplicated tax on distributions made from the company, referencing a closure notice HMRC had issued for the 2017/18 tax year.
HMRC contended that, because no BADR claim had been made in the return and the purported BADR claim had only made during the proceedings, the FTT had no jurisdiction to consider the matter. However, the FTT observed that the closure notice set out HMRC's conclusion that CGT was payable, which, although not expressly stated, included the conclusion that no reliefs were available. Because of that conclusion, the issue of whether a BADR claim could be made was within the matter in question. That was not affected by whether the claim had been made at the time of the closure notice. The issue of whether BADR was available was therefore within the FTT's jurisdiction.
However, the FTT considered that it had no jurisdiction to consider the issue of the taxpayer's brother having received BADR. The treatment of a taxpayer, even in the same or materially similar circumstances, could not generally be seen to form part of the conclusion of a closure notice in relation to a different taxpayer. The FTT had no inherent supervisory jurisdiction and so could not consider what the taxpayer sought to raise without undertaking an analysis of the relevant statutory provisions, which the taxpayer's submissions had not done. That part of the taxpayer's appeal was therefore struck out.
The FTT also struck out the part of the appeal relating to whether there had been a duplication of tax. The 2017/18 closure notice related to a loan written off by the company and a beneficial loan, which had given rise to Income Tax. The 2020/21 closure notice related to a different amount and a different head of tax.