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The Burden Is On HMRC To Show Why An Investigation Should Be Kept Open

If you are facing a tax enquiry then how can you close an HMRC Tax Investigation?


  • A Taxpayer can apply to the Tax Tribunal so that HMRC issues a Closure Notice.
  • Closure Notice is Taxpayer protection from undue delay or excess caution in concluding an Investigation.
  • An HMRC Tax Investigation must be closed EXCEPT if HMRC shows good grounds for not doing so.
  • The burden is on HMRC; it is NOT on the Taxpayer to show that a Closure Notice ought to be issued.
  • Request for information by HMRC in continuing a tax investigation must be reasonable.

What Is An HMRC Tax Investigation?

A company (similar provisions apply to individuals), is required under paragraph 3 of Schedule 18, Finance Act 1998 to file a company tax return (known as a CT600) with HMRC which details its tax liability for a relevant period:

(1) An officer of Revenue and Customs may by notice require a company to deliver a return (a “company tax return”) of such information, accounts, statements and reports—
(a) relevant to the tax liability of the company, or

(b) otherwise relevant to the application of the Corporation Tax Acts to the company,

as may reasonably be required by the notice.

(2) Different information, accounts, statements and reports may be required from different descriptions of company.

(3) A company tax return must include a declaration by the person making the return that the return is to the best of his knowledge correct and complete.

(4) The return must be delivered to the officer of the Board by whom the notice was issued not later than the filing date.

5) Sub-paragraph (1)(b) has effect as if the reference to the Corporation Tax Acts included a reference to sections 911 and 912 of the Income Tax Act 2007.

HMRC Tax Investigation

Under paragraph 24 of Schedule 18 of Finance Act 1998, HMRC can open a tax investigation into a company tax return (subject to time limits varied by amendment or late filing of a return) within 12 months of the date of the return being filed.

An HMRC Tax Investigation or enquiry is a review of the tax return, either submitted by the taxpayer or alternatively a process capable of being triggered by the taxpayer’s failure to file the tax return.

An HMRC Tax Investigation can be a lengthy matter, taking several months and can even extend to years.

Application To Close An HMRC Tax Investigation

If a taxpayer considers that they have fully complied with an HMRC Tax Investigation but the matter is not progressing to a conclusion then in the case of a company (similar provisions apply to individuals in Section 28A of the Taxes Management Act 1970), it can apply for closure under paragraph 33 of Schedule 18 of Finance Act 1998:

(1) The company may apply to the tribunal for a direction that an officer of Revenue and Customs give a partial or final closure notice within a specified period.

(2) Any such application is to be subject to the relevant provisions of Part 5 of the Taxes Management Act 1970 (see, in particular, section 48(2)(b) of that Act).

(3) The tribunal shall give a direction unless satisfied that an officer of Revenue and Customs has reasonable grounds for not giving a partial or final closure notice within a specified period.

Application to close hmrc tax investigation

However, an HMRC Tax Closure Notice will not be issued if HMRC has good reasons for not concluding the HMRC Tax Investigation.

The closure of an HMRC Tax Investigation is not completed until a Closure Notice is issued under paragraph 32 of Schedule 18 of Finance Act 1998. A Closure Notice can be partial or final in respect of a particular tax return.

When an HMRC Tax Investigation Closure Notice is issued, it must confirm details of the amendments required to the relevant tax return and provide the reasons for that in the Closure Notice. Alternatively, the Closure Notice may say that no amendment is required to the tax return.

There is the right of appeal to any amendment made by HMRC to the taxpayer’s return.

Reasons Not To Close An HMRC Tax Investigation

HMRC can look to avoid closing an HMRC Tax Investigation if the taxpayer has not provided the information that HMRC needs to complete its enquiries. However, the obligation is on HMRC to show that there are reasonable grounds for refusing to issue the Closure Notice.

Reason not to close HMRC Tax investigation

As highlighted in the case of Vitol Aviation UK Ltd & ors v Revenue & Customs [2021] UKFTT 353 (TC):

the question is not whether the Applicants have put forward reasonable or appropriate grounds to request a closure notice. The legislation enables a taxpayer to request a closure notice and requires that the Tribunal issue such notice unless HMRC show that there are reasonable grounds for refusing the request. The question for this Tribunal is whether HMRC have demonstrated that there are reasonable grounds for refusing the application to issue a closure notice, not to consider whether the taxpayer has provided reasonable or appropriate grounds for requesting a closure notice.

How To Prevent Delay In Closing An HMRC Tax Investigation

An HMRC Tax Investigation could risk becoming prolonged if a Tax Inspector delayed closure of the investigation or was too cautious about doing so. Fortunately, the legislation offers taxpayer protection.

To prevent the taxpayer from being subject to an HMRC Tax Investigation that aims to leave no stone unturned and subjects the taxpayer to an unduly long investigation, he or she has the right to apply under paragraph 33 of Schedule 18 of the Finance Act 1998 for a Closure Notice.

A Tax Inspector is entitled to investigate to the point that he or she can form a reasonable view of the tax position and apply this to the relevant tax return by way of an amendment if deemed necessary. This view can be expressed in broad terms by the Tax Inspector and can even set any conclusions with various scenarios.

Prevent delayed closure of tax investigation

This position was set out in BCM Cayman LP v Revenue and Customs [2017] UKFTT 226 (TC) as follows:

In Eclipse Film Partners No 35 LLP v HMRC [2009] STC (SCD) 293 the Special Commissioner referred at [17] to the right to apply for a direction requiring a closure notice as being the taxpayer’s protection against “undue delay or caution” on the part of the officer in closing the enquiry. After pointing out that complexity in the taxpayer’s affairs and large amounts of tax at risk are likely to extend an enquiry, he referred to Park J’s comments in Vodafone 2 about “reasonable balance” and said at [19]:

“It is implicit in the powers given to the general or special commissioners to give a direction requiring the issue of a closure notice, and as part of that ‘reasonable balance’, that a closure notice can be required notwithstanding that the officer has not pursued to the end every line of enquiry or investigation – what is required is that he should have conducted his enquiry to a point where it is reasonable for him to make an informed judgment as to the matter in question, so that, exercising such judgment, he can state his conclusions and make any related amendments to the taxpayer’s return. The exercise of that judgment may require the officer to express his conclusions in broad terms, or even express alternative conclusions [referring to D’Arcy at [12]…”

Challenging An HMRC Tax Investigation Information Request

HMRC is the party doing the investigation and so a Tax Investigation will inevitably involve HMRC making requests of the taxpayer to provide information.

If HMRC Tax Investigation information requests are unreasonable then a Closure Notice can more readily be applied for. HMRC will be less able to demonstrate their need for the requested information.

challenge hmrc information request

Information That Does Not Exist

It is not unusual, such as in cases of HMRC Tax Avoidance investigations for HMRC to request a shopping list of information, sometimes spread over a number of pages in a standard form that may not necessarily be in existence as part of the taxpayer’s books and records. Information requested that does not exist cannot form part of the reasonable grounds for refusing to issue a Closure Notice.

Provision Of Information In A Particular Form

HMRC may seek information from the taxpayer in a particular way, particularly with the development of electronic data systems.

HMRC has the power to request information under paragraph 7 of Schedule 36 of the Finance Act 2008, which states that a person is to provide information or documents as follows:

7(1) Where a person is required by an information notice to provide information or produce a document, the person must do so—
(a) within such period, and

(b) at such time, by such means and in such form (if any),

as is reasonably specified or described in the notice.

(2) Where an information notice requires a person to produce a document, it must be produced for inspection—

(a) at a place agreed to by that person and an officer of Revenue and Customs, or

(b) at such place as an officer of Revenue and Customs may reasonably specify.

In the case of Vitol Aviation UK Ltd & ors v Revenue & Customs [2021] UKFTT 353 (TC) the reasonableness of a request for information to be supplied in a particular form came up for discussion. The judge said:

67. In Qualapharm, Judge Mosedale dismissed the appeal on the basis that HMRC had the right to specify form in the information notice and had reasonably specified electronic form in the information notice. As such, she concluded that it was not open to the appellant to argue that the material should be provided in a different form. I note that Qualapharm is a First-tier Tribunal decision and is not binding on this Tribunal.

68. In my view, the key point in the legislation and in Qualapharm in this context is “reasonable”. HMRC contended in the hearing that the information was required to check the transfer pricing model. Officer McFall stated that she expected that the checks would show that the data was correct.

Are you a Director facing a tax enquiry?

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Disclaimer: How To Close An HMRC Tax Investigation

This page: How To Close An HMRC Tax Investigation is not legal advice and should not be relied upon as such. This article How To Close An HMRC Tax Investigation is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.