HMRC directed by tribunal to issue closure notices

In Refinitiv Ltd and others v HMRC [2025] UKFTT 415 (TC), the First-tier Tribunal (FTT) directed HMRC to issue closure notices on the basis it had failed to establish that there were "reasonable grounds" for not issuing such notices as ongoing judicial review (JR) proceedings did not constitute "reasonable grounds".

The seven applicant companies were each a member of the Thomson Reuters Group (the Applicants). The Applicants were involved in intra-group transactions with Thomson Reuters Global Resources (TRGR), a Swiss-resident company holding the group's primary intellectual property (IP). Specifically, the Applicants supplied IP services to TRGR from 2008 to 2018. This became central to a dispute which arose with HMRC in relation to transfer pricing methodologies and subsequent tax assessments. Three of the Applicants (the APA entities) had an Advance Pricing Agreement (APA) in place for these services between 2008 and 2014, but HMRC contended this did not apply to 2018. After TRGR sold significant IP assets in 2018, HMRC issued Diverted Profits Tax (DPT) notices to the Applicants which totalled over £188m for the 2018 tax year. 

The APA entities brought a JR claim against HMRC challenging HMRC's approach to the APA for 2018 (the JR claim). The JR claim was dismissed by the Upper Tribunal and the Court of Appeal, but an application was made for permission to appeal to the Supreme Court. 

HMRC kept its 2018 corporation tax enquiries into the Applicants open whilst this application for permission remained undecided. The Applicants wished for HMRC to close its enquiries and applied to the FTT, pursuant to paragraph 33, Schedule 18, Finance Act 1998, for a direction requiring HMRC to close its enquiries and issue closure notices (the Application). 

HMRC accepted that it had "no reasonable" grounds for not closing the enquiries in respect of the four non-APA entities. The Applicants argued that HMRC was in receipt of all relevant information and had come to an "informed judgment" in respect of the APA Entities, and that the enquiries had continued unnecessarily. HMRC resisted the Application, claiming the outcome of the pending application for permission to appeal before the Supreme Court in the JR claim could affect its enquiries.

FTT decision 

The Application was granted

The FTT found that HMRC had failed to meet the burden which was on it to show that there were reasonable grounds for it not issuing the closure notices sought and directed HMRC to issue closure notices to each of the Applicants for 2018, within specific timeframes.

Whilst the FTT acknowledged it could be considered reasonable for HMRC to want to know the outcome of the JR claim and its impact on the relevant APA and transfer pricing dispute, in its view, ongoing JR proceedings do not justify or present reasonable grounds for keeping enquiries open. The basis for this was that HMRC had sufficient information to issue closure notices wide enough to capture any changes that might arise following the Supreme Court's decision in the JR claim. In addition, the FTT had the power to make any consequential adjustments to the quantum referred to in closure notices.

The FTT also noted that:

• HMRC had no outstanding information requests, and the Applicants had been fully cooperative and compliant with HMRC's requests for information for over 10 years;

• further delay would risk evidence deteriorating and/or witnesses being unavailable; and

• HMRC was holding over £300m of the Applicants’ money which could not be repaid unless and until the FTT ruled in their favour. 

Comment 

One of the keenest areas of contention between HMRC and taxpayers is the length of time that enquiries can take before they are concluded. 

Unfortunately, there is no time limit by which HMRC is required to conclude an enquiry and, sadly, it is not uncommon for enquiries to go on for many years, as was the position in this case. Increasingly, taxpayers are seeking an appropriate direction from the FTT requiring HMRC to issue a closure notice within a specified period of time and in appropriate cases the FTT has shown itself to be sympathetic to such applications, as in this instance. 

The decision can be viewed here.