Paul Bryan v The Commissioners for HMRC

Neutral Citation: [2026] UKFTT 00743 (TC) Case Number: TC 09889 FIRST-TIER TRIBUNAL TAX CHAMBER In public by remote video hearing Appeal reference: TC/2023/16441 INCOME TAX – enquiries into tax returns – application for a direction that HMRC issue a closure notice for both enquiries – application refused Heard on: 27 November 2024 Judgment date: 19 May 2026 Before TRIBUNAL JUDGE NIGEL POPPLEWELL Between MR PAUL BRYAN Applicant and THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS Respondents Representation: For the Applicant:In person For the Respondents: Dr Jeremy Schryber litigator of HM Revenue and Customs’ Solicitor’s Office DECISION INTRODUCTION

1. In his application made under s 28A Taxes Management Act 1970 (“TMA”) dated 14 November 2023 (“the application”) the applicant has requested the tribunal to direct that HMRC issue closure notices in respect of their open enquiries into the applicant’s 2017 and 2018 self-assessment tax returns. HMRC resist the application.

2. This is the third time that the applicant has made an application for such a direction. The first time it was in respect only of his 2017 tax return. The second time it was in respect of both the 2017 and 2018 tax returns. On both occasions his applications were refused as were his applications for permissions to appeal against those refusals.

3. The first refusal is set out in the decision dated 22 May 2020 ([2020] UKFTT 0239). The second refusal is set out in the decision dated 12 January 2023 ([2023] UKFTT 00033) (“the2023 decision”). I refer to these two decisions as the “earlier decisions”.

4. Unfortunately for the applicant, it is not third time lucky. For the reasons given later in this decision, I have decided not to make the direction he requests.

5. It might be justifiably assumed that, given the earlier decisions and the issues reflected in them, the relationship between the applicant and HMRC is somewhat rocky. And it is certainly the case that the applicant has made certain allegations regarding the behaviour of HMRC officers in connection with the conduct of the enquiries.

6. But the tone of the hearing before me was cordial. Between the date of the application and HMRC’s response to it, and the date of the hearing, the applicant supplied a number of documents to HMRC which had only been scrutinised at the time of the hearing (by Officer Green). Such scrutiny enabled Officer Green, at the hearing, to accept that some of their grounds of opposition (that without the information sought they were not in any position to close their enquiry) fell away. And during the hearing, the applicant provided helpful information to HMRC which again reduced the number of issues on which HMRC oppose the application.

7. I was much heartened by this, and I hope that the spirit in which the hearing took place can be sustained, and the outstanding issues resolved between the parties without the necessity for a further application. It seems to me that there is little between the parties, and such difference as there is could be resolved pretty readily and without much further time and effort on the part of the parties.

8. Under Rule 3 of the First-tier Tribunal Rules, I am told that I should seek, where appropriate, to bring to the attention of the parties, the availability of any appropriate alternative procedure for the resolution of the dispute. I hope that my comments regarding settlement, made above and at the hearing, in the context of this Rule, may assist in resolving the parties’ dispute. THE LAW

9. There is no dispute about the relevant law which is set out in the earlier decisions and which I paraphrase below.

10. Under s 9A TMA an HMRC officer may enquire into a taxpayer’s return if he gives notice to do so. That is known as a notice of enquiry.

11. An enquiry is completed when an HMRC officer gives a notice (a final closure notice) to the taxpayer that the officer has completed his enquiries.

12. That closure notice must state the officer’s conclusions and go on to state whether no amendment to the return is required or make the amendments to the return required to give effect to those conclusions.

13. An HMRC officer may issue a partial closure notice in respect of any matter to which the enquiry relates. That partial closure notice completes the enquiry into that matter. Similar provisions apply to what is required by that partial closure notice as apply to the requirements of a final closure notice. In this case the issue concerns a final closure notice.

14. A taxpayer may make an application to the tribunal under s 28A (4) TMA for a direction that HMRC issues a closure notice. Under s 28A (6) TMA, the tribunal is obliged to give the direction unless it is satisfied that there are reasonable grounds for not issuing the closure notice within a specified period. EVIDENCE AND FACTS

15. I was provided with a bundle of documents which included authorities. The applicant provided two witness statements and gave oral evidence. Officer Green provided a witness statement and gave oral evidence on behalf of HMRC. From this evidence I make the following findings.

16. The factual background is set out in the earlier decisions and I do not repeat those here. The facts set out below should be read in conjunction with the facts found in the earlier decisions.

17. The applicant is a solicitor in private practice. He was admitted to the roll in 1986. He employs his wife but has no other employees or support staff.

18. HMRC opened enquiries into the applicant’s 2016-2017 tax return on 4 December 2018, and into his tax return for the year 2017-2018, on 14 January 2020.

19. The applicant has provided HMRC with a considerable amount of documentation and information. Much of that is detailed in the earlier decisions.

20. The 2023 decision was released on 12 January 2023. Thereafter, and significantly in letters dated 20 January 2023 and 20 April 2023, the appellant supplied a great deal more information. In the first of these, he provided fee bills for tax years ending 2016, 2017 and 2018. He also explained his calculation of turnover, how work in progress had been calculated, the trade debtor balances and disbursements. With the second he included a raft of paperwork including his office account bank records for the years ended 2017 and 2018 and records provided by his accountants.

21. However, HMRC have sought more.

22. On 21 June 2023, Officer Green wrote to the applicant (seemingly in ignorance of the letters sent by the applicant in January and April 2023) asking the applicant to provide the information set out in precursor information notices which had been sent to the applicant in August 2021. A copy of those notices were enclosed with his letter.

23. In a letter dated 29 June 2023, the applicant responded querying the lack of any reference to any earlier correspondence in that letter of 21 June 2023.

24. On 18 July 2023, Officer Green wrote to the applicant confirming receipt of the January April and June 2023 letters and apologised for the failure to responded substantively to the two earlier ones.

25. That substantive response was contained in a letter of 8 September 2023 from Officer Green in which he identified his areas of concern as being: Fee bills and client payments; interaction between client and office accounts; disbursements; bad debts; work in progress and expenses.

26. He enclosed with that letter a questionnaire with 29 questions about the running of the applicant’s practice together with a schedule which sets out further information and documentation which he wanted the applicant to provide. This included client bank account statements with client names redacted; an explanation of fee bills with no matching deposit dates; an explanation of the deposits into the office bank account which did not match the amounts on the fee bills for 2016-2017 and 2017-2018; a breakdown of disbursements and reconciliation to fee bills; and a breakdown of the rent, rates power and insurance figures for those two years together with supporting documentary evidence.

27. Officer Green’s witness statement largely reflects these areas of concern.

28. As regards client invoices and income recognition, he was unable to reconcile the applicant’s office bank account statements with his fee notes (i.e. the invoices sent to clients, which the applicant also described as “bills of costs”).

29. He could not reconcile deposits made in the applicant’s office account and thus wanted copies of the applicant’s client account bank statements. The applicant objected to these, as he had done in the 2023 decision on the basis of legal professional privilege (“privilege”).

30. He was also concerned about the position regarding trade debtors and disbursements. Although the applicant had, since the 2023 decision, provided breakdowns of the trade debtor figures, the letter from the applicant’s accountants dated 23 January 2023, which provided a disbursement schedule to the applicant, states that “you may recall that the disbursements was a balancing figure and we discussed this with you each year to confirm that this was reasonable”.

31. Those disbursements had been identified in the applicant’s letter of 20 April 2023 as being £32,994.12. These were also identified, in the same amount, on the disbursement schedule provided by the applicant’s accountants with their email of 23 January 2023, which, in redacted form, was sent to HMRC.

32. In Officer Green’s view, that disbursements figure is extremely high when compared with the invoices rendered by the applicant.

33. Furthermore, it is, in his experience, highly unusual for trade debtors comprising such a large proportion of businesses turnover. From the applicant’s tax return for 2017, turnover is £103,152, and trade debtors are £92,385. For 2018, turnover is £132,401, and trade debtors are £128,868. In his view “it simply doesn’t seem commercially viable to run the business in this way and contradicts the fee payment basis the appellant advertises”.

34. Officer Green was also concerned about the way in which the applicant had estimated his work in progress. The applicant had explained in his letter of 9 January 2018 that this was estimated as approximately one quarter of his employee’s annual salary.

35. However, the applicant’s letter dated 20 January 2023, indicated that he had discussed how various post-2018 year end bills should be included as work in progress at the year end. He went through nine files with those accountants and identified the accumulated work in progress on those nine files. Those figures were incorporated into the work in progress movements in the schedule to the accountant’s letter which had been provided to HMRC.

36. Officer Green was therefore confused about the work in progress position and its method of computation.

37. He was also concerned about the figure which had been included for expenses, which included rent.

38. The applicant explained at the hearing that he did not pay rent as such since he used an office in his own premises and thus did not pay rent to a third party. And in oral evidence he explained that the rent figure was calculated on an area basis, 4/11 of the area of the house being used for business activities and thus the same proportion of overall outgoings was regarded as a business expense.

39. Officer Green was concerned, however, that whilst the claims for expenses in year 2016 was £4,572, and for 2019 was £4,130, the expenses claimed were £9,353 for the year ended 2017 and £9,662 for the year ended 2018. He could not understand why there was this fluctuation.

40. In preparation for this hearing, the applicant provided two witness statements. The second of these appended a detailed reconciliation of the invoices/bills of costs/fee notes with the applicant’s office account bank statements, together with copies of those statements with the number of the relevant invoice identified against the relevant deposit. DISCUSSION

41. HMRC accept that it is up to them to show that there are reasonable grounds for not issuing the closure notice sought by the applicant. Submissions

42. In summary, the applicant submitted as follows: (1) He has taken to heart the observations in paragraph 44 of the 2023 Decision. In that, Judge Brannan expressed the hope that HMRC would bring the enquiries to a swift conclusion once the applicant had “produced the required information and documents”. (2) He then provided that information and documentation in his letters of 20 January 2023 and 20 April 2023. (3) In his letter of 8 September 2023, Officer Green suggests that the only difference between the amount recorded in his tax returns and evidenced by the bank statements as receipts, is approximately £226. And that correlates to an entry of £227 in the associated tax return. This suggests that there was no problem elsewhere with the applicant’s figures. (4) He has provided HMRC with redacted fee notes, invoices, bills of costs, bank statements, cheque stubs and paying in receipts. HMRC have had detailed explanations of drawings from the business together with copies of the bank accounts. These documents are more than adequate to enable HMRC to close the enquiry and issue a closure notice. There is no missing money. Everything has been through the books. (5) His client account bank statements attract privilege. And in any event, HMRC do not need them to come to a conclusion. They have all the office account information. (6) He accounts on accruals basis. This means that he is taxed on invoices raised and work in progress movements. If there are bad debts, then that does not affect his taxable income. Nor do his trade debtors. He is still taxed even if his clients haven’t paid. There is no reason, therefore, why debt and disbursement issues, should therefore be relevant to his tax position. (7) The situation has become wholly disproportionate. This can be seen from the hearing bundle for this application which amounts to some 900 pages. HMRC are unjustifiably seeking too much detail. The enquiry has become too microscopic. They don’t seem to have understood that debtors and disbursements do not affect his tax position. (8) The cost in terms of time, money, and mental attrition of this continuing enquiry is having a significant impact on the applicant and his practice. He cannot go on doing this microscopic research for HMRC. It is time to call it a day.

43. In summary, Dr Schryber submitted as follows: (1) The information and reconciliation provided by the applicant with his second witness statement has been extremely helpful. He endorsed the thanks which Officer Green had offered to the applicant for this information, and the apology, also offered by Officer Green for the delay that it has taken to process this information. (2) However, HMRC have not been able to fully reconcile the interaction between the applicant’s office bank account and client bank account. It appears that certain payments are sometimes made directly from the client account. He understands why that might be the case for disbursements. But (see below) given that the figure for disbursements appears to be a balancing figure rather than any precise reflection of amount actually spent, the client account details are needed to obtain a complete picture of the applicant’s turnover. (3) They do not attract privilege. The Court of Appeal decision in R. (Miller GardnerSolicitors) v Minshull Street Crown Court [2002] EWHC 3077 (Admin), demonstrates that there is a distinction between legal advice provided by solicitor (which is privileged), and records (such as attendance at a solicitors office for an appointment, or the provision of an individual’s name address and contact number, without more, and which records nothing which passes between solicitor and client relating to advice) which is not privileged. The client account bank statements fall into the latter category (4) And they certainly do not attract privilege if they are redacted. They also form part of the applicant’s statutory records. (5) He accepts that the applicant is taxed on an accruals basis and thus takes the bad debt risk. But the disbursements appear to be surprisingly high, and, as evidenced by the accountant’s letter, do not appear to reflect the actual disbursements, but are simply a “balancing figure”. This worries HMRC, and they wish to understand how it is made up, as it appears that these amounts described as disbursements may not have been actually paid at all. (6) And if they are a balancing figure, it suggests that the accounts would not otherwise “add up”. (7) There are historic bad debts, some going back to 2008, and HMRC need to understand why these are still showing in the applicant’s accounts and how they have been treated for tax purposes. (8) As regards work in progress, HMRC do still not fully understand how work in progress has been calculated. Computing it at 25% of an employee’s salary seems a very odd method (notwithstanding that he accepts that this was the method suggested by the applicant’s previous accountants). (9) Given the applicant’s evidence that he has now been through nine files with his accountants and come up with specific numbers which have been factored in to work in progress movements, it would be a simple exercise for the applicant to go through one of these files with Officer Green to explain the methodology which will enable Officer Green to come to a conclusion regarding its propriety. (10) The applicant has helpfully explained how he has calculated his expense figures, based on a proportion of business and private use based on floor area. However, there are inconsistencies between the expense claims for the 4 years described by Officer Green, and HMRC simply ask for an explanation as to why there are those inconsistencies. (11) The enquiries are neither in oppressive nor intrusive. The risks that HMRC are still addressing are those which were identified at the start of the enquiries. There is further to go (but not much). (12) It is true that the enquiries have been going on for some time (six years or so). The breakdown of those six years shows that, whilst there have been delays on both sides (and he attributes no blame to the applicant nor to HMRC for these. It is simply a consequence of the way enquiries work, Covid, and the fact that the applicant has made two previous applications for closure notices which have been subject to adjudication by the courts). In his view 3 ½ of those six years are attributable to those applications, and only 2 ½ years to the underlying enquiries. (13) In summary HMRC have reasonable grounds for resisting the application. Their enquiries have been reasonably focused. Some matters have been resolved (for example the office bank account reconciliation to invoices). Others remain outstanding (for example disbursements and work in progress methodology). Client account bank statements are required to enable HMRC to fully understand cash flows and turnover. All of these are required to verify the applicant’s figures, or to enable HMRC to make amendments to the returns when they close their enquiries. My view

44. The principles which I adopt when considering the application are those set out in the FTT decision of Andreas Michael [2015] UKFTT 0577, a case which was not cited to me by the parties, and although not binding on me, I gratefully adopt.

45. In Michael, Judge Sinfield said as follows: “26. Section 28A (6) TMA requires the tribunal to direct that HMRC give a closure notice within a specified period unless HMRC can satisfy the tribunal that there are reasonable grounds for not giving such a notice within a specified period. The burden of satisfying the tribunal that a direction should not be given is on HMRC.

27. As the tribunal in Estate 4 Ltd v HMRC [2011] UKFTT 269 (TC), which was not cited by the parties in this case, observed “… the test to be applied by the tribunal is whether on an objective view it is appropriate for a closure notice to be issued. This involves close scrutiny of the questions put to the taxpayer and its advisers, the information provided in response and its adequacy, and the extent to which it appears to the tribunal that further enquiry would produce information enabling the company’s corporation tax liability to be adjusted to a level differing from that shown in the return. All enquiries must come to an end at some point and so the focus of the issue before the Tribunal is whether, on an objective view, HMRC have reasonable grounds for not giving the closure notice immediately or within a specified period…

29. We take the same view as the tribunal in Stephen Price v HMRC [2011] UKFTT 624 (TC), another case which was not cited to us by the parties. In Price, the appellant had submitted that the enquiry could be closed and an estimated assessment made. The tribunal said that while HMRC has the power to issue such assessments: “HMRC is entitled to know the full facts related to a person’s tax position so that they can make an informed decision whether and what to assess. It is clearly inappropriate and a waste of everybody’s time if HMRC are forced to make assessments without knowledge of the full facts. The statutory scheme is that HMRC are entitled to full disclosure of the relevant facts: this is why they have a right to issue (and seek the issue of) information notices seeking documents and information reasonably required for the purpose of checking a tax return (see Schedule 36 of Finance Act 2008)”.

30. If we directed HMRC to close the enquiry into Mr Michael’s tax return for 2012- 13 now, it would put them in the position of being “forced to make assessments without knowledge of the full facts” as the tribunal put it in Stephen Price. In our view, it is not necessary for HMRC to be certain that the figures are wholly accurate before they can issue a closure notice. We consider, however, that it would not be appropriate in this case to direct that HMRC must issue a closure notice when it is clear that further information is or may be available that will affect Mr Michael’s liability to tax. We say this because it appears to us that there is real uncertainty about the level of takings from the Charcoal Grill for the year ended 5 April 2013, as revealed by the decision of HMRC in the VAT investigation to issue an assessment for under recorded takings covering part of the period. In addition, we consider that it is reasonable that HMRC should have further information about payments of rent received by Mr Michael including the addresses of the properties to which the rents relate. Providing such information would clearly not be onerous for Mr Michael and would allow HMRC to determine whether or not the rents should be regarded as his income. Requiring HMRC to close the enquiry now would mean that they would be bound, on the evidence available to them, to amend the return to treat the rent payments as Mr Michael’s income. In that situation, Mr Michael would have to appeal. If it can easily be established that the payments of rent are not his income but his daughter’s, then the issue of the closure notice at this stage and the making of an appeal would be a waste of everyone’s time. Accordingly, we are satisfied that HMRC have reasonable grounds for not giving a closure notice now”.

46. The foregoing extract from Stephen Price was referred by the parties to the tribunal in the applicant’s first application for a closure notice which was heard on 5 March 2020.

47. Having considered these principles, and applying them to the applicant’s position, I have reached the conclusion that there are reasonable grounds for not issuing a closure notice, either now, or within a specified period.

48. I have reached the conclusion for the following reasons.

49. These enquiries have been going on for a long time, and it is clear that the applicant has provided much relevant information and documentation. And this has now been processed by HMRC.

50. But HMRC’s misgivings as set out in Officer Green’s evidence, and as submitted by Dr Schryber, concerning the applicant’s client account, disbursements, expenses, and work in progress methodology are wholly justifiable.

51. There are money movements between the applicant’s office account and client account, which justifies their concern that the applicant’s turnover may not be exclusively evidenced by the former. It is clear from the accountant’s letter that the disbursements figure is simply a balancing figure and does not appear to reflect specific disbursements paid by the applicant out of either office account or client account. The spike in expenses for two years has not been explained. The work in progress methodology originally used by the applicant (a proportion of employees’ wages) is not one which either HMRC, nor indeed myself, have ever seen. But the applicant has now been through nine files with his accountant and a different methodology (but one which has not been explained to HMRC) has been adopted in respect of those.

52. These then are matters which are highly relevant to HMRC’s ability to issue a closure notice. And without further information about them, HMRC would be forced to issue a closure notice in the absence of full facts which would be a waste of everyone’s time.

53. Furthermore, as Officer Green commented, it would not be fair to the applicant. This reflects the sentiments expressed in the Supreme Court decision in Tower MCashback [2011] UKSC 19, in which Lord Walker said that “in issuing a closure notice an officer is performing an important public function in which fairness to the taxpayer must be matched by a proper regard for the public interest in the recovery of the full amount of tax payable”.

54. If I were to direct HMRC to issue a closure notice at this stage, I’m not at all sure of the basis on which they would be able to state their conclusion in a way which was fair to the applicant. Any addback, for example, of some or all of the disbursements on the basis that they reflect additional turnover would be, without further information, a finger in the wind exercise. The same would be true of amending turnover without seeing the applicant’s client accounts. It might be possible for HMRC to use the presumption of continuity to justify an amendment to the applicant’s expenses, but how much simpler and more precise for the applicant to explain why the expenses in two of the four years are roughly twice those in the other two.

55. The same is true of the way in which the applicant has calculated is work in progress. HMRC have no handle on how that has now been done in relation to these nine files.

56. I am with the applicant when he submits that because his turnover is calculated on an accruals basis, bad debts are not strictly relevant. So, Officer Green’s observations that it would be unusual for a business to carry so many trade debtors, is largely irrelevant as they do not affect his turnover. He is taxed on the invoices he sends out and work in progress movements from one year to the next. And indeed, it is my experience that practices such as that carried on by the applicant are likely to have a significant number of trade debtors.

57. But accounting on an accruals basis makes it all the more important that work in progress movements are properly and rigorously calculated. And thus makes it all the more important, in this case, for the applicant to explain to HMRC the basis on which his work in progress has been calculated as regards the nine files he has now analysed with his accountant

58. Furthermore, apart from it being virtually impossible for HMRC to issue a closure notice which is fair to the applicant and reflects what is essentially a best judgment assessment based on the best available relevant information, the information sought by HMRC is precisely what the applicant would need to provide on an appeal against that closure notice to discharge his burden of proving that the conclusions in any closure notice overcharged him.

59. I do not believe that the provision of this information is disproportionate, nor will it involve much work or expense by, or on behalf of, the applicant. To the extent that they are still available, the applicant’s client bank accounts can be copied, redacted and sent to HMRC. Explanations regarding the method of calculating work in progress on those nine files can be provided by the applicant and his accountant. I have no doubt that the applicant can provide a ready explanation for the spikes in his expenses for the two years in question. And as regards disbursements, to the extent that they are not readily apparent from the client account, it should be possible for the applicant to provide an explanation.

60. I agree with HMRC that the information sought by them in relation to the applicant’s client account bank statements is not privileged and is certainly not privileged if it is redacted.

61. I appreciate the applicant’s position that HMRC are being too microscopic and drilling down to a disproportionate level of detail. But I disagree with it. Whilst it is true that HMRC can properly issue a closure notice without being absolutely certain that the facts are wholly correct, in this case all HMRC are asking for is information without which they are in no position to issue a closure notice as they are not in possession of a number of important facts. Those will be revealed by the provision of the information which has been sought. And without that information, it would be premature for me to direct that HMRC issue a closure notice.

62. I have also considered whether I should direct HMRC to issue a closure notice at a future date. But I have decided not to. The reason for this is that until they have more information, then, as mentioned above, they will not be in a position to issue a proper closure notice. And it is not at all clear to me when the applicant might provide sufficient information to enable HMRC to do this. If I were to direct HMRC to issue a closure notice in, say, three months’ time, then were the applicant unable to provide the information requested, HMRC would be in the same position then as they are now. Not in possession of full facts and thus unable to issue a proper closure notice. DECISION

63. For the foregoing reasons, I dismiss the application. RIGHT TO APPLY FOR PERMISSION TO APPEAL

64. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. NIGEL POPPLEWELL TRIBUNAL JUDGE Release date: 19 May 2026