Obtaining closure

The taxpayers claimed first year allowances under CAA 2001, s 45 in respect of software licence agreements made on 31 March 2004. HMRC refused the claim under s 45(4) on the basis that the expenditure was incurred with a 'view to granting to another person a right to use or otherwise deal with any of the software in question' and was thus excluded from the 'class 3' expenditure on software that would otherwise qualify. Closure notices under TMA 1970, s 28B(1) were sent to the agents stating that the claim failed 'on the s 45 point alone'.

The taxpayers appealed and, during the hearing before the Special Commissioners, HMRC abandoned the s 45 point, but the Commissioners found in favour of HMRC. The taxpayers appealed.

The High Court held that a taxpayer's right of appeal was confined to the issues in the closure notice — in this case, whether s 45(4) applied. The Special Commissioner had no jurisdiction to consider whether the other requirements of s 45 had been satisfied as this would have strayed away from the closure notice. The Commissioner should have refused to consider the other matters raised by HMRC and he had therefore erred in his reasoning.

The court upheld the taxpayer's appeal.

Tower MCashback LLP and another v CRC

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