‘No ambush’ in closure notice

The appellant is a partnership. In 2002 it sold a property originally acquired in 1996 recording in its partnership tax return for the year ended 5 April 2003 a capital gain in respect of the sale calculated on the basis that business asset taper relief applied.

HMRC opened an enquiry into the 2003 return and when this was concluded issued a closure notice stating that the capital gain should be reduced to nil while the turnover was to be increased by £1 150 002. A partnership statement reflecting HMRC’s amendments was also issued.

The appellant initially appealed to HMRC against the closure notice.

Following a review HMRC upheld the decision sending a letter saying ‘should the tribunal find that the transaction was by way of an investment [rather than as part of the partnership’s trading activities as decided in the closure notice]...