More clarity needed

The taxpayers were limited liability partnerships (LLPs) that operated film investment schemes. They appealed against HMRC closure notices.

The main issue was whether the LLPs carried on a trade with a view to profit. The First-tier Tribunal (FTT) refused to allow an adjournment to enable the taxpayers to rebut allegations of dishonesty made by the Revenue.

The taxpayers appealed again saying the FTT had “erred in permitting un-pleaded allegations to be made”.

The Upper Tribunal said the FTT could not have made a finding of dishonesty unless the allegations had been put to the appellants “fairly and squarely” with an opportunity to respond.

It was open for HMRC to make accusations of dishonesty as long as the department clarified its position.

The judge said the taxman was under no obligation to plead a positive case of dishonesty and no adjournment was required on that basis – but...