Validity of TMA 1970, s 28B(4) notices to partners

The taxpayers invested in a limited liability partnership Tower MCashback LLP 3 with the aim of generating trading losses. The partnership was the successor to Tower MCashback LLP 1 and LLP 2. In May 2011 the Supreme Court in Tower MCashback LLP 1 and another v CRC [2011] STC 1143 ruled that the arrangements were only partly effective and disallowed 75% of the losses claimed. The effect was final for LLP 3 also and in June 2011 HMRC issued a closure notice disallowing 75% of the losses claimed. However HMRC had already given effect to the taxpayers’ claims on their shares of LLP 3’s trading losses through their individual tax returns.

HMRC then took steps to amend the taxpayers’ returns by issuing notices under TMA 1970 s 28B(4). These stated the amounts by which the taxpayers’ losses would be reduced...