In Limited & Julian Standen v HMRC [2021] TC08119, a company and its director failed to terminate a tax investigation with a Closure Notice. Enquiring into a suspiciously late capitalisation of intangible property after incorporation, the taxpayer had failed to provide HMRC with enough information to be able to raise valid assessments.

The FTT found that the circumstances of the adjustments to intangible property had never been properly explained by the taxpayers or their advisers. As a consequence, the forced issue of a Closure Notice was not an option as HMRC still required full answers to its enquiries in order to raise valid assessments. It was also apparent that other years were also under enquiry.

Striking out the application, the FTT placed much of the blame for the delays on the Appellants’ advisers for failing to provide full responses to HMRC's enquiries.

The FTT concluded that the burden was on the taxpayers to describe and explain the terms on which the intangible assets were transferred. This included the nature of the consideration, how the consideration was paid, to whom and when it was paid, any covenants assumed to be in place to justify the valuation and the tax consequences of 'unwinding' dividends.

Useful guides on this topic

Incorporating an existing business
How to transfer an existing sole trader's business by incorporation into a company.

Incorporation & Goodwill: Tax Issues
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Regulation 80 Determinations
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Closure notices 
When does HMRC issue a closure notice? What is a partial closure notice? Can a taxpayer demand one? Are there appeal rights? 

How to appeal an HMRC decision
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Appeals: Grounds for Appeal Toolkit
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External link Limited & Julian Standen v HMRC [2021] TC08119

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