Interpretation of wording in closure notices

The taxpayers were limited liability partnerships that acquired 25-year licences for equities trading software funded by bank loans. They acquired the licences as part of a marketed tax scheme which included a warranty agreement under which partnerships were compensated if projected profits were not achieved. They claimed first-year allowances on the licences which resulted in significant tax losses.

After an enquiry HMRC issued closure notices which stated: ‘I conclude of the losses claimed only a currently unquantifiable part may be allowable.’

It amended the loss figures on the taxpayers returns to nil.

The First-tier Tribunal dismissed the taxpayers’ appeal.

The main issue in the subsequent appeal to the Upper Tribunal concerned the closure notices.

The taxpayers said the wording of the closure notices either expressly or by implication accepted that some of the losses were allowable. The First-tier Tribunal was therefore not entitled to use the prior history relating to the...