In Tinkler v HMRC [2021] UKSC 39, the Supreme Court held that a taxpayer (Mr Tinkler) was prevented (estopped by convention) from challenging the validity of an enquiry into his tax return. The effect of the Court of Appeal’s decision below had been that HMRC’s notice of enquiry had not been validly served on the taxpayer (Mr Tinkler). This was not challenged by HMRC before the Supreme Court. Instead, the ground for HMRC’s appeal before the Supreme Court was that Mr Tinkler was prevented from relying on this fact as a result of the operation of the doctrine of estoppel by convention. The Supreme Court accepted this argument and allowed HMRC’s appeal. This was principally because Mr Tinkler and his tax advisers had, for a long period of time, corresponded with HMRC on the assumption that the notice of enquiry had been validly issued.

Lessons for other taxpayers

The Supreme Court appears to have approached the appeal on the basis that it was concerned merely with a “technical point (that the notice of enquiry was sent to the wrong address) even though that has not caused Mr Tinkler any prejudice.” In doing so, the Supreme Court did not engage with the Court of Appeal’s observation that the “giving of a notice of enquiry is an important step with serious and immediate consequences“, such that the relevant procedural formalities are also important protections for the taxpayer. That is a cause for regret. In light of Tinkler, taxpayers and their advisers should consider at each stage of an enquiry whether HMRC have complied with the relevant procedural formalities. This in turn can inform the taxpayer’s correspondence with HMRC. Any statements made to HMRC to the effect that an enquiry has been validly opened may be held against the taxpayer if it subsequently transpires that HMRC had failed to comply with the relevant procedural formalities.

More generally, Tinkler is a case that demonstrates the potential downsides for taxpayers of opting to have an issue in an appeal to the First-tier Tribunal (the “FTT”) determined as a preliminary issue. In this case, the issue of whether HMRC’s notice of enquiry had been validly served on Mr Tinkler was raised as a preliminary issue, in connection with which HMRC raised the issue of estoppel by convention. Resolving this preliminary issue has taken close to six years from when it was first heard by the FTT. After this significant delay, Mr Tinkler’s appeal against the substance of the relevant closure notice issued by HMRC has yet to be determined. The case is therefore a further reminder that taxpayers would be advised to consider carefully whether opting to have an issue determined as a preliminary issue runs the risk of adding to the length and cost of the relevant proceedings.


HMRC had sent a letter to Mr Tinkler on 1 July 2005 indicating that they “intended enquiring into” his tax return for the 2003/4 tax year. For reasons never fully explained, HMRC did not send this letter to Mr Tinkler’s address at the time (an address that was known to HMRC) but instead sent it to another address, which Mr Tinkler had previously rented but had ceased to have any connection with by July 2005. This mistake meant that notice of enquiry had not been validly served on Mr Tinkler, as it was not sent to his “usual or last known place of residence” (section 115 of the Taxes Management Act 1970 (“TMA 1970”)). The FTT found that the letter arrived at the address to which it was sent, but was never received by Mr Tinkler as it was not forwarded to him.

When sending the notice of enquiry to Mr Tinkler’s old address, HMRC also wrote to Mr Tinkler’s tax advisers, BDO, and attached a copy of the notice of enquiry which HMRC stated had been issued to Mr Tinkler on the same day. BDO acknowledged receipt of HMRC’s letter on 6 July 2005. In the course of the response, BDO stated that Mr Tinkler’s return for the 2003/4 tax year was “now the subject of a s9A TMA 1970 enquiry“. HMRC and BDO corresponded in relation to that enquiry over the following year and a closure notice was eventually issued to Mr Tinkler on 30 August 2012.

Mr Tinkler’s subsequent notice of appeal (as amended in January 2015) contended that HMRC’s failure to send him a valid notice of enquiry meant that the closure notice was also invalid, and that this preliminary issue could determine his appeal without the need to his consider his substantive objections to HMRC’s closure notice. The Tribunal agreed that this issue could be heard as preliminary issue, such that the substantive appeal would only be heard later (if necessary).

At the FTT hearing, HMRC raised the argument in its closing submissions that Mr Tinkler was estopped by convention from raising the argument about the lack of validity of the notice of enquiry and therefore the closure notice.

The test for estoppel by convention

As cited in the Court of Appeal judgment in Tinkler, Chitty on Contracts (32nd edition, at 4-108) provides the following description of estoppel by convention:

Estoppel by convention may arise where both parties to a transaction ‘act on an assumed state of facts or law, the assumption being either shared by both or made by one and acquiesced in by the other.’ The parties are then precluded from denying the truth of that assumption, if it would be unjust or unconscionable (typically because the party claiming the benefit has been ‘materially influenced’ by the common assumption) to allow them (or one of them) to go back on it.

While estoppel by convention is more frequently encountered in contractual disputes, it can also arise in relation to non-contractual dealings. The Court of Appeal in Tinkler explained that the following principles must be satisfied for a party to be able to rely on estoppel by convention in a dispute arising out of non-contractual dealings:

(1) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. The assumption must be shown to have crossed the line in a manner sufficient to manifest an assent to the assumption.

(2) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely on it.

(3) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.

(4) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.

(5) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.

These principles were laid down by Briggs J in HMRC v Benchdollar Limited and Ors [2009] EWHC 1310 (Ch), with an amendment to the first criterion (incorporated above) made by the Court of Appeal in Blindley Heath v Bass [2015] EWCA Civ 1023. In Tinkler, the Supreme Court affirmed that these principles are a correct statement of the law on estoppel by convention in the context of non-contractual dealings. This was not doubted in the earlier decisions in Tinkler, but these principles were applied in markedly different ways as the case progressed from the FTT to the Supreme Court.

Earlier decisions

The FTT had held the elements for estoppel by convention set out in Benchdollar (as modified by the Court of Appeal in Blindley Heath) were satisfied, such that HMRC were permitted to rely on the doctrine.

The Upper Tribunal’s decision was made on basis that valid notice of enquiry was given to Mr Tinkler through the letter sent by HMRC to BDO (though this argument was subsequently rejected by the Court of Appeal and was not raised before the Supreme Court). The Upper Tribunal nevertheless indicated that it considered that the FTT had been incorrect in its decision about estoppel by convention. The Upper Tribunal considered that there was nothing “unjust or unconscionable” about a taxpayer raising the argument that HMRC had failed to comply with the relevant procedural formalities when issuing a notice of enquiry. Moreover, the Upper Tribunal suggested that permitting HMRC to raise estoppel by convention where it had failed to issue a valid notice of enquiry would undermine the protections afforded to taxpayers in the provisions of the TMA 1970 which set out how notice could validly be given.

The Court of Appeal also found against HMRC on the issue of estoppel by convention. The Court of Appeal was influenced in its conclusion by the fact that the assumption mistakenly shared by BDO and HMRC for a number of years about the validity of the original notice of enquiry arose out of the misrepresentation made by HMRC in its letter of 1 July 2005 to BDO that it had validly issued the notice of enquiry to Mr Tinkler. In those circumstances, the Court of Appeal held that neither BDO nor Mr Tinkler had assumed the requisite “element of responsibility for the assumption made” (per the Benchdollar principles). In addition, the Court of Appeal considered that HMRC’s responsibility for the mistake (ie, its failure to serve proper notice on Mr Tinkler), and therefore the mistaken assumption, was “highly relevant” to the issue of unconscionability. The fact that HMRC had failed to serve proper notice on Mr Tinkler but had misrepresented to BDO that a notice of enquiry had been validly served meant that “any acquiescence by BDO in HMRC’s mistaken assumption is insufficient to found unconscionability“. To the Court of Appeal, this was “a case in which HMRC have only themselves to blame for what occurred“.

The Supreme Court decision

Unfortunately for the taxpayer, the Supreme Court arrived at the opposite conclusion, finding that the five Benchdollar principles were satisfied. It therefore held that Mr Tinkler was estopped from arguing that (i) HMRC’s notice of enquiry was invalid and (ii) that the subsequent closure notice was vitiated as a result.

The Supreme Court held that BDO’s statement in its letter to HMRC of 6 July 2005 that Mr Tinkler’s return for the 2003/4 tax year was “now the subject of a s9A TMA 1970 enquiry” meant that the taxpayer and his advisers were partly responsible for the parties continuing to share the mistaken belief that notice of enquiry had been validly given. Further correspondence and phone calls between BDO and HMRC in the months after July 2005 were held to further demonstrate BDO’s assumption of responsibility for the shared but mistaken assumption.

The Supreme Court’s approach to the issue of unconscionability also differed from that of the Court of Appeal. The Supreme Court considered that, in most cases, “unconscionability is unlikely to add anything once the other elements of estoppel by convention have been established and, in particular, where it has been established that the estoppel raiser has detrimentally relied on the common assumption.” On the basis of earlier cases, it also held that while HMRC were “primarily at fault on the facts of this case” through “carelessly sending the notice of enquiry to the wrong address and its consequent misrepresentations to BDO“, this did not amount to unconscionable conduct which would itself prevent HMRC from invoking estoppel by convention.

The Supreme Court also concluded that permitting HMRC to succeed (on the preliminary issue) through estoppel by convention did not undermine the requirement in section 9A of the TMA 1970 that the taxpayer be given notice of an enquiry. It reached this conclusion by considering that there were other means through which HMRC could have provided notice on Mr Tinkler (with his agreement), such that the TMA 1970 is “permissive as to the method of giving notice“. The logic of this conclusion, however, is far from clear, as Mr Tinkler and HMRC had not agreed that notice could be given through means other than notice to him at his usual or last known place of residence. The Supreme Court also indicated that the fact that Mr Tinkler (and/or his PA) were aware of HMRC’s enquiry in November 2005 supported the argument that the purpose of section 9A TMA 1970 would not be undermined by permitting HMRC to invoke estoppel by convention. This was because “there cannot be any conceivable undermining of the statutory purpose once the taxpayer actually knows of the enquiry.” This conclusion also appears open to question. In Mr Tinkler’s case, HMRC had failed to open an enquiry into his tax return by providing valid notice to him. The fact that the taxpayer was aware that HMRC considered that an enquiry to be open does not change the fact that HMRC’s belief was mistaken due to a failure on its part to send notice to Mr Tinkler at his most recent address.

Nick Clayton
Nick Clayton
+44 20 7466 6409
Steven Wenham
Steven Wenham
+44 20 7466 2444