When Three Strikes Don't Close the Enquiry: Bryan v HMRC [2026] UKFTT
When Three Strikes Don't Close the Enquiry: Bryan v HMRC [2026] UKFTT
A First-tier Tribunal decision handed down in May 2026 serves as a timely reminder that securing a direction to close an HMRC enquiry is no straightforward matter, even when a taxpayer has spent years cooperating and providing documentation by the bundle.
The Background
Mr Paul Bryan, a sole practitioner solicitor, found himself subject to HMRC enquiries into his self-assessment returns for 2016/17 and 2017/18. The enquiries were opened in December 2018 and January 2020 respectively. By the time this third application for a closure notice direction came before Tribunal Judge Nigel Popplewell in November 2024, Mr Bryan had already made two previous applications, both refused, with permissions to appeal also denied.
The Legal Framework
A taxpayer can apply to the First-tier Tribunal under section 28A(4) Taxes Management Act 1970 for a direction that HMRC issue a closure notice. The Tribunal must grant that direction unless HMRC can demonstrate reasonable grounds for not doing so. The burden sits firmly with HMRC.
What HMRC Still Wanted
By the time of the hearing, significant progress had actually been made. Mr Bryan had supplied fee bills, office account bank statements, turnover calculations, work in progress schedules, debtor breakdowns, and disbursement analyses. Officer Green acknowledged at the hearing that a number of earlier concerns had been resolved by documentation the applicant had supplied.
But four sticking points remained:
Client account bank statements. HMRC could not fully reconcile money flows between the office and client accounts. Mr Bryan resisted disclosure on grounds of legal professional privilege. The Tribunal sided with HMRC, following the Court of Appeal's analysis in Miller Gardner Solicitors, concluding that client account bank statements, particularly in redacted form, do not attract privilege. They record financial transactions, not legal advice.
Disbursements. The applicant's own accountants had described the disbursements figure as a 'balancing figure.' At £32,994, it struck Officer Green as disproportionately high relative to invoiced work. HMRC wanted to understand whether these sums had actually been paid, or whether the description was masking something else.
Expenses. Business expenses spiked markedly in 2017 and 2018, roughly double the figures for the years either side. No explanation had been provided for the inconsistency.
Work in progress methodology. The original approach (a fixed percentage of an employee's salary) was, as the Tribunal put it, one neither HMRC nor the judge had seen before. A revised methodology had apparently been applied across nine files, but had never been explained to HMRC.
The Decision
The application was refused. Judge Popplewell was candid that he found little to separate the parties and expressed a genuine hope that the outstanding issues could be resolved without a fourth application. But the legal test had not been met.
Citing the well-established principles in Andreas Michael [2015] UKFTT 0577 and Estate 4 Ltd, the Tribunal confirmed that HMRC need not be certain all figures are correct before issuing a closure notice, but they are entitled to the full facts before they do so. Forcing a closure notice in the absence of that information would result in a speculative amendment, which would serve nobody's interests, including the taxpayer's.
Notably, the Tribunal rejected the applicant's argument that the enquiry had become disproportionately microscopic. On the contrary, the outstanding questions were characterised as focused and legitimate.
Key Points
Bryan reinforces several lessons for anyone engaged in, or advising on, an open HMRC enquiry:
The section 28A application is a useful tool, but it is not a shortcut. The Tribunal will scrutinise whether HMRC's concerns are genuinely outstanding rather than pretextual, but where real questions remain unanswered, the application will fail.
Accounting methodology matters. Where unusual methods are used, particularly for work in progress, HMRC will require a clear explanation. Describing a disbursements figure as a 'balancing figure' in correspondence with your own accountants is precisely the kind of admission that will extend an enquiry.
Privilege arguments over client account bank statements are unlikely to succeed, especially where redaction is offered. The distinction between legal advice and transactional records is well-established.
And finally: enquiries of this kind carry a human cost. The Tribunal acknowledged the time, expense and 'mental attrition' that a six-year investigation imposes.
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