Neutral Citation Number: [2018] EWHC 1146 (Ch)
Case No: HC-2017-002445
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

 Rolls Building, 
Fetter Lane, 
London EC4A 1NL

Date: 18/05/2018

Before :

CHIEF MASTER MARSH
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Between :

	DAVID MARK KYTE	Claimant	
	- and -		
	THE COMMISSIONERS FOR HER MAJESTY’S 
REVENUE AND CUSTOMS	
Defendant	

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Aiden Casey QC (instructed by Ingram Winter Green LLP) for the Claimant
Edward Brown (instructed by General Counsel and Solicitor HM Revenue and Customs) for the Defendant

Hearing dates: 27 and 30 April 2018
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Judgment Approved
Chief Master Marsh: 
1.	 In the tax year 2007/2008 the claimant invested in a tax mitigation scheme known as Scion Structured Products (“the Scion Scheme”) that involved the purchase of certain rights in the well-known film “Frost Nixon”. The claimant had also invested in two other tax mitigation schemes, one called Goldcrest and the other Ingenious Film Partners 2 (“Ingenious”), but it is only Scion that is directly relevant to the issue in this claim. The claimant seeks a declaration that he entered into a binding contract with HMRC on 12 January 2016 to settle his tax liabilities arising from the Scion Scheme. HMRC denies that a concluded agreement was reached on that occasion and contends that the claimant’s case fails for four reasons, any one of which is fatal to the claim. HMRC says there was no offer, no acceptance of an offer, no legal certainty and, in any event, the negotiations were understood to be, and were, ‘subject to contract’.
2.	The extent of the factual dispute between the parties is limited. The claimant served three witness statements, one from the claimant himself and statements from Mr Jeff Hartstone, the senior partner of Berg Kaprow Lewis LLP (“BKL”) and Mr Colin Lamont who is a senior tax manager employed by BKL as head of personal tax compliance. BKL are the claimant’s accountants and tax advisers. Evidence on behalf of HMRC was provided by Mrs Jenny Pitt who is employed by HMRC as a customer relationship manager. Only Mr Lamont and Mrs Pitt gave evidence because the evidence in the witness statements of the claimant and Mr Hartstone was agreed.
The Scion Scheme
3.	The principal features of the claimant’s participation in the Scion Scheme were that:
(1)	The claimant made a total capital contribution into the Scion Scheme of £1,481,122, such contribution being made during 2007/08.
(2)	The total capital contribution was made up of two elements. First, £311,036 which was a contribution made by him “in cash”. Secondly £1,170,086 which was a contribution made by him by using a limited recourse loan provided to him under the provisions of the Scion Scheme.
(3)	The claimant was entitled to be credited with certain minimum payments on an annual basis. These are described as the “MAPs”. They derived from a leaseback of the rights to the film Frost Nixon.
(4)	The claimant became liable to make annual interest payments under the loan.
(5)	The MAPs receivable by the claimant were mandated to be paid or credited to the lender, to be offset against the loan interest payable by the claimant, such that the claimant never actually received any monies under or by reference to his entitlement to the MAPs.
4.	Following his participation in the Scion Scheme, the claimant submitted to HMRC self-assessment tax returns which, amongst other things, contained relevant disclosures relating to the scheme. The tax returns covered the years 2007/08 to 2012/13. His return for the year 2007/08 claimed sideways loss relief against his other income for that year in respect of that part of the total contribution which the claimant and his advisers considered to be a trading loss. His subsequent tax returns also included losses by reference to the scheme, but in much smaller amounts.
5.	HMRC opened enquiries into the claimant’s returns (save for the tax return for the year 2009/10) pursuant to section 9A of the Taxes Management Act 1970 (“TMA”) which gives HMRC a general power to enquire into a return by giving notice of its intention to do so. In the case of the return for 2008/09, notice was given on 23 November 2009 and it requested the claimant to provide detailed information about his “Self-employed Film Rights Trading”. Enquiries were opened into the subsequent tax years after the applicable returns were filed. None of the enquiries have yet been closed by the service of a closure notice under section 28A(1) TMA. Section 28A(2) specifies that a closure notice must either state that no amendment is needed to the return or make the amendments to the return that are required to give effect to HMRC’s conclusions. There is no express obligation placed upon HMRC to serve a closure notice, but a taxpayer may apply to the First-tier Tribunal for a direction requiring HMRC to issue a closure notice within a specified period. 
6.	It is common ground that there were two issues between the claimant and HMRC namely (1) whether his participation in the Scion Scheme meant that he had suffered any allowable losses and (2) whether the loan interest was deductible from the MAPs. It is also common ground that for the years 2008/09 and 2010/11 the claimant made overpayments of tax totalling £195,711.53. 
7.	The relief sought by the claimant is confined to declarations that:
(1)	A binding contract arose between him and HMRC on 12 January 2016, settling the issues relating to the Scion Scheme (so far as they related to the claimant’s tax affairs and liabilities); and
(2)	Payment of £316,955.30 has satisfied his liabilities under the contract (and/or pursuant to that contract such payment has satisfied his material tax liabilities).
8.	It is not part of the claimant’s case that he is in a position to require HMRC to serve a closure notice under section 28A TMA. This claim does not directly concern the statutory framework within which the parties dealt with each other and relates solely to the question of whether or not a binding contract was reached. However, that issue cannot be dealt with in a vacuum and some regard must be had to the context in which the parties were dealing with each other.
9.	HMRC has a published policy governing settlement entitled “EM 6000 Enquiry Manual - Contract Settlements: Settlement Discussions”. The manuals are internal documents directed to staff working for HMRC. Both Mr Hartstone and Mr Lamont were aware, at a general level, of HMRC’s manuals but they were not aware of the passages upon which HMRC relies. The relevance of the manual is not agreed. HMRC relies on the following passages:
“When explaining your figures to the taxpayer or agent, whether in writing or in person, you must make it clear that they are without prejudice and do not constitute an offer of settlement or the closure of your enquiry … You should take extra care where you are corresponding directly with the taxpayer”.
“Where there is any doubt as to the basis of your discussions you should explain that a final position can only be reached when either
•	HMRC enters into a binding contract settlement with that taxpayer by accepting their letter of offer;
…
“If the taxpayer or agent claims that any letter in which you explain your figures or any subsequent settlement proposals that you make have effectively completed the enquiry or constitute an offer to settle, you must immediately issue a disclaimer and seek advice from contact link …”.
10.	The relevant chain of correspondence commences with a letter to the claimant from HMRC dated 25 January 2013 that invited him to contact HMRC with a view to discussing a settlement opportunity. The claimant says that an exchange of two emails in January 2016, some three years later, achieved a binding agreement. 
11.	On 4 January 2016 Sue Nottage, an HMRC Officer in the High Net Worth Unit in Portsmouth sent an email (“the Offer”) to Colin Lamont of BKL:
“Dear Mr Lamont
I attach copies of my calculations for 2007/08 to 2012/13. I also attach a copy of my notes detailing the amendments to each year and the overall adjustments for all years. Interest has been calculated to 31 January 2016.
If you have questions regarding these please do not hesitate to contact me.”
12.	Her email refers to both “calculations” and “notes”. The former is headed “Calculations 2007/08 to 2012/13” and provides a summary of the revisions to Mr Kyte’s tax assessment for each relevant tax year as they related to the Scion Scheme. It also has a summary at the end setting out adjustments to the tax payable by Mr Kyte for those years, taking into account both the additional tax calculated to be due and two sums totalling £195,711.53 he had overpaid. Save for the overpayments, the revisions solely relate to the Scion Scheme. The net sum after charging statutory interest of £60,862.68 was £316,955.30.
13.	The notes comprise detailed tax calculations for Mr Kyte’s entire tax position (Income Tax, Capital Gains Tax and National Insurance (“NI”)) for each of the years and take account of the revisions relating to the Scion Scheme enquiry. They ignore any revisions that might have been needed in connection with other enquiries into Mr Kyte’s returns and are best seen as being illustrative of the effect of a settlement of the issues relating to the Scion Scheme, all other tax issues being equal. To put the Offer in context, the total Income and Capital Gains tax due for 2007/08 after revision was £1,301,328.26 and £905,015.67 for 2008/09.
14.	On 12 January 2016, Mr Lamont replied by email (“the Acceptance”), copying in Mrs Pitt, with whom he had been in correspondence in 2015:
“Sue
Thanks for all your work on this. We have today had a meeting with Mr Kyte and he would like to go ahead with the settlement on Scion in accordance with your figures. Could you please let us have the settlement deed.
In addition would it be acceptable for Mr Kyte to pay the £316, 955.30 over a 9 month period?
I look forward to hearing from you.”
The law
15.	There is little difference between the parties concerning the principles of law that are applicable. The words comprising the Offer and the Acceptance must be construed objectively in their relevant context and without regard to evidence of subjective intent. Their communications are to be understood in the way that a reasonable person in the position of the recipient would have understood them. (Destiny 1 Limited v Lloyds TSB Bank PLC [2011] EWCA Civ 831 per Moore-Bick LJ at [15]). It is also impermissible for the court, for the purposes of the exercise of deciding whether a contract has been concluded where the contract is to be found only in written communications, to have regard to what the parties said or did after the date of the acceptance that is relied upon. (Newbury v Sun Microsystems [2013] EWHC 2180 QB per Lewis J at [27]).
16.	A summary of the principles can be found in the judgment of Lord Clarke giving the judgment of the Supreme Court in RTS Limited v Molkerei Alois Muller GmbH & Co AG [2010] 1 WLR 753 at [45]:
“45.	The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded, or the law requires, as being essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”
17.	Lord Clarke goes on to cite with approval a summary of the principles provided by Lloyd LJ in Pagnan SpA v Feed Products Limited [1987] 2 Lloyd’s Rep 601 at p 619:
“(1)	In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole … (2) 	Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary ‘subject to contract’ case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed … (4) Conversely, the parties may intend to be bound forthwith even though there are a further terms still to be agreed or some further formality to be fulfilled … (5) If the parties failed to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole on workable or void for uncertainty. (6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautological. If by ‘essential’ one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is true. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the judge [at p.611] ‘the masters of their contractual fate’. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.”
18.	I was also referred to Contract Formation Law and Practice 2nd ed. by M Furmston and GJ Tolhurst. Their formulation of the test following a detailed discussion of the principles is as follows:
“2.45 It is clear that whether a proposal constitutes an offer turns not on the actual intention in the proposer’s mind, but on the apparent intention which the addressee is justified in concluding from the proposer’s external manifestations. If the external manifestations do justify the addressee in judging a proposal to be an offer then the proposer cannot argue that it was not his intention to make an offer.
2.46 The language used in the proposal is the most decisive factor when examining what the addressee is entitled to conclude. The level of commitment is important, and language which expressly denies any commitment can be determinative. However, this language of commitment has to be interpreted in its context ....”
19.	I was also referred to Blue v Ashley [2017] EWHC 1928 (Comm) a decision of Leggatt J (as he then was). There are three points that emerge from his analysis that are of potential relevance to this case. First, at paragraph [61] he discusses the need for certainty and completeness:
“Vagueness in what is said or omission of important terms may be grounds for concluding that no agreement has been reached at all or for concluding that, although an agreement has been reached, it is not intended to be legally binding. But certainty and completeness of terms is also an independent requirement of a contract. Thus, even where it is apparent that the parties have made an agreement which is intended to be legally binding, the court may conclude that the agreement is too uncertain or incomplete to be enforceable-for example, where it lacks an essential term which the court cannot supply for the parties. The courts are, however, reluctant to conclude that what the parties intended to be a legally binding agreement is too uncertain to be of contractual effect and such a conclusion is very much a last resort.” [my emphasis]
20.	Secondly, at paragraphs [56] and [63] the judge points to the need to take account of not just the words used but their context. After referring to the passage from Lord Clarke’s judgment in RTS Flexible Systems Ltd cited above, he describes the context as being “… all relevant matters of background fact known to both parties.”
21.	Thirdly, Mr Brown who appeared for HMRC placed reliance on an expression used by Leggatt J at paragraph [56] of the judgment where he described the words that are required to amount to an offer as a “promissory statement”.
22.	I would add two observations of my own. First, the sentence I have highlighted in paragraph [61] in Blue v Ashley does not appear to me to be a statement of legal principle but rather to be an indication that the court will generally take a pragmatic approach to filling in the gaps in the contract where it is clear the parties intended to enter into a contract. Secondly, and more significantly, context includes the identity and special features that attach to one, or both, parties. In this case, it is right to have regard to the fact that HMRC is a very large public body that operates within a highly complex statutory framework. It has duties to collect tax and, of course, the taxpayer has a duty to pay tax that is properly due and payable. Decisions made by HMRC may be challenged under the statutory regime and, in limited circumstances, at common law. There are obvious differences between HMRC and a commercial person or entity, where HMRC is undertaking its duties to collect tax. Different considerations may apply where HMRC is negotiating the terms of a commercial deal with a business that is hoping to provide commercial services to it. That said, HMRC regularly reaches contractually binding agreements with taxpayers about the amount of tax that is payable and it agrees to accept a sum that is less that the full amount that would be payable if HMRC’s view of the facts or the law were to be upheld in the Tribunal. The language used by the parties in this case might be very similar to that used by business people in the context of negotiating a commercial deal. The same words may have a different effect depending upon the context in which they are provided. In one context it might be obvious that a contract had been concluded, but it may be clear in another context that the same or similar words lead to the opposite conclusion. That said, the law of contract applies to an agreement to settle a tax liability in the same as any other agreement.
23.	The claimant’s case relies upon a term being implied to provide a date for payment of the sum it is said the claimant agreed to pay if the court is unwilling to find that there was a contractual payment date of 31 March 2016. The Supreme Court reviewed the subject of implied terms in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Limited [2016] AC 742. Lord Neuberger’s judgment [14] to [32] (with which Lord Sumption and Lord Hodge agreed) provides a detailed analysis of the circumstances in which a contractual term may be implied. The parties were content to proceed on the basis that the court should only imply a term if such a term is necessary to do so relying on Baird Textiles Holdings Limited v Marks & Spencer plc [2002] 1 All ER (Comm) 737. A more detailed analysis of the law is required for the purposes of this judgment.
24.	The fourth limb of HMRC’s case is that if offer, acceptance and certainty are satisfied, the ‘agreement’ was subject to contract. A useful summary of the relevant principles is found in the judgment of HH Judge Pelling QC (sitting as a High Court judge) in Bieber v Teathers Limited [2014] EWHC 4205 (Ch) at [14]. 
25.	This claim was initially listed for trial on 7 and 8 March 2018. The parties had agreed there was no need for any witness evidence and that the issues arising from the statements of case could be determined solely from the emails that passed between them. Having seen the parties’ skeletons, I referred the parties to the passage in Chitty on Contracts 32nd Ed at 3-13 to 3-18 and to the discussion there of the decision in the House of Lords in The Hannah Blumenthal [1983] 1 A.C. 854. The editors of Chitty suggest that the test to establish whether a contract has been concluded may not be entirely objective where there is doubt about whether the accepting party has reason to believe the offeror intended to make an offer. It seemed to me there was at least a possibility that this principle might be engaged here. In the event, the parties agreed to adjourn the trial date. Evidence was then exchanged. However, at the resumed trial the parties agreed in closing submissions that I could safely disregard all the evidence provided to the court. 
The facts
26.	It is essential to have regard not just to the Offer and Acceptance emails but also to full exchange of emails between the parties. The starting point is a letter sent by HMRC to the claimant on 25 January 2013 relating to the Scion Scheme headed “Without Prejudice Settlement Opportunity”:
“HMRC is prepared to discuss entering into an agreement with you as an individual to settle on the basis set out below ….”.
27.	The letter refers to HMRC’s success in litigating ‘sole trader’ tax avoidance schemes and contains an internet address for an HMRC’s announcement. The announcement sets out the proposal in more detail than the letter and also says that the settlement opportunity was made “… in accordance with HMRC’s Litigation and Settlement Strategy”. This is a published strategy which is accompanied by the Enquiry Manual. Under the heading “The Settlement Opportunity” the letter says:
“HMRC will discuss settlement on the basis of allowing amounts related to the initial cash contribution by you in the sole trader scheme less any disallowable fees paid from the cash contribution. No interest relief will be available for borrowed sums beyond the initial cash contribution. Future income from the scheme may be taxable.”
28.	Similar letters were sent by HMRC to the claimant and to BKL on 26 April 2013. There are two elements of the letters that are significant. First, they referred to a recent tribunal decision concerning a scheme said to be similar to the Scion Scheme where the Tribunal concluded that it did not work and that the taxpayer as a “sole trader” was not carrying on a trade. This meant that there were no losses arising from “trading activities”. The letter also referred to a growing number of Tribunal decisions that similar schemes did not work. The letters explained that the settlement opportunity was made on the basis that the taxpayer was carrying on a trade but restricted the amount of relief to the amount of the taxpayer’s personal contribution less any disallowable fees. This excluded the loan element thereby significantly reducing the tax benefits that would otherwise be obtained. (As with many similar schemes, the personal contribution was about 20% of the investment and the remaining 80% was borrowed as part of the scheme).
29.	The next communication of importance took place on 16 October 2014 following initial contact having been made by Mr Lamont with Mr Brian Skelley of HMRC about the scope of the settlement opportunity. Mr Skelley has said that the Goldcrest scheme was outside the opportunity but that both the Scion and Ingenious schemes were within it. Mr Skelley sent an email to Mr Lamont asking for information that would enable HMRC to consider a settlement offer relating to the Scion scheme. The email referred to the fact that under the Scion Scheme the loan interest had been set off against the MAPs. The email went on to say:
“… the details we will require to establish the tax due will be:
1.	The personal cash contribution;
2.	If the [above] sum was borrowed, the amounts of loan interest that were paid to the lender from start to date.
3.	The sums of MAP received or credited from the start to date.”
30.	It bears emphasis that HMRC is reliant upon information provided by the taxpayer in order to formulate a settlement proposal and the taxpayer, if not wholly reliant upon HMRC’s calculations will have close regard to them.
31.	On 11 February 2015, Mr Lamont, seemingly having overlooked the request for information made by Mr Skelley in October 2014, requested the “figures for the settlement” and the “settlement figures”. Mr Skelley replied that he did not have the details he would “need to compute the Scion settlement”. His reply has an informal feel to it and he concludes by saying if Mr Lamont provided the information he needed he would “get things rolling again.”
32.	On 20 March 2015 Mr Lamont sent an email to Mr Skelley confirming that the claimant wished to have details of the Scion potential settlement figures from HMRC. It seems Mr Lamont may have misunderstood what Mr Skelley had asked for because he asked Mr Skelley to get the details HMRC needed to send out “the appropriate offer”. It was for Mr Lamont to provide the information Mr Skelley had asked for to enable HMRC to calculate the tax it would accept in a settlement. On 8 April 2015 Mr Lamont sent a further email to Mr Skelley providing, amongst other things, the information requested in Mr Skelley’s email dated 16 October 2014.
33.	On 13 April 2015 HMRC served Accelerated Payments Notices (“APNs”) under the regime contained in the Finance Act 2014 relating to the Goldcrest Scheme to which objection was made by BKL on 6 May 2015. 
34.	On 28 May 2015, Mr Skelley sent to Mr Lamont, by email, a letter which enclosed “computations of your clients liability (sic) should he take advantage of the Loss Settlement Opportunities that have been made available by HMRC”. The letter invited BKL’s observations on the figures Mr Skelley enclosed and an indication about how the claimant wished to proceed. The letter dealt with schemes other than the Scion scheme as well as the Scion scheme. So far as Scion is concerned, the figures involved a proposal by HMRC that principally involved the claimant being allowed loss relief on what was taken by HMRC to be his personal cash contribution, but not on the loan contribution and further that the MAPs would be assessed as chargeable to income tax and the loan interest could not be set off against the MAPs.
35.	On 9 July 2015 Mrs Pitt of HMRC got in contact with Mr Lamont to introduce herself as his customer relationship manager. He replied on 14 July 2015 dealing with the APNs relating to Goldcrest. On 27 July 2015 Mrs Pitt said in an email that she would need to issue APNs on the Scion Scheme and indicated that the amount of tax due was £567,439.68. The APNs are of no direct relevance save that they are likely to have increased the pressure on the claimant to agree terms.
36.	Then on 5 August 2015 HMRC sent a formal letter to the claimant giving him notice that the settlement opportunity was to be withdrawn. He was required to register his interest by noon on 11 February 2016 or he would no longer be able to use the opportunity to get his tax affairs in order. The letter is an important one because, on the claimant’s case, it marks the start of a more formal phase leading up to the conclusion of an agreement. In particular, the claimant relies on the answers to the ‘Frequently Asked Questions’ (“FAQs”) which form an attachment to the letter. The letter requested the claimant to register an interest following which HMRC would “send you a calculation of the tax and interest you would need to pay to settle our dispute.” The letter also asked him to provide evidence of the cash contribution he made and a breakdown of any claims he had made for loan interest relief.
37.	The claimant relies on the following part of the FAQs:
“Why should I settle now?
Settling will give you the peace of mind that your tax affairs in relation to the scheme listed in your letter have been brought up-to-date with HMRC. You would not face litigation on the scheme, and the potential cost, publicity and scrutiny of your tax affairs that this can involve.
Choosing not to settle could mean you have to pay more tax. The broad terms of settlement on offer to you are that HMRC will allow part of your contribution to the scheme as a tax loss, after deducting any unallowable fees. The part we will allow is the amount you contributed from your own money. We will not allow any amount of your loss claim relating to a scheme loan and there may also be adjustments for loan interest relief claims and income in later years.”
38.	The claimant also relies upon the question that deals with the taxpayer’s inability to pay the full amount immediately. The answer says that options about payment can be discussed to ensure the tax is paid as quickly as possible.
39.	It is common ground that on 30 October 2015 Mr Lamont spoke by telephone with Mrs Pitt in relation to HMRC’s settlement proposal relating to the Scion Scheme. An issue emerged from the statements of case about what was said. Mrs Pitt has produced a contemporaneous note of the conversation that accords with her witness statement. The note records words attributed to Mr Lamont when he told Mrs Pitt that the claimant “is inclined to make an offer” to end his involvement in Scion and he was prepared to pay up to £528,000. The note records Mrs Pitt’s response was:
“I said that it was not as simple as that. HMRC is not open to offers. We have to stick to the agreed settlement opportunities. I said that I would arrange for the figures to be sent to him.
I confirmed that the APN is due to go out next week.”
40.	I consider the note is likely to be an accurate record, albeit a summary, of what was said. Mrs Pitt was distinguishing a settlement that could be described as a ‘horse trade’ from a calculated assessment of the tax that was due on a specified basis. The former was not an acceptable approach. The telephone conversation is referred to in the letter sent by Mrs Pitt to Mr Lamont on 4 November 2015. Significantly, Mrs Pitt quotes what she was told by Mr Lamont about the claimant being inclined to make an offer to end his involvement in Scion. The letter goes on to say:
“I attach my calculation of the settlement figure of £695,378.48”.
41.	The letter attached documents which fall into two categories. First, there is a calculation of the settlement figure which is a one page document headed “indicative settlement calculation” and the tax is calculated to be £695,378.48. The letter also enclosed a series of tax calculations for each of the financial years showing what the effect of the settlement would be on the claimant’s overall tax liability, all other things being equal. HMRC relies on the heading to the calculation which describes it as being “indicative”. That heading is absent from the letter sent subsequently. Subject to that difference, the form of the letter and its enclosures are similar to the Offer.
42.	The calculation did not take any account of the overpayment of tax by the claimant of £195,711.53. Interest is charged on the base figure of £579,082.91 up to 6 November 2015 (the day after the letter was sent). The calculation (a) allowed the claimant no loss relief on either the personal cash contribution or the loan contribution, (b) set off the loan interest against the MAPs such that there would be no charge to income tax arising from the MAPs and (c) included interest down to 6 November 2015. On 2 December 2015 Mr Lamont sent an email to Mrs Pitt. Mistakenly the email refers to the Goldcrest Scheme. The error was corrected when Mrs Pitt replied on 17 December 2015. I consider both emails are important because they immediately precede the Offer. I set out the emails with the error corrected:
“From: Colin Lamont
Sent: 02 December 2015 16:42
To: Pitt, Jenny
Subject: Scion Settlement
Jenny
The Scion settlement does not appear to give any relief for the investment Mr Kyte made. Is this correct?
		
		From: Jenny Pitt
Sent: 17 December 2015 15:38
To: Colin Lamont
Hello Colin
I understand that your query relates to Scion, not Goldcrest?
Sue is reviewing the calculations, and we’ll get back to you as soon as possible.”
43.	“Sue” is Ms Nottage who is a member of the same High Net Worth Unit of HMRC in Portsmouth as Mrs Pitt. Her email to Mr Lamont dated 4 January 2016 is the Offer.
44.	The calculations enclosed with the Offer are in a form that is similar to those provided on 4 November 2015 save that:
(1)	They are not headed “indicative”. Instead they are headed: “Calculations 2007/08 to 2012/13”
(2)	They include a table of adjustments that take account of the overpayments of tax made by the claimant.
(3)	Interest is calculated to 31 January 2016 (rather than to the following day) and the date is stated expressly in the body of the email. 
45.	On 12 January 2016 Mr Lamont sent the Acceptance to Ms Nottage.
46.	On 13 January 2016 Jenny Pitt responded to Mr Lamont’s email:
“We need to bottom out the payment instalment arrangements before we can issue the settlement deed (as it alters the wording). I’ll need some more information, which I’ll come back to you on ASAP.
However, I have a query on the previous arrangement. Did your client pay the full £88,523.24 as agreed on 16 December? Our records show he was £270 light. Can you please advise whether this error is his, or ours? If it is his, we obviously need the balance to be paid urgently.”
47.	There then followed a further exchange of emails between Mrs Pitt and Mr Lamont about arrangements for payment. None are admissible when the court is seeking to establish whether an agreement was concluded between the parties. It suffices to record that on about 28 January 2016 Mrs Pitt, or another member of HMRC, realised that, according to HMRC, an error had been made in the calculations provided to Mr Lamont by Ms Nottage. When this point was made, BKL asserted that a binding agreement had been reached. 
Submissions
48.	The claimant’s case is that a binding settlement of the issues relating to the Scion Scheme arose from the Offer and the Acceptance. Recognising that certainty requires there to be a date for payment, the claimant says, “for the avoidance of doubt”, there was an implied term of the contract that the claimant would make payment to HMRC of the settlement sum within a reasonable time or, alternatively, it was an express or implied term that the claimant would make payment to HMRC of the settlement sum by 31 January 2016. £316,955.30 was paid by the claimant on 27 May 2016. The payment was accepted by HMRC as a payment on account.
49.	HMRC’s case is that no offer was made. It is said that if it was anything, Ms Nottage’s email constituted an invitation to treat and that the email of 4 January 2016 was not sufficiently certain because it simply contained calculations made by an HMRC officer. HMRC relies upon its published guidance and pleads:
“13. (c) Given HMRC’s guidance the objective understanding of the circumstances of the correspondence was that any binding contract would only be formed by accepting a letter from the claimant setting out an offer.
(d) The mutual understanding of the parties in any event was that any dialogue would be on the basis of an exchange of information with terms to be finalised in a settlement deed or equivalent formal memorandum. The email correspondence did not have legal or contractual effect.
(e)	The terms of the purported contract were too vague to be certain in any event.”
50.	Mr Casey QC, who appeared for the claimant, led his submissions with three propositions.
(1) There is no juridical reason that prevented HMRC from concluding a contract with the claimant to settle the dispute with HMRC about the extent of reliefs available from the Scion Scheme on the terms set out in the particulars of claim.
(2) HMRC does not rely upon evidence of custom or practice that affect the legal position.
(3) The approach for the court to adopt is to look at the language that was used and to decide whether it is consistent with contractual intent, by there being an offer and an acceptance. If there is such intent, the court should conclude there was a contract unless there is a reason not to do so such as that the agreement being subject to contract.
51.	Mr Brown who appeared for HMRC accepted these three propositions but with some qualifications. Taking them in turn.
(1) It may be strictly right that that there is no legal bar to HMRC concluding an agreement, but it is necessary to look at the alleged agreement in its proper context, namely that the claimant and HMRC were dealing with an enquiry into a series of tax returns and tax enquiries arise under the statutory framework of the TMA. There are exceptions to HMRC’s ability to settle disputes arising in connection with an enquiry. One example can be seen in section 54 TMA where there is an appeal. The section provides a framework for agreements that affects the ability of the taxpayer and HMRC to conclude a common-law agreement. In this case, it is not said that the agreement relied upon by the claimant entitled the claimant to obtain closure of the enquiry. Mr Brown points to the limited relief that the claimant seeks in the claim.
(2) Although it is accepted that there is no evidence of custom or practice, or of ‘notorious fact’, Mr Brown submits that it is important to take account of HMRC’s position as an authority that is given wide statutory powers to collect tax under a complex regime that is allied with the taxpayer’s statutory duty to pay tax. The agreement does not arise in connection with HMRC operating as a commercial entity but, rather, within the relevant statutory framework. This is relevant, he submits, to the way in which the language is construed and the likelihood of the parties having achieved a settled contractual intent.
(3) It is agreed that the principal task of the court is to consider the language used by the parties, but it is important not to lose sight of the relevant context and the nature of the contracting parties as part of the process of considering what the language was intended to achieve.
52.	It is necessary to analyse the communications between the parties by reference to the traditional approach of offer and acceptance and, additionally, to consider whether the words used were sufficiently certain and complete. I bear in mind, however, the observation by Professor John Cartwright in Formation and Variation of Contracts at 3-19 that the notion of there being an offer and an acceptance is very often an artificial analysis. As Lord Wilberforce observed in New Zealand Shipping v AM Satterthwaite and Co Limited (The Eurymedon) [1975] A.C. 154 at 167:
“… English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration.”
	Was there an offer?
53.	The correspondence between the parties starts with notification from HMRC approximately three years before the agreement was said to have been concluded that there was a “settlement opportunity” and a willingness to discuss entering into an agreement. Clearly such language was equivocal. HMRC was expressing a wish to resolve the claimant’s tax position relating to the Scion Scheme as part of its duty to collect tax and to agree concessions where appropriate. There was a degree of persistence on the part of HMRC to ensure that the settlement opportunity was considered. 
54.	As I have observed earlier in this judgement, the position reached in February and March 2015 still had a marked degree of informality about it. However, the service of APN’s in relation to the Goldcrest scheme and the subsequent indication that APN’s would be served in relation to the Scion Scheme brought a degree of stringency to the process. HMRC was clearly intending to encourage the claimant to conclude issues relating to his tax liability under the relevant tax mitigation schemes. On 28 May 2015 Mr Skelley sent “computations” with an invitation to BKL to say whether Mr Kyte wish to proceed with the settlement. At that point the language is some distance away from being an offer to enter into a contract. Matters started to come to a head following HMRC’s letter sent on 5 August 2015 giving notice that the settlement opportunity would be withdrawn in early 2016. The telephone conversation between Mr Lamont and Mrs Pitt on 30 October 2015 clarified, if it had been in doubt, that HMRC was not in the business of ‘horse trading’. In other words, HMRC was willing to resolve the dispute about the claimant’s tax liability by a calculated sum being agreed. Although some care is needed to avoid labels becoming more than a useful lens through which to view the communications, I agree with Mr Brown it is helpful to distinguish between a computation (or a calculation) and a settlement offer. The two may become synonymous but it is important to take proper account of the need for HMRC first to obtain relevant information from the taxpayer in order to make a computation, on a basis that is acceptable to HMRC, of the tax that is due, secondly to process that information and thirdly to provide the taxpayer with the conclusions HMRC has reached. A computation provides the workings and may not be just an offer to settle at a stated sum.
55.	The letter sent by Mrs Pitt on 4 November 2015 is the immediate precursor to the Offer. It is essential to see the Offer as something that follows on from Mrs Pitt’s letter rather than seeing it in isolation. To my mind, Mrs Pitt’s letter is entirely clear; she was providing an indicative settlement calculation with a series of tax calculations for the claimant to consider. It does not have regard to the overpayment of tax and interest is calculated to the date on which the letter was sent. I do not consider that Mr Lamont’s email sent on 2 December 2015 can be understood as being a query about an offer. His query concerns the calculation of the tax that is due. He makes the point that the calculation does not appear to give any relief to Mr Kyte. The response from Mrs Pitt is that the “calculations” were being reviewed. I consider it is clear that what then emerged in the Offer was a further iteration of the calculations that had already been provided. It is true that the heading “indicative” had been removed from the calculations and the overpayment of tax is taken into account. The calculations had moved a step forward toward a sum that could have become a settlement figure either by an offer to settle at that amount being made by the claimant or, subject to the way the exchange proceeded, with an offer emanating from HMRC.
56.	It is also right to have regard to the fact that the calculations provided by Ms Nottage included interest to 31 January 2016. It might be said that this prospective calculation of interest was made on the assumption that the figure provided by the calculations was one that Mr Kyte could merely accept. It assumed, perhaps, that Mr Kyte would need some time in which to consider the figure. On the other hand, it could equally be consistent with the end of the month merely being taken as a convenient date to calculate statutory interest. It is common ground that interest would be charged and that the rate of interest was not a matter of discretion. Rates are set under The Taxes (Interest Rate) Regulations 1989.
57.	I consider that the language used Ms Nottage’s email sent on 4 January 2016, even seen in light of the previous communications, is some considerable distance from the type of language which could be described as ‘promissory language’ or the language of commitment. It is oversimplistic to see the calculations, that involve a considerable number of factors relating to a number of tax years, as leading to a figure that could be accepted. In the context of, say, negotiations about the purchase of a chattel or a specified quantity of a commodity, putting forward a figure may amount to an offer that is capable of acceptance. The context here is materially different. Using traditional language, the figure HMRC put forward in its calculations was an invitation to treat.
58.	Having reached that conclusion, it is strictly unnecessary to go on to consider whether there was an acceptance of an offer and the two additional considerations put forward in Mr Brown’s analysis. However, it is right that I should do so and I proceed on the assumption that Ms Nottage’s email sent on 4 January 2016 was, in fact, an offer, contrary to the conclusion I have reached.
	Was there an acceptance?
59.	I do not consider that this question gives rise to any real difficulty. The language contained in Mr Lamont’s email sent on 12 January 2016 is plainly equivocal. He says that the claimant would like to “go ahead with the settlement on Scion”. He follows this by requesting a “settlement deed”. Furthermore, he then asks a question, namely whether it would be acceptable for the claimant to pay over a nine-month period? In his analysis of the email, Mr Casey QC relied heavily on the first paragraph. However, when looked at as a whole, Mr Lamont was saying to HMRC that the figure was acceptable but there were terms that needed is to be negotiated, in particular a payment date.
60.	 A date for payment is an essential part of an offer to pay a sum of money. There are circumstances in which the court may, by virtue of an implied term, fill a gap. However, I find it hard to see how the acceptance of an offer could include the acceptor asking the offeror about terms for payment. This is not leaving a gap about the settlement date. It is either properly seen as a counter-offer, or as a step in a negotiation that might lead to a concluded contract.
61.	Mr Lamont’s request for a settlement deed is also indicative of a wish to receive a more detailed proposal. 
	Was there legal certainty?
62.	It follows from what I have said that the terms included in the exchange of emails lacked a sufficient degree of precision to enable them to amount to a binding contract. In this connection, it is possible to put interest on one side because both parties could be assumed to have understood that interest was not a matter of discretion. It would simply have fallen to be calculated in accordance with the relevant regulations up to the payment date (or dates). There is however, real difficulty about the payment date. Mr Casey QC submitted that the calculation of interest to 31 January 2016 was a clear indication that this was the payment date and could be seen as an express term. I do not agree. The calculation of interest to that date is far more likely to have been merely a matter of convenience.
63.	I also consider that the terms contained in the Offer and Acceptance were insufficiently precise about the scope of the settlement and the release that would follow from it. It is here that the context is important. The claimant’s tax liabilities were plainly complex and it would have been essential for both HMRC and the claimant to have understood with precision exactly what the scope of the agreement was intended to be and how it might affect the enquiry into the claimant’s participation in the Scion Scheme. In theory it is possible for a taxpayer, perhaps in less involved circumstances, merely to agree a sum with HMRC, provided terms for payment are agreed, but here, Mr Lamont expressly asked HMRC to provide a settlement deed and it and it is clear he did so with a view to the claimant, and BKL, being able to understand what the effect of agreeing a settlement would be. Mr Casey QC relied upon an answer to one of the FAQs to make good the scope of the agreement. I can see nothing wrong with that approach in principle, if the answer to the FAQ is sufficiently precise. The difficulty with it in this case, however, is that the notion of the claimant’s tax affairs being ‘brought up to date’ is far too general to be of assistance.
	Was any agreement subject to contract?
64.	It is not essential for there to be any formality before a taxpayer concludes an agreement with HMRC. It is right there is no evidence of a requirement from HMRC for the taxpayer to make an offer to HMRC or for there to be a settlement deed (or indeed any additional document). However, Mr Lamont expressly requested HMRC to provide a draft settlement deed. I consider that such a request was not made not merely as a matter of form, or good practice, such that an agreement that had already been concluded remained contractually binding. Rather, it appears to me that his email was intended to be a further step along the path toward a concluded agreement being reached and that the agreement was to have additional formality. Even if all the other elements of a binding contract were present, which I do not accept, the acceptance was conditional upon their being a further document to conclude the agreement. The request for a deed can be analysed in a number of different ways, either as a counter offer, or as an acceptance that is subject to contract. Indeed, the Acceptance can be seen as being too uncertain by virtue of the request for a deed. Whichever way it is looked at, the Acceptance was not the last step in concluding a binding contract.
	Conclusion
65.	For the reasons I have given, the claim will be dismissed.