Information notices and the long reach of the tax man
The Court of Appeal has decided in HMRC’s favour in an important decision about the department’s powers.
The decision concerned HMRC’s ability to issue Schedule 36 information notices outside the UK. Such information notices are formal requests for information under Schedule 36 Finance Act 2008 and such notices may be issued to taxpayers themselves as well as to third parties.
The taxpayer, Tony Jiminez, a former owner of Charlton Athletic and vice-president of Newcastle United, had left the UK in 2002, to live in Cyprus and Dubai during the 2004-2014 period covered by the information notice in question.
The Court of Appeal reviewed earlier decisions by the First Tier Tax Tribunal and a High Court judicial review which had concluded that HMRC had exceeded its powers in seeking information from the taxpayer who was no longer resident in the UK.
HMRC had issued a notice under para 1 Schedule 36 Finance Act 2008 to Mr Jiminez at his address in Dubai, attaching a schedule of information required including bank account and credit card records and details of his visits to the UK.
At judicial review, the judge had held that para 1 Schedule 36, which authorises the issue of a taxpayer notice, could not be exercised extra-territorially and quashed the notice.
The Court of Appeal rejected arguments made at the High Court that HMRC’s powers stop at the UK border, that Schedule 36 is not intended to subvert the sovereignty of other states and that the wording of Schedule 36 makes no reference to being able to be issued overseas.
Lord Justice Patten dismissed these arguments, stating that a Para 1 notice can only be given to someone who is or may be a UK taxpayer and it is this status, rather than his place of residence, that is key.
Lord Justice Leggatt added that he did not accept that sending a notice by post to a person living in a foreign country requiring the production of information reasonably required for the purpose of checking their UK tax position violates the principle of state sovereignty.
This is a landmark decision and we are likely to see greater use by HMRC of information notices where they are investigating non-UK residents.