Cornhill P W Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 February 2021 |
| Neutral Citation | [2021] UKFTT 48 (TC) |
| Date | 17 February 2021 |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 48 (TC)
Judge Brooks
Georgia Hicks counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the applicant
Joseph Howard, counsel, instructed by and appeared for the respondent
Income tax/Corporation tax – Application by HMRC for information/documents in support of reasons that certain arrangement is not notifiable under DOTAS – Application allowed in part – FA 2004, s. 313A, 313B.
The First-tier Tribunal (FTT) ordered a company to provide information supporting the company's contention that arrangements that it was responsible for managing were not notifiable under DOTAS. The FTT rejected HMRC's application in respect of information supporting the company's withdrawn contention that it was not a promoter.
HMRC suspected that Cornhill P W Ltd (Cornhill) was a promoter of a scheme which may have been notifiable under the disclosure of tax avoidance schemes (DOTAS) provisions. As HMRC had not been notified of the scheme, HMRC asked Cornhill to either notify the scheme or explain why it thought it was not required to notify the scheme.
Cornhill told HMRC that it was “of the opinion” that it was not a promoter and that the arrangements were not notifiable under DOTAS. Not content with that response, HMRC issued Cornhill with a pre-disclosure enquiry notice under FA 2004, s. 313A. HMRC later requested information and documents from Cornhill to support its contention that the arrangements were not notifiable, and that Cornhill was not a promoter. Cornhill did not supply the requested information and documents, but instead explained why it did not consider itself to be a promoter (the “promoter reason”) or consider the scheme to be a notifiable DOTAS arrangement (the notifiable arrangement reason).
After some further correspondence, HMRC applied to the Tribunal for an order, under FA 2004, s. 313B, requiring Cornhill to provide the specified information and documents previously requested.
A couple of months after HMRC's applications, Cornhill wrote to HMRC to say that it was no longer relying on the promoter reason, but just the notifiable arrangement reason. HMRC did not amend their application.
The Tribunal rejected HMRC's assertion that a person could not retrospectively withdraw, revise or amend a reason given in response to a pre-disclosure enquiry notice. Although there was nothing in the legislation to permit a person to do so, there was also nothing to the legislation to prohibit it either. Therefore, any information and documents which Cornhill should be ordered to provide under s. 313B should be limited to those in support of the notifiable arrangements reason.
The Tribunal rejected Cornhill's assertion that it could not be a promoter in the absence of a notifiable arrangement. Instead, the FTT found that based on s. 307(6), it was not necessary for the arrangements concerned to be notifiable for Cornhill to be a promoter. Given this, the FTT found that Cornhill was a promoter and as such had to provide the information required in accordance with s. 308, and further specified information and documents HMRC could request under s. 310A, although restricted to supporting the notifiable arrangements reason.
The Tribunal also rejected Cornhill's contention that HMRC's application should be rejected because the scheme was one promoted by Baxendale Walker which had been the subject of appeals in relation to some of the users and therefore HMRC had sufficient information to allocate a DOTAS scheme reference number. The Tribunal noted that HMRC may only allocate a DOTAS number where a person complies or purports to comply with s. 308(1) or (3), s. 309(1), or s. 310 in relation to the notifiable arrangements, and Cornhill had not done this, therefore it was appropriate to order Cornhill to provide the specified information and documents.
The FTT accordingly ordered Cornhill to provide the information and documents requested by HMRC in relation to whether the arrangements were notifiable.
Based on the legislation and this FTT decision:
- A person can retrospectively withdraw, revise or amend a reason given in response to a pre-disclosure enquiry notice under FA 2004, s. 313A.
- A person can be a promoter without there being notifiable arrangements, pursuant to s. 307(6).
- HMRC are unable to issue a DOTAS scheme reference number unless s. 308(1) or (3), s. 309(1), or s. 310 have been complied with or purportedly complied with.
[1] HM Revenue and Customs (“HMRC”) apply for an order, under s 313B of the Finance Act 2004, requiring Cornhill PW Limited (“Cornhill”) to provide specified information or documents, as set out in a 52 item schedule attached to the application, in support of the reasons it, Cornhill, contends that certain arrangements are not “notifiable arrangements” under the Disclosure of Tax Avoidance Schemes (“DOTAS”) provisions contained in Part 7 of the Finance Act 2004.
[2] As Green J (as he then was) observed in Walapu v R & C Commrs [2016] BTC 14:
[11] … Pursuant to these [DOTAS] provisions certain persons, normally the promoters of tax avoidance schemes, were required to provide HMRC with information about “arrangements” and “proposals for arrangements” (ie the tax avoidance schemes): where that arrangement or proposal might be expected to provide a person with a tax advantage in relation to a specified tax; where the tax advantage might be expected to be the main benefit, or one of the main benefits, of using the scheme; and, where the scheme fell within certain descriptions contained within the Regulations. There have been changes to the Regulations since 2004 and the scheme now in force was introduced in 2006.
[12] In circumstances where a scheme is notifiable the promoter is required to provide specified information to HMRC. The obligation to notify normally accrues within 5 days of the marketing of the scheme or the making of the scheme available to clients for implementation. HMRC may issue a Scheme Reference Number (“SRN”). If so the promoter is required to pass the SRN on to the scheme users who, in turn, are obliged to notify HMRC of their use of the scheme. They do this normally by including the SRN upon their tax return. This enables HMRC to identify the users of a particular scheme.
[3] Georgia Hicks appeared for HMRC and Joseph Howard for Cornhill. I am grateful to both for their concise and succinct submissions, both written and oral.
[4] On 24 August 2018 HMRC wrote to Cornhill:
… because we suspect that you're a promoter of the scheme described below. This scheme may be notifiable under DOTAS. A “promoter” is a person who is, or has been, promoting a scheme. In this context, the term “scheme” means “arrangements” or “a proposal for arrangements”. Promoters are required to notify certain schemes under DOTAS, as set out in section 308 of the Finance Act 2004.
As we suspect you're a promoter of this scheme, we may give you a notice under section 313A of the Finance Act 2004. This notice requires you to give us a full explanation of your reasons for not notifying us of this scheme. However, before we think about doing this, I'm now giving you the opportunity to give us the information voluntarily.
The letter, which described the scheme as the “Remuneration Trust”, continued:
If you are a promoter of the scheme shown above and you now think the scheme is notifiable under DOTAS, you should notify us of the scheme straightaway. You can do this by using form AAG1, which you can find online. Go to www.gov.uk and search for “AAG1”. Once you've notified the scheme to us, please also write to me at the above address to let me know that you've done so.
If you think you're not required to notify the scheme, because you believe either, it's not notifiable or you're not promoting it, please write to me to let me know. You'll need to:
- explain why – with reference to the tests set out in Part 7 of the Finance Act 2004 and the associated regulations
- send documentary evidence to support your view
You can find more information about these tests in our guidance. Go to www.gov.uk and search for “Disclosure of tax avoidance schemes; guidance”.
Please send me your reply by 24 September 2018. If you don't, we may give you a notice requiring you to give us the information the information. We'll do this under section 313A of the Finance Act 2004.
If we give you this notice and you don't give us the...
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