Hanan
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 December 2018 |
| Neutral Citation | [2019] UKFTT 2 (TC) |
| Date | 20 December 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 0002 (TC)
Judge Robin Vos
Albert Fox appeared for the appellant
Ross Kernohan, Officer of HM Revenue & Customs, appeared for the respondents
Income tax/Capital gains tax – Taxpayer information notice issued under FA 2008 to Sch. 36, para. 1 – Validity of notice – Whether documents in the appellant's possession or power – Were the documents reasonably required – Effect of amendments to information notice on review – Validity of assessment/notification of penalty for non-compliance with information notice – Whether appellant had a reasonable excuse for failure to comply.
[1] The appellant, Mr Hanan, owns a company which carries on a jewellery business.
[2] As a result of information received by HMRC in respect of bank accounts held by Mr Hanan in Switzerland, they launched an investigation into his tax affairs in May 2011. The investigation is being conducted under Code of Practice 9 (cases of suspected serious fraud).
[3] In order to carry out their investigation, HMRC requested Mr Hanan to provide a large amount of information. Some information was provided but, despite a number of further requests, some information remained outstanding.
[4] As a result of this HMRC issued a taxpayer information notice under paragraph 1 of Schedule 36 to Finance Act 2008 (“Schedule 36”) on 12 November 2015 (the “Original Information Notice”) which contained a Schedule setting out 37 points in respect of which HMRC required Mr Hanan to provide information/documents.
[5] Mr Hanan appealed against the Original Information Notice on 1 March 2016 and on 20 June 2016 accepted HMRC's offer of a review of its decision in relation to the Original Information Notice.
[6] On 12 October 2016, the reviewing officer set out the conclusions from her review which were as follows:
- The validity of the notice was upheld.
- 19 items from the schedule forming part of the Original Information Notice were however removed on the basis that the information had already been provided.
- Some amendments were made to the remaining 18 items to take account of queries raised by Mr Hanan in his correspondence with HMRC prior to the review.
- The reviewing officer attached the updated list of the remaining 18 questions (as amended) as an appendix to the review conclusion letter headed Appendix A – Information Notice (the 2016 Appendix).
- Mr Hanan was given a further 30 days (i.e. until 11 November 2016) to comply with the revised information notice.
[7] HMRC subsequently agreed to extend the time for compliance with the information notice to 2 December 2016.
[8] As Mr Hanan had not complied with the information notice by that date, HMRC wrote to him on 5 December 2016 to notify him that they had charged a penalty of £300 for non-compliance with the information notice.
[9] Mr Hanan appealed to HMRC against the penalty on 7 December 2016. The penalty was however upheld on review on 28 February 2017.
[10] Mr Hanan appealed to the Tribunal against the penalty on 5 May 2017.
[11] Mr Hanan subsequently appealed to the Tribunal against the information notice on 22 March 2018.
[12] Both of Mr Hanan's appeals to the Tribunal were made outside the statutory time limit.
[13] As far as the appeal against the penalty is concerned, this was just over a month late and the Tribunal has previously given permission for this appeal to be notified to the Tribunal out of time.
[14] Mr Hanan's appeal to the Tribunal against the information notice itself was lodged following encouragement from HMRC on the basis that Mr Hanan's grounds of appeal against the penalty to a large extent consisted of grounds of appeal against the information notice. HMRC do not object to the late appeal against the information notice.
[15] It is nevertheless up to the Tribunal to consider whether it is in the interests of fairness and justice to allow the late appeal.
[16] In this case, the appeal against the information notice should have been made to the Tribunal by 11 November 2016 and was only notified to the Tribunal on 22 March 2018, approximately 16 months late. This is clearly a serious and significant delay.
[17] In the intervening period, HMRC and Mr Hanan have continued to correspond in relation to the information which has been requested and Mr Hanan has provided a certain amount of further information requested in the notice. It might therefore be said that it would be wrong to allow such a late appeal against the validity of the information notice in circumstances where it appears that Mr Hanan has treated it as a valid notice and has made some efforts to comply with it.
[18] It is however clear that matters have now reached something of an impasse and I have come to the conclusion that the best way for the Tribunal to assist the parties to progress the investigation is to allow the late appeal and to make a decision in relation to the validity and requirements of the information notice.
[19] The Tribunal therefore gives permission for Mr Hanan's appeal against the information notice to be notified to the Tribunal outside the statutory time limit.
[20] At the end of the hearing, the Tribunal invited the parties to make written submissions on two points which arose during the course of the hearing and which the parties had not come prepared to deal with in detail. These are as follows:
- Mr Fox suggested on behalf of Mr Hanan that the reviewing officer of HMRC did not have any statutory power in conducting her review to make changes to the scope of the information requested (as opposed to confirming or deleting specific requests). The first matter on which I asked for written submissions is therefore the extent of a reviewing officer's power to vary an information notice.
- Mr Fox drew attention to the fact that the penalty notice sent to Mr Hanan refers to an information notice dated 12 October 2016. As will be seen below, part of his case is that the document issued by the reviewing officer on 12 October 2016 did not constitute an information notice (or was not a valid information notice). Mr Kernohan asserts that the reference in the penalty notice to an information notice dated 12 October 2016 is an error and that the penalty notice should have referred to the Original Information Notice issued on 12 November 2015. The second area on which I asked for written submissions is whether such an error in the penalty notice invalidates the penalty.
[21] I have received written submissions from HMRC and have taken those submissions into account in reaching my decision.
[22] HMRC may require a tax payer to provide information or documents which are reasonably required in order to check a taxpayer's tax position (paragraph 1 of Schedule 36).
[23] Schedule 36 does not provide any particular form which the notice should take. paragraph 6(2) of Schedule 36 permits the notice either to specify or to describe the information or documents which are required.
[24] HMRC have discretion as to the period which is to be allowed for compliance with the notice (paragraph 7 of Schedule 36). This is normally (and was in this case) set at 30 days from the date of the notice. HMRC may however allow further time for compliance before a penalty becomes payable (paragraph 44 of Schedule 36).
[25] HMRC may not require the production of documents which are more than six years old unless an “authorised officer” of HMRC agrees (paragraph 20 of Schedule 36).
[26] A taxpayer is only required to produce a document if it is within the taxpayer's possession or power (paragraph 18 of Schedule 36). A taxpayer is only required to produce a document if it is within the taxpayer's possession or power (paragraph 18 of Schedule 36).
[27] If (as in this case) a taxpayer has filed a self-assessment tax return, HMRC may only issue an information notice if one of four conditions (conditions A – D) is met. In this case, only conditions A and B are relevant. Condition A is that there is an ongoing enquiry into the relevant tax return. Condition B is that an officer of HMRC has reasons to suspect that there has been an under assessment to tax (paragraph 21 of Schedule 36).
[28] A taxpayer who receives an information notice has the right to appeal either against the notice itself or against any requirement in the notice (paragraph 29 of Schedule 36). There is an exception to this if the information/documents required form part of the taxpayer's “statutory records” (in respect of which there is no right of appeal). HMRC do not however rely on this exception.
[29] On an appeal, the Tribunal may confirm, vary or set aside the information notice or any requirement of the notice (paragraph 32 of Schedule 36).
[30] Where the Tribunal confirms or varies the notice or any requirement of the notice, it may specify the date by which the taxpayer must comply. If it does not do so, HMRC, acting reasonably, may specify a period for compliance (paragraph 32(4) of Schedule 36).
[31] Unlike most decisions of the First-tier Tribunal, there is no right of appeal to the Upper Tribunal against the First-tier Tribunal's decision in relation to the information notice (paragraph 32(5) of Schedule 36).
[32] Where a taxpayer fails to comply with an information notice, they are liable to a penalty of £300 (paragraph 39 of Schedule 36).
[33] A daily penalty of up to £60 per day is payable for continued failure to comply after the date on which the initial £300 penalty is imposed (paragraph 40 of Schedule 36).
[34] There is no liability to a penalty if the taxpayer has a reasonable excuse for the failure to comply (paragraph 45 of Schedule 36).
[35] Where a taxpayer becomes liable to a penalty, HMRC may assess the penalty and, if they do so, they must notify the taxpayer (paragraph 46 of Schedule 36).
[36] A taxpayer has the right to appeal against HMRC's decision that a penalty is...
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Hanan v R & C Commissioners
...Mr Hanan received. References in square brackets are to paragraphs of the decision (the “Decision”) that is under appeal, namely Hanan [2019] TC 06898. [4] Paragraph 1 of Schedule 36 permits HMRC to issue information notices requiring taxpayers to provide documents or information within suc......