Jupiter Online Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 July 2019 |
| Neutral Citation | [2019] UKFTT 478 (TC) |
| Date | 25 July 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 478 (TC)
Judge Michael Connell, Member Jo Neill
The appellant did not attend and was not represented
Mr Matthew Beattie, Officer of HMRC, appeared for the respondents
Income tax – Notice to provide information – Whether items reasonably required for the purposes of checking the taxpayer's tax position – Yes – Appeal dismissed – FA 2008, Sch. 36, para. 1.
The First-tier Tribunal (FTT) dismissed a taxpayer company's appeal against an information notice. The taxpayer had not shown that it was not reasonable for HMRC to require the information/documents referred to in the notice.
HMRC issued an information notice to the appellant (Jupiter Online Ltd or “the Company”) under FA 2008, Sch. 36, para. 1. The notice was issued as part of an enquiry into the Company's tax returns for the two accounting periods ending 30 September 2016. The information/documentation related to fees and services between the Company and two other companies (IFL Management Ltd and Mete Corporation) which HMRC considered to be linked as part of a mass marketed tax avoidance scheme.
After further correspondence between the Company and HMRC, the Company appealed against nine items in the notice on the grounds that the information/documentation was not reasonably required to check the Company's tax position.
The FTT noted that it was generally established that the burden of proof in relation to the “reasonably required” test in FA 2008, Sch. 36, para. 1 rested on the appellant, and not on HMRC. The position depended on the circumstances and the type of information requested and it was for the tribunal to determine where the burden of proof lay. In this case Judge Connell found that the appellant had the burden of showing that it was not reasonable for HMRC to require the information/documents referred to in the notice.
The FTT noted that HMRC were entitled to check how the Company operated, who the Company's customers were, the nature of the services provided and what involvement it had with other entities both on and offshore. The FTT found that the disputed information and documentation clearly gave HMRC a better understanding of the nature of the Company's activities which would allow HMRC to determine the Company's role in the purported tax avoidance scheme.
The FTT rejected the Company's grounds of appeal. Finding that HMRC were justified in issuing the information notice to secure the production of documents/information reasonably required for carrying out an investigation or enquiry into the Company's tax position. The appellant had not discharged the burden of showing that it was not reasonable for HMRC to require the information/documents referred to in the notice.
The Company's appeal was accordingly dismissed.
The decision quotes both Judge Redston in Mathew [2015] TC 04342 and Judge Beare in Hundal [2018] TC 06647 to support HMRC's submission that the burden of proof in relation to the information/documentation being “reasonably required” for the purposes of checking the taxpayer's tax position rested on the taxpayer, and not on HMRC. While in both those decisions the judges thought it likely that the burden rested with the taxpayer, this decision does not mention that:
- in Mathew, Judge Redston did not decide the point and acknowledged that it remained arguable that the burden was on HMRC; and
- in Hundal, as no submissions were made on the subject, Judge Beare adopted the working assumption that the onus was on HMRC to establish that they had satisfied the provision.
[1] This was an appeal under paragraph 29(1) of Schedule 36 to the Finance Act 2008. The appeal was against a notice issued to Jupiter Online Limited (“Jupiter” or “the Company”) by the respondents (“HMRC”) on 25 January 2018 under paragraph 1 of Schedule 36, during the course of an enquiry into the 2014–15 and 2015–16 tax returns of Jupiter, requiring documents and information for the purpose of checking the Company's tax position. We dismissed the appeal and now set out reasons for our decision in full.
[2] The relevant statutory provisions of Schedule 36 Finance Act 2008 are as follows:
[3] Under paragraph 1, HMRC may by notice in writing require a person (the “taxpayer”):
- to provide information, or
- to produce a document
if the information or document is reasonably required by HMRC for the purpose of checking the taxpayer's tax position.
[4] Paragraph 18 (Restrictions on Powers) provides that an information notice only requires a person to produce a document if it is in the person's possession or power. There is no equivalent provision in relation to information.
[5] Under paragraph 21, where a person has made an income tax return, a notice under paragraph 1 (“a notice”) may only be given for the purpose of checking that person's tax position where, or to the extent that, any of conditions A to D has been met:
- Condition A includes where a notice of enquiry has been given in respect of the tax return, and the enquiry has not been completed.
- Condition B is that HMRC has reason to suspect that (amongst other things) an amount that ought to have been assessed to tax for the chargeable period may not have been so assessed or has become insufficient.
(Conditions C and D are not relevant to this decision).
[6] Under paragraph 29(1), a taxpayer who has been given a notice may appeal against the notice or any requirement in the notice.
[7] Under paragraph 32(3), on an appeal the First-tier Tribunal (“the tribunal”) may
- confirm the notice or a requirement in the notice,
- vary the notice or such a requirement, or
- set aside the notice or such a requirement.
[8] Under paragraph 32(4), where the tribunal confirms or varies the notice or a requirement, the person to whom the information notice was given must comply with the notice or requirement:
- within such period as is specified by the tribunal, or
- if the tribunal does not specify a period, within such period as is reasonably specified in writing by HMRC following the tribunal's decision.
[9] Under paragraph 32(5), notwithstanding the provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007 a decision of the tribunal is final.
[10] Under paragraph 58, “checking” includes carrying out an investigation or enquiry of any kind.
[11] Under paragraph 62 “information or a document” forms part of a person's statutory records if it is information or a document which the person is required to keep and preserve under and by virtue of the Taxes Acts and any other enactment relating to a tax.
[12] Under paragraph 64, “tax position” in relation to any person means the person's position as regards any tax.
[13] Jupiter was incorporated on 15 October 2003. Mr Mark Aylwin Turner has been a director of the Company since its incorporation. Ms Tina Loraine Ban'dyle was a director of the Company from its incorporation until 1 September 2014. Ms Doreen Turner/Nash (now deceased) was the Company secretary from 15 October 2003 until 12 December 2015.
[14] The Company's business is registered at Companies House as “accounting and auditing activities”.
[15] Jupiter first came to HMRC's attention during a review of the director, Tina Ban'dyle, which was started in December 2013. At that time, Jupiter was a dormant Company. This review was carried out because of Ms Ban'dyle's involvement in another set of arrangements run via Choice Premier Ltd (“Choice Premier”). In addition, both directors at the time (Mark Turner and Tina Ban'dyle) were known to be involved with UK entities that were promoting and operating known tax avoidance schemes. Some of these included Choice Premier (loans in depreciating foreign currencies), Keypay (loan via trust), Kinsella (loan via trust) and Runnymede Services (loans in depreciating foreign currencies). All of these are under investigation by HMRC.
[16] HMRC's investigations into Jupiter and another company, IFL Management Ltd (“IFL”) of which Ms Ban'dyle was also a company director, show that the two companies are closely linked and IFL has paid substantial sums of money to Jupiter for services which are not yet entirely clear.
[17] HMRC say that Jupiter is an umbrella company that facilitates a mass marketed tax avoidance scheme, known internally in HMRC as “Mapleseed”. Documents obtained show that users were leaving a previous scheme which involved depreciating foreign exchange currencies (“FOREX”) operated through Choice Premier and were being invited to use an alternative scheme operated through Jupiter and based on interest free loans.
[18] The scheme operated...
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