Perfectos Printing Inks Company Ltd and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 June 2019 |
| Date | 14 June 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 388 (TC)
Judge Asif Malek
Mr. Keith Gordon, of counsel, appeared for the appellants
Mr. Philip Oborne, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the respondents
Applications for closure notices under TMA 1970, s. 28A and FA 1998, Sch. 18, para. 33 – Whether HMRC had reasonable grounds for not giving a closure notice – Applications allowed subject to time limits – Appeals against information notices issued under FA 2008, Sch. 36 – Whether copies sufficient – Whether information reasonably required – appeals partly allowed.
The First-tier Tribunal (FTT) directed that HMRC issue closure notices in respect of seven open enquiries, allowed appeals against three information notices and partly allowed an appeal against a fourth information notice.
HMRC opened enquiries into several tax returns of Perfectos Printing Inks Co Ltd (PPIC Ltd), Perfectos Printing Inks Group Ltd (PPIG Ltd) and Dr Price. As part of the enquiries HMRC issued several information notices under FA 2008, Sch. 36.
Dr Price appealed against information notices requesting his personal bank statements and details of a beneficial loan he had received from a Hong Kong based subsidiary of Perfectos Printing Inks. HMRC wanted the statements so that they could: confirm how the loan had been invested; identify any income that resulted from such investment; confirm the exact amounts of the money received; and establish the true nature of the payment to Dr Price. Dr Price had provided copies of his personal bank statements, but HMRC felt that they were insufficient.
PPIC Ltd appealed against information notices requesting accounting records and details about the use of company car parking spaces.
Dr Price, PPIC Ltd and PPIG Ltd applied for closure notices to be issued under TMA 1970, s. 28A and FA 1998, Sch. 18, para. 33 respectively.
The FTT noted that:
- in relation to the information notices it was for HMRC to show, on the balance of probabilities, that the information or documents were reasonably required by them for the purpose of checking the taxpayer's position; and
- in the case of closure notices the burden was on HMRC to satisfy it, on the balance of probabilities, that there were reasonable grounds for not issuing a closure notice within a specified period.
In relation to the application for closure notices the FTT adopted the law as set out in Beneficial House (Birmingham) Regeneration LLP; Stanley Dock (All Suite) Regeneration LLP [2017] TC 06207 [15].
The FTT allowed Dr Price's appeal against the information notices. As there was no reason to suspect that Dr Price may have underassessed his tax liability HMRC did not reasonably require unredacted bank statements to complete their check. In relation to the beneficial loan, Dr Price had answered the questions directed at him and provided the information sought to the extent that it was reasonably required to check his tax position.
The FTT directed that HMRC issue a closure notice in respect of the enquiry into Dr Price's affairs within 30 days. The enquiry had been opened for more than two years, there had been no complaint that Dr Price had delayed in providing information, there was no outstanding information and HMRC had not given details about the amount of tax that might be at stake or the reasons why this was a particularly complex investigation.
The FTT found that some of the information requested in the information notices directed at PPIC Ltd was reasonably required by HMRC and should be provided as soon as possible. However, the FTT rejected HMRC's assertion that copies of documents provided by the taxpayer or its advisor could not be trusted for their accuracy or veracity, i.e. that the copies had been either badly copied or had been deliberately tampered with. There was no evidence of the former and regarding the latter, taxpayers and their advisers are to be treated as honest unless there was good reason to the contrary, which there was not. The FTT also found that HMRC already had enough information about the parking spaces to make an assessment.
The FTT directed that HMRC issue closure notices in respect of the enquiries into PPIC Ltd and PPIG Ltd within six months. The earliest enquiries had been opened for almost three years, there had been no undue delay to provide information and HMRC had not given details about the amount of tax that might be at stake or the reasons why this was a particularly complex investigation. HMRC were given six months to issue the closure notices to allow them reasonable time to examine the further information required from PPIC Ltd.
These appeals highlight the balance that must be struck between HMRC having the ability to use their information and enquiry powers so that they can do their jobs and the taxpayer's right to finality and privacy.
Judge Asif Malek noted that a useful summation, of the dividing line as to what was reasonably required when it came to the provision of personal bank statements, lay between those cases where the officer could show a reason to suspect underassessment and those where the officer was simply on a “fishing expedition”. In this case the FTT found that there was no reason to suspect an underassessment.
The decision also highlights that taxpayers and their advisers are to be treated as honest unless HMRC has good reason not to (as is clearly set out in HMRC's Your Charter).
[1] This case concerns applications for closure notices under sections 28A and 28B of the Taxes Management Act 1970 and section 32, Sch18 Finance Act 1998; and appeals against information notices issued under Schedule 36 of the Finance Act 2008. I use the following abbreviations throughout this judgment – PPIC Ltd to mean the First Appellant and PPIG Ltd to mean the Second Appellant.
[2] The opening dates of the enquiries are as follows:
| Taxpayer | Period under enquiry | Trib. Ref. | Opening letter |
| PPIC Ltd | Year to 1 April 2015 | TC/2018/5582 | 28 Sept 2016 |
| PPIC Ltd | Year to 1 April 2016 | TC/2019/396 | 14 Dec 2017 |
| PPIC Ltd | Year to 1 April 2017 | TC/2019/396 | 8 January 2019 |
| PPIG Ltd | Year to 1 April 2015 | TC/2018/5525 | 28 Sept 2016 |
| PPIG Ltd | Year to 1 April 2016 | TC/2019/395 | 14 Dec 2017 |
| PPIG Ltd | Year to 1 April 2017 | TC/2019/395 | 8 January 2019 |
| Dr Price | Year to 5 April 2016 | TC/2018/4288 | 2 May 2017 |
[3] The information notices under appeal are as follows:
| Taxpayer | Notice date | Trib. Ref. | Subject matter | Bundle |
| PPIC Ltd | 6/6/18 | TC/2018/6871 | Accounting documents | A128 |
| PPIC Ltd | 7/12/18 | TC/2019/987 | Payment for car spaces | A161 |
| Dr Price | 12/10/18 | TC/2019/397 | Bank statements etc. | A181 |
| Dr Price | 5/11/18 | TC/2018/7825 | Hong Kong loan | Al44 |
[4] For the purposes of the hearing the Appellants chose to produce their own bundle, but also referred to the bundle produced by the Respondent at relevant times. In addition to the documentary evidence before me I had the opportunity of hearing from witnesses.
[5] The Respondents relied upon the evidence of Mr. Scott Sibbald and Ms. Lesley McArdle, both of whom were officers of HMRC in the complex evasion team. The evidence of both officers was set out in their witness statements, elaborated upon in the witness box and subject (especially in the case of Mr. Sibbald) to lengthy and detailed cross examination.
[6] The Appellants relied upon the evidence of Mr. Michael Henshaw and Mr. Christopher Miller, the former a director of and the latter an employee of HSKS Greenhalgh, accountants for the Appellants. Again each produced a witness statement, gave oral evidence and was available for / subject to cross examination.
[7] Section 28A of the Taxes Management Act 1970 provides:
(4) The taxpayer may apply to the tribunal for a direction requiring an officer of the Board to issue a partial or final closure notice within a specified period …
(6) The tribunal shall give the direction applied for unless satisfied that there are reasonable grounds for not issuing the partial or final closure notice within a specified period.
[8] Near identical provisions appear in paragraph 33 of Schedule 18, Finance Act 2008 in relation to corporation tax and provide:
(1) The company may apply to the tribunal for a direction that an officer of Revenue and Customs give a partial or final closure notice within a specified period …
(3) The tribunal shall give a direction unless satisfied that an officer of Revenue and Customs has reasonable grounds for not giving a partial or final closure notice within a specified period.
[9] Paragraph 1(1) of Schedule 36, Finance Act 2008 provides:
An officer of Revenue and Customs...
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