Perlman
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 June 2021 |
| Neutral Citation | [2021] UKFTT 219 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 219 (TC)
Judge Anne Redston
Mr Peter Vaines and Ms Dhanoa, both of Counsel, appeared for the appellant
Mr Sebastian Purnell of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax and National Insurance – Information notices – Whether Tribunal has jurisdiction to decide – As part of the information notice hearing – Whether the appellant is domiciled in the UK – If yes – Whether the Tribunal should exercise that jurisdiction – Held, the Tribunal does not have that jurisdiction, and if that conclusion were to be wrong – The jurisdiction should not be exercised – FA 2008, Sch. 36 .
The First-tier Tribunal (FTT) decided that as part of an information notice hearing it did not have jurisdiction to decide whether a taxpayer was domiciled in the UK.
The appellant (Mr Perlman) was born in Curaçao. Although he had lived in the UK for at least 50 years he considered that he had retained his domicile of origin in Curaçao and claimed the remittance basis of taxation on that basis. HMRC enquired into Mr Perlman's returns for 2014–15 to 2016–17 and concluded that he was domiciled in the UK and therefore not entitled to the remittance basis. HMRC informally asked for information and documents (hereon simply referred to as “information”) about his worldwide income and gains to enable them to make amendments to his tax return and close the enquiries. Mr Perlman refused to provide the requested information, which led HMRC to issue him with taxpayer information notices under FA 2008, Sch. 36, para. 1 for 2014–15 to 2016–17 and also for 2013–14 pursuant to the requirement to correct provisions in F(No. 2)A 2017.
Mr Perlman appealed the information notices to the FTT on the ground that the information was not “reasonably required” because he was not domiciled in the UK. He submitted that the information would only be reasonably required if HMRC had first proved he was not so domiciled. In other words, he asked for his domicile dispute with HMRC to be decided as part of the hearing against the information notice.
The FTT agreed with HMRC's view, that it did not have the jurisdiction to decide Mr Perlman's domicile as part of an appeal against an information notice, and even if it did have that jurisdiction, it should decline to exercise it.
Judge Redston came to those conclusions because:
- In Kotton v First-tier Tribunal (Tax Chamber) [2019] BTC 16, the High Court decided that the FTT's jurisdiction when deciding appeals against Sch. 36 notices issued to a third party under Sch. 36, para. 2 and 3 was expressly limited in that it could consider only whether the officer was carrying out a genuine and legitimate investigation or enquiry of any kind into the tax position of a taxpayer that is neither irrational nor in bad faith, and that for information to be reasonably required it was necessary only that there be a rational connection between the enquiry and the information required by the notice.
- These dicta were equally applicable to first party notices such as that served on Mr Perlman, and therefore the FTT did not have the jurisdiction to decide Mr Perlman's domicile as part of the hearing against the notices.
- Sch. 36 was part of a suite of statutory provisions, and could not be construed without understanding its role and purpose within that framework. The issuance of notices operates at a preliminary investigative stage, which may be followed by the closure of enquiries, the issuance of assessments and taxpayer appeals. It was inconsistent with that statutory framework for the substantive dispute between the parties to be decided during a hearing against a Sch. 36 notice.
- There was no right for the losing party to appeal a Sch. 36 notice appeal. Thus, if the FTT could decide Mr Perlman's domicile status as part of a Sch. 36 notice hearing, the losing party would have no right to appeal the resulting decision, and that would be a surprising outcome.
- In R & C Commrs v Vodafone 2 [2006] BTC 702, the Court of Appeal held that the Tribunal had the jurisdiction to decide incidental points of law when deciding taxpayer applications to close an enquiry. However, the Tribunal did not have the same jurisdiction when deciding Sch. 36 notice appeals.
- Even if that conclusion were to be wrong:Vodafone 2 was only authority for the Tribunal having a jurisdiction to decide incidental points of law, whereas a decision on domicile was a complex mixed question of fact and law; andIn Eastern Power Networks plc [2017] TC 05948, the Tribunal exercised the jurisdiction described in Vodafone 2 and when the case came to the Court of Appeal, under reference [2021] BTC 9, Rose LJ ended her judgment by saying that the jurisdiction was to be exercised sparingly and that she would firmly discourage another Tribunal from following the route taken in Eastern Power Networks plc.
- Thus, even if the findings as to the nature and extent of the Tribunal's jurisdiction was wrong, so that it was similar (albeit more extensive) than that which applied to closure notice application hearings, that jurisdiction should be exercised sparingly. Given that a domicile dispute often involves many days of contested witness evidence, it would not be in the interests of justice for the Tribunal to exercise that occasional jurisdiction in Mr Perlman's appeal against the Notices.
The decision that the Tribunal did not have the jurisdiction to decide the taxpayer's domicile was the same conclusion as that reached by the FTT in Executors of Mrs Levy[2019] TC 07233. However, in Henkes [2020] TC 07645, the FTT found that it did have the jurisdiction to decide the appellant's domicile.
[1] Mr Perlman was born in Curaçao and has lived in the United Kingdom for at least 50 years. He claimed the remittance basis of taxation on the basis that he was not domiciled in the UK because he retained his domicile of origin in Curaçao.
[2] HM Revenue & Customs (“HMRC”) opened enquires under Taxes Management Act 1970 (“TMA”) s 9A into Mr Perlman's self-assessment (“SA”) tax returns for the years 2014–15 though to 2016–17. On 5 July 2019, HMRC notified Mr Perlman that they had decided he was domiciled in the UK and had not been entitled to claim the remittance basis. They asked informally for information and documents1 about his worldwide income and gains, so they could make consequential amendments to his SA returns and close the enquiries.
[3] Mr Perlman refused to provide that information, and on 30 April 2020, HMRC issued him with Notices under Finance Act 2008, Sch 36 (“Sch 36 Notice” or “Notice”) for the years under enquiry and also for 2013–14 pursuant to the “Requirement to Correct” (“RTC”) provisions in Finance (No 2) Act 2017.
[4] Mr Perlman appealed the Notices to the Tribunal on the ground that the information was not “reasonably required” because he was not domiciled in the UK. In his submission, the information would only be reasonably required if HMRC had first proved he was not so domiciled. In other words, he asked for his domicile dispute with HMRC to be decided as part of the hearing against the Sch 36 Notices.
[5] In HMRC's view, the Tribunal does not have the jurisdiction to decide whether Mr Perlman is domiciled as part of an appeal against a Sch 36 Notice, and even if it did have that jurisdiction, it should decline to exercise it. On 21 September 2020, HMRC applied for those two issues to be decided at a preliminary hearing (“the Application”).
[6] I decided the Tribunal does not have the jurisdiction to decide Mr Perlman's domicile as part of a hearing against Sch 36 Notices, but that if I were wrong in that conclusion, the Tribunal should decline to exercise the jurisdiction.
[7] I came to those conclusions in summary for the following reasons:
- In Kotton v First-tier Tribunal (Tax Chamber) [2019] BTC 16 (Kotton) Simler J (as she then was) considered the meaning of reasonably required in the context of an appeal against Sch 36 Notices issued to a third party under paras 2 and 3 of Sch 36. She held that the Tribunal's jurisdiction when deciding those appeals was expressly limited in that it could consider only whether the officer is carrying out a genuine and legitimate investigation or enquiry of any kind into the tax position of a taxpayer that is neither irrational nor in bad faith, and that for information to be reasonably required it is necessary only that there be a rational connection between the enquiry and the information required by the Notice.
- I agreed with Mr Purnell, HMRC's Counsel, that these dicta were equally applicable to first party Notices such as that served on Mr Perlman, and that the Tribunal therefore did not have the jurisdiction to decide Mr Perlman's domicile dispute as part of the hearing against the Notices, but only to decide whether the officer was carrying out a genuine and legitimate investigation or enquiry that was neither irrational nor in bad faith, and that this was akin to a supervisory jurisdiction.
- I also agreed with him that Sch 36 is part of a suite of statutory provisions, and cannot be construed without understanding its role and purpose within that framework. The issuance of Notices operates at a preliminary investigative stage, which may be followed by the closure of enquiries, the issuance of assessments and taxpayer appeals. It is inconsistent with that statutory framework for the substantive dispute between the parties to be decided during a hearing against a Sch 36 Notice.
- There is no right for the losing party to appeal a Sch 36 Notice. Thus, if Mr Vaines were to be correct that the Tribunal could decide Mr Perlman's domicile status as part of an Sch 36 Notice hearing, the losing party would have no right to appeal the resulting decision, and that would be a surprising outcome. In contrast, the lack of an appeal right following Sch 36 hearings is entirely consistent with...
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