Phillipou
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 January 2017 |
| Neutral Citation | [2017] UKFTT 20 (TC) |
| Date | 05 January 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
[2017] UKFTT 0020 (TC)
Judge Nigel Popplewell, Mr Simon Bird
Mr Tony Monger, Tax Adviser, appeared for the appellant
Mrs Christine Cowan, Officer HM Revenue and Customs, appeared for the respondents
Information notices – Appeal against information notices issued under the Finance Act 2008 (FA 2008), Sch. 36 – Information reasonably required? – Yes – Information notices varied and appeal otherwise dismissed.
[1] This case concerns the issue of two taxpayer information notices (the “notices”, each a “notice”) issued by the respondents (or “HMRC”) on 16 March 2016 during the course of an enquiry into the appellant's 2013/2014 tax return.
[2] The notices were issued pursuant to Schedule 36 of the Finance Act 2008 (“Schedule 36”) which enables the respondents to request information or documents if the information or documents are reasonably required by the respondents for the purpose of checking the taxpayer's tax position.
[3] The sole issue between the parties is whether the information sought by the notices is reasonably required to check the appellant's tax position. The appellant says HMRC already has sufficient information with which to check her position, and the request for further information is unreasonable. HMRC say that they do not have sufficient information to undertake that check, the information sought by the notices is reasonably required, and they are entitled to it.
[4] For the reasons given in this decision, and pursuant to our powers to vary information notices given under paragraph 32 of Schedule 36, we have decided to vary the notices in accordance with the revised notices set out in the appendix to this decision. And save to the extent so varied, we dismiss the appeal.
[5] The relevant legislation, or a summary of it, is set out below. References in this decision to paragraphs, without anything further, are to paragraphs in Schedule 36.
- The respondents may enquire into an individual's self-assessment tax return by giving notice of their intention to do so within the relevant period. This is usually 12 months from the end of the relevant filing date (section 9A Taxes Management Act 1970 (TMA)).
- An enquiry under section 9A TMA is completed when HMRC issues a closure notice informing the taxpayer that the enquiry is complete, and states a conclusion as to the tax liability of the taxpayer (section 28A TMA).
- Where the conclusion is that there is more or less tax to pay than was originally identified in the tax return, that conclusion is given effect by an amendment to the tax return (section 28A TMA).
- Under paragraph 1(1) An officer of Revenue and Customs made by notice in writing require a person (the taxpayer):to provide information, orto produce a document,if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position.(2) In this Schedule, taxpayer notice means a notice under this paragraph.
- Where a taxpayer has filed a tax return, a taxpayer notice may only be given if one of four conditions is met. One of these conditions (Condition A) is that an enquiry notice has been given in respect of the return (paragraph 21).
- An information notice (which term includes a taxpayer notice) must specify or describe the information or documents to be provided or produced by the taxpayer (paragraph 6). The taxpayer must provide or produce the information or documents so requested within a reasonable time, and at a place specified, in default of agreement, by HMRC (paragraph 7).
- A taxpayer is only obliged to produce a document, pursuant to an information notice, if that document is in the person's possession or power (paragraph 18).
- A taxpayer has a right of appeal against an information notice or any requirement in the notice (paragraph 29(1)). But the taxpayer has no appeal right against an information notice if it requires the provision of information (or production of any document) that forms part of the taxpayer's statutory records (paragraph 29(2)).
- Under paragraph 32:(3) On an appeal that is notified to the tribunal, the tribunal may–confirm the information notice or a requirement in the information notice,vary the information notice or such a requirement, orset aside the information notice or such a requirement.(4) Where the tribunal confirms or varies the information 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, orif the tribunal does not specify a period, within such period as is reasonably specified in writing by an officer of Revenue and Customs following the tribunal's decision.(5) Notwithstanding the provisions of sections 11 and 13 of the Tribunals Courts and Enforcement Act 2007 a decision of the tribunal on an appeal under this Part of this Schedule is final.
- The definition of tax position is very wide and includes the taxpayer's position as regards past, present and future liability to pay any tax (paragraph 64(1)). The concept of checking, too, is wide and includes carrying out an investigation or enquiry of any kind (paragraph 58).
[6] Mrs Cowan took us to the case of Price [2011] TC 01466 (“Price”). In particular she took us to [10] of that decision. This paragraph has been cited with approval in other tribunal cases, most notably in the case of Michael [2015] TC 04722 (“Michael”) by Judge Sinfield. At [29] of that decision, he states as follows:
[29] We take the same view as the tribunal in Price [2011] TC 01466, another case which was not cited to us by the parties. In Price , the appellant had submitted that the enquiry could be closed and an estimated assessment made. The tribunal said that while HMRC has the power to issue such assessments:
HMRC is entitled to know the full facts related to a person's tax position so that they can make an informed decision whether and what to assess. It is clearly inappropriate and a waste of everybody's time if HMRC are forced to make assessments without knowledge of the full facts. The statutory scheme is that HMRC are entitled to full disclosure of the relevant facts: this is why they have a right to issue (and seek the issue of) information notices seeking documents and information reasonably required for the purpose of checking a tax return (see Schedule 36 of Finance Act 2008).
[30] If we directed HMRC to close the enquiry into Mr Michael's tax return for 2012–13 now, it would put them in the position of being “forced to make assessments without knowledge of the full facts” as the tribunal put it in Stephen Price . In our view, it is not necessary for HMRC to be certain that the figures are wholly accurate before they can issue a closure notice. We consider, however, that it would not be appropriate in this case to direct that HMRC must issue a closure notice when it is clear that further information is or may be available that will affect Mr Michael's liability to tax. We say this because it appears to us that there is real uncertainty about the level of takings from the Charcoal Grill for the year ended 5 April 2013, as revealed by the decision of HMRC in the VAT investigation to issue an assessment for under recorded takings covering part of the period …
[7] Both Price and Michael were cases about the issuing of closure notices rather than cases about information notices. But of course the two are intimately related.
[8] In the case of the appellant, HMRC has opened an enquiry into her 2013/2014 tax return.
[9] The enquiry will end with the giving of a closure notice under section 28A TMA.
[10] All that section 28A TMA requires HMRC to do when closing an enquiry is to state its conclusions. There is no need for those conclusions to be made to “best judgment” (as would be the case for a VAT assessment or a PAYE regulation 80 Determination). There is, furthermore, no need for HMRC to give reasons for its conclusion.
[11] In Fidex Ltd v R & C Commrs [2014] BTC 530 (“Fidex”), the Upper Tribunal considered the decision in R & C Commrs v Tower MCashback LLP 1 [2011] BTC 294, and summarised the applicable principles at [62] as follows:
- An appeal to the FTT in such a case as this is brought against an amendment of a company's return which is required to give effect to conclusions stated in a closure notice.
- The scope of the appeal is defined by and confined to the subject matter of the enquiry, the conclusions and amendments (if any) in the closure notice. An appeal does not permit HMRC to launch a new roving enquiry into a tax return.
- It is the HMRC officer's conclusions/amendments in the closure notice which matter, and not the process of reasoning which has led to them.
- The officer does not need to give reasons for his conclusions.
- The officer has a duty to make the closure notice as helpful to the taxpayer as is possible or appropriate in the circumstances.
- The FTT has jurisdiction to entertain legal arguments which have played no part in the officer's reasoning for the conclusions in the closure notice; any element of ambush or unfairness must be avoided by proper case management.
- It is a matter for the fact finding tribunal (the FTT) to identify the subject matter of the enquiry, the conclusions and, therefore, the appeal.
- In determining these matters the context is relevant and may include, in addition to the subject matter of the enquiry and the contents of the closure notice themselves, any other relevant correspondence.
- In making its determination the FTT should also balance protection of the taxpayer with the public interest in the collection of the correct amount of tax.
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