R Derrin Brother Properties Ltd v The Commissioners for HM Revenue and Customs Hsbc Bank Plc and Another (Interested Parties)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Simler DBE |
| Judgment Date | 15 April 2014 |
| Neutral Citation | [2014] EWHC 1152 (Admin) |
| Docket Number | Case No: CO/3091/2013 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 15 April 2014 |
[2014] EWHC 1152 (ADMIN)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Simler DBE
Case No: CO/3091/2013
and
Miss Hui Ling McCarthy (instructed by Kingsley Napley Solicitors) for the Claimant
Miss Julie Anderson (instructed by Solicitor and General Counsel to the Commissioners for Her Majesty's Revenue and Customs) for the Defendant
Hearing dates: 27 March 2013
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This challenge concerns the use by Her Majesty's Commissioners of Revenue and Customs ("HMRC") of investigatory powers requiring disclosure of documents by notice by a number of Banks and a firm of Accountants relating to their clients' affairs, following a request made by the Australian Tax Office ("ATO") for assistance in accordance with the exchange of information procedure under Article 27 of the Double Tax Convention between Australia and the UK. The ATO was investigating a series of complex arrangements involving companies and other entities in foreign jurisdictions (including the UK) beneficially owned by Australian residents and used by those residents to avoid tax otherwise payable in Australia. The ATO investigations indicated that Lubbock Fine LLP (a UK firm of Accountants) was providing nominee directors and shareholders to the UK incorporated companies involved in the arrangements. The Australian resident taxpayers had failed to provide documents under formal request to establish the beneficial ownership and residence status of those companies and entities, accordingly the ATO wished to obtain that information from third parties in the UK. The tax at stake was said to be tax on income of AUD 230m
The Claimants are 24 of the companies whose documents (held by Lubbock Fine LLP and the Banks) are sought by HMRC for the purposes of that investigation. All but three are not the "taxpayer" being investigated; nor are any of them the recipients of the document requests or notices. Consequently, if lawful the notices in their present form require the handing over of business records and confidential documents belonging to them currently in the possession of third parties, to investigate the tax position of other taxpayers, in circumstances where at least 21 of them have not received any reasons for HMRC's intended seizure and have had no opportunity to submit written representations objecting to disclosure. They contend that this result cannot be lawful.
HMRC sought approval of the First-tier Tribunal (Tax Chamber) (the "Tribunal") to the giving of certain third party information and document notices under para. 2 of Schedule 36 to the Finance Act 2008 (" FA 2008") following the ATO's request. At ex-parte hearings on 23 November 2012 (and 9 January 2013), Judge Berner sitting as a judge of the Tribunal approved the giving of a number of notices, subsequently given on 27 November 2012 and 14 January 2013 respectively ("the Notices"). The statutory scheme provided by Schedule 36 does not provide for any appeal against the giving of a notice in the circumstances of this case. Accordingly, the Claimants have pursued the only avenue of challenge available, namely judicial review. Permission was given by Sales J on 8 October 2013.
Challenge is made both to the HMRC officer's decision to seek approval for giving the Notices and to the Judge's approval. The grounds of challenge raise the following broad issues for this court:
(a) Whether on a proper interpretation of the provisions in Sch. 36 there was any breach of the requirements of Sch. 36 FA 2008 so as to invalidate the giving of the Notices by HMRC; and/or
(b) Whether the Tribunal acted in breach of article 6 of the European Convention of Human Rights ("ECHR") (right to a fair hearing) when taken in conjunction with article 8 (right to respect for private and family life) and/or article 1 to the First Protocol (protection of property) ("A1P1") as given effect by the Human Rights Act 1998 (" HRA 1998").
The applicable legal principles
It is helpful first to set out Article 27 of the UK/Australia Double Tax Convention 2003 (the "DTC") which sets out the obligations of the UK and Australia relating to the exchange of information and provides (so far as is relevant):
"Exchange of information
1 The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant to the administration or enforcement of the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes to which this Convention applies insofar as the taxation under those laws is not contrary to this Convention. The exchange of information is not restricted by Article 1 of this Convention. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic law of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes to which this Convention applies. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.
2 If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall obtain that information in the same manner and to the same extent as if the tax of the first-mentioned State were the tax of that other State and were being imposed by that other State, notwithstanding that the other State may not, at that time, need such information for the purposes of its own tax.
3 In no case shall the provisions of paragraphs 1 or 2 of this Article be construed so as to impose on a Contracting State the obligation:
(a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; …"
Two points can be noted. First, there is a restriction on the use of information obtained under the DTC in Article 27(1): if information is obtained by HMRC and subsequently provided to the ATO, the DTC restricts the ATO's use of that information to collection, enforcement etc of taxes to which the Convention applies (albeit that information obtained about person A is not restricted to use in relation to person A, just as it would not be domestically). Secondly, the UK is only obliged to supply information to the ATO obtainable under UK law. In other words, the DTC does not extend the scope of the UK's domestic information powers; nor could it.
The UK's domestic information powers are those given to HMRC by Parliament under Sch. 36 FA 2008 to call for information and documents. The legislation gives HMRC powers of varying degrees of intrusiveness appropriate to different situations. The power to issue third party notices, though not at the top of the scale, is nevertheless intrusive. It is provided by Sch.36 paragraphs 2 and 3 and entitles an officer of HMRC, by notice in writing to require a third party to provide information and documents which are
"reasonably required by the officer for the purpose of checking the tax position of another person whose identity is known to the officer ("the taxpayer")" (para. 2(1)).
The notice can be enforced only in respect of documents in the possession or power of the recipient of the notice (para. 18).
'Checking' in this context "includes carrying out an investigation or enquiry of any kind" (Sch.36 para. 58) and, "tax position" includes a person's position as regards "past, present and future liability to pay any tax" (paras. 63 and 64) where "tax" includes "relevant foreign tax" (para.63(1)(m)) which for these purposes includes Australian tax. Importantly, a third party notice must name the taxpayer to whom it relates unless this requirement is disapplied (para. 2(2)). This requirement was not disapplied in this case.
Absent agreement of the taxpayer, exercise of this power requires the approval of the Tribunal (para.3 (1)(b)). Since none of the Claimants agreed, the third party notices required the Tribunal's approval. An application for approval may be made without notice (para.3 (2A)). So far as approval of the Tribunal is concerned, given the intrusive nature of this power and the fact that penalties for non-compliance with a notice can be sought, the statutory scheme provides a number of statutory safeguards against oppressive or abusive use of these powers, particularly at para.3(3) which provides:
"(3) The tribunal may not approve the giving of a… third party notice unless –
(a) an application for approval is made by, or with the agreement of an authorised officer of Revenue and Customs,
(b) the tribunal is satisfied that, in the circumstances, the officer giving the notice is justified in doing so,
(c) the person to whom the notice is to be addressed has been told that the information or documents referred to in the notice are...
To continue reading
Request your trial
-
Hunter
...the Revenue. [256] The Tribunal's decisions in several tax cases: R (on the application of Derrin Brother Properties Ltd) v R & C Commrs [2014] BTC 21, Mathew [2015] TC 04342, Betts [2013] TC 02824, and also Newton [2018] TC 06682 illustrate the circumstances where Schedule 36 information r......
-
Keith Hunter v The Commissioners for Her Majesty's Revenue & Customs, TC 07140
...B as set out above. 258. Mr Staff relied on the judgment in R (on the application of Derrin Brother Properties Ltd) v R&C Commrs [2014] BTC 21, regarding third party information requests, where the Court had stated: “HMRC may not use their Sch.36 powers for a fishing expedition… A broadly-d......
-
Gold Nuts Ltd and Others
...to use the Sch 36 powers to “fish” for possible issues, see R (on the application of Derrin Brother Properties Ltd) v R & C Commrs [2014] BTC 21, where Simler J said at [20]: HMRC may not use their Sch. 36 powers for a fishing expedition – whether for their own or the purposes of another re......
-
Gold Nuts Ltd and Others v The Commissioners for HM Revenue & Customs
...BTC 89 (‘Coombs’) as summarised by Simler J at [15] of R (on the application of Derrin Brother Properties Ltd) v R & C Commrs TAX[2014] BTC 21 (‘Derrin’): the Tribunal is the independent person designated by Parliament with the duty of supervising the exercise of HMRC's intrusive powers. Pa......