R Tony Michael Jimenez v The First Tier Tribunal (Tax Chamber)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Leggatt,Lady Justice Nicola Davies |
| Judgment Date | 31 January 2019 |
| Neutral Citation | [2019] EWCA Civ 51 |
| Docket Number | Case No: C1/2017/3133 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 January 2019 |
[2019] EWCA Civ 51
Lord Justice Patten
Lord Justice Leggatt
and
Lady Justice Nicola Davies
Case No: C1/2017/3133
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Charles J
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir James Eadie QC, Jessica Wells and James Rivett (instructed by General Counsel and Solicitor to HMRC) for the Appellants
Rory Mullan and Paul Luckhurst (instructed by Excello Law) for the Respondent
Hearing date: 18 December 2018
Approved Judgment
The Respondent, Mr Jimenez, is a UK national who now resides in Dubai. He also has a Spanish passport. For a number of years he resided in the UK with his former wife and children before moving first to Cyprus and then to the UAE. It is common ground that he has been a UK taxpayer for some of this time although the precise period is in dispute. But both his past and present tax position is currently under investigation by HMRC. The principal issue is one of residency.
As part of this investigation an authorised officer of HMRC, on 18 May 2016, issued a notice under paragraph 1 of Schedule 36 to the Finance Act 2008 (“ FA 2008”) directed to the Respondent at his address in Dubai. Attached to the notice was a schedule of the information which the Respondent was asked to produce including details of bank and credit card accounts since 6 April 2004 and a schedule of his visits to the UK between that date and 5 April 2013.
Schedule 36 FA 2008 gives to HMRC a number of powers to obtain information (including documents) and to inspect premises for the purpose of checking a person's tax position. Paragraph 1 gives an officer of HMRC power to give such an information notice to the taxpayer himself. Paragraph 2 authorises HMRC to serve notice on a third party requiring that person to provide information or documents which are reasonably required for the purpose of checking the tax position of the taxpayer. Paragraph 10 includes a power for an officer of HMRC to enter a person's business premises and inspect them or any business assets or documents there for the same purpose.
In the present case information notices under paragraph 2 were also issued to HSBC plc, Bradford and Bingley TMB plc and Pennington Manches LLP seeking information about the Respondent's tax position. But we are concerned on this appeal only with the notice issued under paragraph 1. That provides as follows:
“(1) An officer of Revenue and Customs may by notice in writing require a person (“the taxpayer”)—
(a) to provide information, or
(b) to 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.”
Compliance with the notice is governed by paragraph 7. “Information notice” includes both a taxpayer and a third party notice: see paragraph 6(1). Paragraph 7 states:
“(1) Where a person is required by an information notice to provide information or produce a document, the person must do so—
(a) within such period, and
(b) at such time, by such means and in such form (if any),
as is reasonably specified or described in the notice.
(2) Where an information notice requires a person to produce a document, it must be produced for inspection—
(a) at a place agreed to by that person and an officer of Revenue and Customs, or
(b) at such place as an officer of Revenue and Customs may reasonably specify.
(3) An officer of Revenue and Customs must not specify a place that is used solely as a dwelling.
(4) The production of a document in compliance with an information notice is not to be regarded as breaking any lien claimed on the document.”
“Tax position” is a defined term under paragraph 64(1) of Schedule 36 as follows:
“In this Schedule, except as otherwise provided, “tax position”, in relation to a person, means the person's position as regards any tax, including the person's position as regards—
(a) past, present and future liability to pay any tax,
(b) penalties and other amounts that have been paid, or are or may be payable, by or to the person in connection with any tax, and
(c) claims, elections, applications and notices that have been or may be made or given in connection with the person's liability to pay any tax,
and references to a person's position as regards a particular tax (however expressed) are to be interpreted accordingly.”
“Tax” means any of the taxes listed in paragraph 63. It is common ground that the taxpayer notice issued on 18 May 2016 did relate to the Respondent's tax position as defined and there is no issue on this appeal about the scope of the information requested or whether it was reasonably required for the purpose of checking the Respondent's tax position. The sole issue is whether, on its proper construction, paragraph 1 of Schedule 36 authorises a taxpayer notice to be issued and sent to a taxpayer who at the relevant time was resident outside the UK. On the hearing of the Respondent's claim for judicial review Charles J held that the power could not be exercised extra-territorially and quashed the notice: see [2017] EWHC 2583 (Admin). HMRC now appeal.
Before I turn to this issue of statutory construction I need to refer to some of the other provisions in Schedule 36 which govern the procedure for issuing a taxpayer's notice and the consequences of non-compliance. A third party notice under paragraph 2 may not be given except with either the prior approval of the taxpayer or that of the First-tier Tribunal (“Ft-T”): see paragraph 3(1). But in the case of a taxpayer notice prior consent is unnecessary but is optional in the case of approval by the Ft-T: see paragraph 3(2). Approval by the Ft-T may only be given if the tribunal is satisfied that the notice is justified: see paragraph 3(3). In the present case HMRC sought and obtained the approval of the Ft-T to the taxpayer notice at a hearing on 18 May 2016. The application was made without notice as permitted under paragraph 3(2A). By this time the Respondent had already indicated and made representations that he was not resident in the UK and that HMRC had no jurisdiction over his affairs. But the Ft-T decided that the information was reasonably required for the purposes of HMRC's investigation and that the taxpayer's residence abroad did not exclude the power to give the notice.
Part 4 of Schedule 36 contains certain safeguards and restrictions on the scope of the powers conferred. An information notice is limited to documents in the possession or power of the recipient of the notice (paragraph 18); there is a saving for privileged documents and information (paragraph 23); and there are special provisions governing the position of auditors and tax advisers (paragraphs 25 and 26). The taxpayer has a statutory right of appeal against the giving of a taxpayer notice but only where the prior approval of the Ft-T has not been obtained: see paragraph 29(3). Where as in this case such approval has been given the remedy of the taxpayer is to seek permission to bring a claim for judicial review. That was given in the present case on the sole issue of whether the power to give a taxpayer notice under Schedule 36 had, as it was put, extra-territorial effect.
Part 7 of Schedule 36 sets out the penalties for non-compliance with an information notice which, as mentioned earlier, includes notices issued under both paragraphs 1 and 2. Paragraph 39 imposes a civil penalty of £300 for failure to comply with an information notice. If the failure continues after the date of the paragraph 39 penalty then the person becomes liable for a further penalty or penalties at a rate not exceeding £60 for each subsequent day of non-compliance: see paragraph 40. There is a defence to any liability for a penalty under paragraphs 39 or 40 based on reasonable excuse (see paragraph 45) and the assessment of the amount of the penalty by HMRC is subject to a right of appeal under paragraph 47. The penalties are recoverable as if they were income tax: see paragraph 49(2). Part 8 of Schedule 36 also imposes separate criminal penalties for the concealment or destruction of a document whose production is required under an information notice that was given with the approval of the Ft-T: see paragraph 53.
In considering the scope of the powers contained in Schedule 36 and in particular the intended territorial reach of those powers it is necessary to place them in context. The tax position of the taxpayer which HMRC is given power to investigate is now based on the taxpayer's self-assessment of his tax liabilities. Key to the proper operation of the self-assessment system is the ability of HMRC to investigate the correctness of the assessment and the powers granted to HMRC by FA 2008 replaced those contained in the Taxes Management Act and other legislation and are designed to enable HMRC, within the limits I have mentioned, to obtain the information necessary to check that the tax position set out in the assessment is correct. Insofar as the powers contained in Schedule 36 engage the rights and freedoms of the taxpayer and third parties under Article 6 and Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”), they have been held by this Court to be both justified and proportionate: see R (on the application of Derrin Brother Properties Ltd and others) v First-tier Tribunal (Tax Chamber) [2016] EWCA Civ 15. At [67]–[68] Sir Terence Etherton C said:
“67. As Ms Julie Anderson, for HMRC, said,...
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Hunter
...of Schedule 36 Information Notices was recently considered by Lord Justice Patten in R (on the application of Jimenez) v R & C Commrs [2019] BTC 4. Lord Justice Patten at paragraph 29 of the judgment in Jimenez, relied upon the Supreme Court's decision in Perry v SOCA [2012] 4 All ER 795, w......
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...contention was inconsistent with recent Court of Appeal authority. The case of R (on the application of Jimenez) v R & C Commrs [2019] BTC 4 (“Jimenez”) – permission to appeal to the Supreme Court was granted on 27 June 2019. Jimenez concerned the issue of whether HMRC had the power to issu......
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