R v Commissioners of Inland Revenue ex parte Ulster Bank Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MORRITT,SIR BRIAN NEILL,LORD JUSTICE SIMON BROWN |
| Judgment Date | 01 May 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0501-22 |
| Date | 01 May 1997 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No. FC3 97/5336/D |
[1997] EWCA Civ J0501-22
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
Royal Courts of Justice
Strand
London WC2
Lord Justice Simon Brown
Lord Justice Morritt
Sir Brian Neill
Case No. FC3 97/5336/D
MR D GOLDBERG QC and MR G LEGGATT QC (instructed by Messrs Travers Smith Braithwaite, London EC1A 2AL) appeared on behalf of the Applicant.
MR T BRENNAN (instructed by the Legal Department, Commissioners of Inland Revenue, London WC2R 1LB) appeared on behalf of the Respondent.
By this application, for which we gave leave at the commencement of the hearing, Ulster Bank Ltd ("the Bank") seek an order quashing the decision of the Inland Revenue, communicated by letters dated 27th June 1996 and 7th January 1997, to apply to a Special Commissioner for consent to the issue of a notice under s.20(8A) Taxes Management Act 1970. Such a notice, if consent were forthcoming, would require the Bank to produce to the Revenue certain documents for the purpose of the Revenue's enquiries into the tax liabilities of other taxpayers.
It is convenient to start by setting out the relevant legislation. That is contained in Part III of the Taxes Management Act 1970 entitled "Other Returns and Information". The material sections were substantially amended by Finance Acts 1976, 1988, 1989 and 1994. I refer to the various provisions as so amended. S.20 confers on the Revenue wide powers to call for the documents of taxpayers and others. Ss.(1) and (2) deal with the production of documents or information by the taxpayer himself. Ss.(3) deals with the production to the Revenue by a third party of documents in his possession or power relevant to another person's liability for tax. It provides that
"Subject to this section, an inspector may, for the purpose of enquiring into the tax liability of any person ('the taxpayer'), by notice in writing require any other person to deliver to the inspector or, if the person to whom the notice is given so elects, to make available for inspection by a named officer of the Board, such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to any tax liability to which the taxpayer is or may be, or may have been, subject, or to the amount of any such liability."
Ss.(7) provides that a notice under ss.(3) shall not be given except with the consent of a general or special commissioner; but that such Commissioner
"is to give his consent only on being satisfied that in all the circumstances the inspector is justified in proceeding under this section."
Ss. (8) requires that, subject as provided in ss.(8A), a notice given under ss.(3) shall name the taxpayer with whose liability to tax the Revenue is concerned. Ss.(8A) enables a notice under ss.(3) to be given without naming the taxpayer concerned if a Special Commissioner gives his consent. He may not do unless satisfied
"(a) that the notice relates to a taxpayer whose identity is not known to the inspector or to a class of taxpayers whose individual identities are not so known;
(b) that there are reasonable grounds for believing that the taxpayer or any of the class of taxpayers to whom the notice relates may have failed or may fail to comply with any provision of the Taxes Acts;
(c) that any such failure is likely to have led or to lead to serious prejudice to the proper assessment or collection of tax; and
(d) that the information which is likely to be contained in the documents to which the notice relates is not readily available from another source."
Ss.(8D) provides that
"…references in this section to documents and particulars are to those specified or described in the notice in question;.."
Before the consent of a Special Commissioner may be sought compliance with s.20B(1) is required. That subsection, so far as material, provides that
"Before a notice is given to a person by an inspector under section 20 (1), ( 3) or (8A),…the person must have been given a reasonable opportunity to deliver (or in the case of section 20(3), to deliver or make available) the documents in question…; and the inspector must not apply for a consent under section 20( 7) or (8A)…until the person has been given that opportunity."
Though the statute makes no express provision for them, compliance with this subsection is normally demonstrated by the service of what have come to be known as "precursor notices". By ss.(5) of that section a person is not to be obliged by a notice under s.20(3) to deliver or make available a document more than six years old at the date of the notice. But that subsection may be excluded if the Special Commissioner on giving his consent under s.20(7) approves. He may only give such approval if he is satisfied
"that there is reasonable ground for believing that tax has, or may have been, lost to the Crown owing to the fraud of the taxpayer."
Assuming compliance with s.20B(1), the consent of a Special Commissioner and the giving of a notice under s.20(8A) then by virtue of s.20(8B)
"A person to whom there is given a notice under subsection (8A) above may, by notice in writing given to the inspector….object to that notice on the ground that it would be onerous for him to comply with it; and if the matter is not resolved by agreement, it shall be referred to the Special Commissioners, who may confirm, vary or cancel that notice."
The falsification, concealment or destruction of documents which the person has been given an opportunity to produce under s.20B(1) or was required to produce under s.20(8A) is an offence under s.20BB. Failure to comply with a notice given under s.20(8A) is an offence under s.98(1).
The essential point in all this is that it is a condition precedent to the ability of the Revenue to seek the consent of the Special Commissioner to the giving of a notice under s.20(8A) that it shall previously have given, usually by a precursor notice, to the intended recipient of such a notice "a reasonable opportunity to deliver or make available…the documents in question".
The Bank is a clearing bank carrying on business primarily in Northern Ireland. It has 77 branches and more than 100 offices there. On 6th September 1985 The Enquiry Branch of the Revenue brought to the notice of the Bank the concern of the Revenue that customers of the Bank were apparently able to carry out certain banking transactions otherwise than through, or so as to be recorded in, their own accounts. The Bank disclosed that certain suspense accounts, called "Sundry Parties Accounts", had been used in the type of transaction with which the Revenue was concerned.
In March 1986 Deloitte Haskin Sells reported to the Bank at the request of the Revenue, on the use of such accounts. In May 1986 the Revenue served on the Bank notices under s.13 Taxes Management Act 1970 requiring the Bank to disclose details of moneys it had received from its Isle of Man subsidiary in respect of deposits with that subsidiary on behalf of any other person in any of the years ended 5th April 1984, 1985 and 1986. In December 1987 the Bank commenced proceedings against the Revenue seeking a declaration that moneys received from its Isle of Man subsidiary did not fall within s.13 Taxes Management Act 1970 or any of the notices with which it had been served. That action was settled in December 1991 on terms which included an assurance from the Bank that no transactions were to take place through "Sundry Parties Accounts", which since 12th April 1991 had been redesignated as obsolete accounts, and that future compliance with the instruction to branches would be monitored. The Revenue abandoned reliance on the notices served under s.13 Taxes Management Act and formally released the Bank from any obligation to comply with them.
That however was not the end of the story for on 24th August 1995 the Revenue again expressed its concern to the Bank that "Sundry Parties Accounts" might have been used to transfer money concealed from the Revenue to a subsidiary of the Bank in the Isle of Man. At the meeting held on that day the Revenue served a precursor notice under s.20B(1) requesting the Bank to deliver or make available by 24th November 1995:
"1. Statements in respect of all sundry parties/suspense accounts.
2. All debit and credit vouchers in respect of the transfer of funds, for any amounts in excess of £1,000, into or out of the sundry parties/suspense accounts referred to in (1) above.
3. Any document, including the banks customer record card, internal notes or memorandum, sufficient to identify the full name and address of each customer on whose behalf transactions involving amounts in excess of £1,000 have been effected through the sundry parties/suspense accounts referred to in (1) above."
Correspondence ensued concerning the Bank's objection that the Revenue's action was inconsistent with their obligations under the settlement of the 1987 action.
On 27th June 1996 the Revenue notified the Bank of its decision to apply to the Special Commissioner for consent to the issue of a notice under s.20(8A). The reason given was that the Revenue had discovered good evidence that the sundry parties accounts operated by the Bank before 1990 had been used to facilitate serious tax evasion in two separate cases. The letter continued by denying that the Revenue was precluded from doing so because of the 1991 settlement and pointing out that the proceedings for judicial review threatened by the Bank would be premature because of the provisions of s.20(8B).
On 16th August 1996 the Bank initiated an application...
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