[2011] UKFTT 60 (TC)

TC00938

Appeal number: TC/2010/06944

INFORMATION NOTICE – Sch 36 FA 2008- whether documents reasonably required to check position? Yes in circumstances – Whether notice onerous or disproportionate? No in circumstances – Appeal dismissed

FIRST-TIER TRIBUNAL

TAX 		

	PAUL WHIGHT	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents
					(Capital gains tax)

		TRIBUNAL: 	ADRIAN SHIPWRIGHT (TRIBUNAL JUDGE)						JOHN CHERRY (TRIBUNAL MEMBER						

Sitting in public at Holborn Bars, 138-142 Holborn, London EC1N 2NQ on 4 November 2010 

Setu Kamal, Counsel, instructed by PWC for the Appellant

Martin White of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This is appeal by Mr Paul Whight ("the Taxpayer") against a notice ("the Notice") under paragraph 1 schedule 36 FA 2008 to produce documents etc.
2.	The Notice was issued on 31 March 2010 by Mrs D Wade. It was accepted that Mrs D Wade was a duly authorised person for these purposes and the Notice was in proper form.
3.	The Notice was modified by HMRC at the hearing.  A revised notice was to be produced (and has now been produced).  We accordingly allowed the Taxpayer to make written representations on the revised notice within seven days of the hearing. HMRC were then to have fourteen days to make representations in reply if they chose. The Taxpayer was then to have fourteen days to reply. This was done but the submissions did not differ significantly from the position at the hearing. These have been taken into account in reaching this decision. We allowed this for reasons of fairness and expedition.
4.	Application was also made to have the case categorised as a complex case. We adjourned this application over as it did not seem appropriate to deal with it at this stage particularly until fuller information was available. The Taxpayer is at liberty to renew this application if he wishes to.
5.	We were told by HMRC (and the Taxpayer did not object that this was incorrect) that the background was that the Taxpayer had sold shares in a UK plc ("the Company").  The shares in the Company were sold, according to the Press, for more than £280 million.  There was loss of potential capital gains tax in a significant sum in HMRC’s view.
6.	The Taxpayer in essence claimed to be non-resident for exactly 5 years of assessment.  It was in this context that HMRC wished to investigate the residence position.
7.	HMRC had asked for information and they had been supplied with helpful schedules by those acting for the Taxpayer setting out a great deal of information.  However, HMRC had not seen much original documentation.  It was this they particularly wanted to see so as to be able to check the position for themselves.
8.	Paragraph 1 Schedule 36 FA provides:
“1—(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. [emphasis supplied]
(2)	In this Schedule, “taxpayer notice” means a notice under this paragraph”.
9.	In essence, the Taxpayer argued that the obligations imposed by the Notice were onerous and unreasonable and accordingly the appeal should be allowed and the Notice discharged.
10.	In more detail, the Taxpayer contended that:
(1)	HMRC were bound by IR 20 following the Davis and Gaines Cooper case;
(2)	Accordingly, their enquiries should be limited to see whether or not paragraphs 2.1 to 2.3 of that publication had been fulfilled; and 
(3)	that anything further than that was onerous and therefore unreasonable.
11.	In essence, HMRC argued that the information was reasonably required "by the officer for the purpose of checking the taxpayer's tax position".
12.	In more detail, HMRC said:
(1)	the information requested allowed HMRC to check the IR 20 position and the position under the wider general law;
(2)	this was something that might involve expenditure and efforts on the part of the Taxpayer but in the context of what was required was not unreasonable.
13.	We remind ourselves that this is an appeal by the Taxpayer and it is for the Taxpayer to prove his case.  The onus is on the taxpayer.
14.	We accept that the Taxpayer has provided much information.  However, HMRC has the right to check the position and in particular to see original documents.
15.	We do not see that the information requested in the amended notice does not fall within the range of requests for information and documents reasonably required for the purpose of checking the taxpayer's tax position. We find that it is with that range. To the extent we can we find this as a fact.
16.	As regards IR 20 we note that it is not a matter of law.  It may be that the assurances given by HMRC in IR 20 are enforceable in appropriate circumstances by the Courts.  However, the First-Tier Tribunal does not have a general judicial review power though it may be that certain matters may be treated as falling within the First-Tier Tribunal's jurisdiction on the basis set out in the Oxfam case. The application of IR 20 is something done in appropriate circumstances and it is reasonable for HMRC to check this and the wider position.
17.	It may be that IR 20 is binding in these circumstances.  However that is not a matter for this Tribunal.  At any rate as the Court of Appeal pointed out the circumstances for the application of IR 20 must be met before it can be said that IR 20 governs the position.
18.	We remind ourselves that in Davies, Gaines Cooper et al Moses LJ (with whom Dyson LJ agreed) said:
“[15] As I have recalled, issues of residence may give rise to complex questions of fact. The principles depend on case law not on statutory definition. The Court of Appeal (in Revenue and Customs Comrs v Grace [2009] EWCA Civ 1082 at [6] and [7], [2009] STC 2707 at [6] and [7]) has recently adopted Dr Brice's summary of relevant factors in Shepherd v Revenue and Customs Comrs [2005] STC (SCD) 644 and Lewison J's identification of relevant features in Revenue and Customs Comrs v Grace [2008] EWHC 2708 (Ch), [2008] STC 213. Many of the questions which must be asked to determine questions of residence, such as whether the purpose for which a person has adopted an abode is 'settled' (see [2009] STC 2707 at [6](vi)) or whether there is a sufficient degree of permanence and continuity (see at [6](iv)) lend themselves to no certain conclusion. They require value judgments, which may express a wide range of views, all of which are within the area of reasonable conclusion, even when they conflict.
[16] IR20 reminds taxpayers and advisers of this uncertainty, and warns that the Revenue's determination of residence will often depend on its assessment of the facts. The Preface reads:
'The notes in this booklet reflect the law in practice at October 1999. They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case. If you have any difficulty in applying the rules in your own case you should consult an Inland Revenue Tax Office … Some practices explained in this booklet are concessions made by the Inland Revenue. A concession will not be given in any case where an attempt is made to use it for tax avoidance.'”
19.	In order to check the Taxpayer's tax position HMRC are entitled to check the residence position as a matter of general law and under IR 20 and whether IR 20 is applicable as part of their wider investigation. This is especially so when as Moses LJ said there are complex issues of fact involved. This avoids anyone being unawares.
20.	Whilst it might be convenient for the Taxpayer for HMRC to confine their enquiry to IR 20 matters it is not in our view unreasonable for HMRC to request original documentation to check the position under both the general law and IR 20. We do not consider the request disproportionate in the circumstances outlined to us as set out above. We consider that in fact in the context of what was required it was not unreasonable.
21.	It is not for the Tribunal to determine how HMRC conduct their review of the case any more than it could determine how the Taxpayer should conduct its case provided what is done is within the rules as laid down by the legislation and case law.
22.	Accordingly, we find that the Taxpayer has not shown as a matter of fact that the information or documents are not reasonably required by the officer for the purpose of checking the taxpayer's tax position. We also find that the request is not disproportionate or onerous in the particular circumstances of the case.
23.	Accordingly, we dismiss the appeal and direct that the documents and information requested be produced within 30 days of the issue of this decision as agreed by the parties.
24.	This document contains full findings of fact and reasons for the decision. 

                                        ADRIAN SHIPWRIGHT
TRIBUNAL JUDGE
RELEASE DATE: 18 JANUARY 2011