© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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I-6: Limits on information notices
Asking for more than HMRC entitled to request does not necessarily invalidate whole notice
"[186] Paragraph 20 of Schedule 36 provides that an information notice may not require a person to produce a document if the whole of the document originates more than six years before the date of the notice, unless the notice is given by or with the agreement of an authorised officer. Mr Firth objected to the request in the information notice for details of investments held more than six years before the issue of the notice. He suggested that Mr Burns consciously overreaching this time limit invalidated the whole of the notice. Mr Firth accepts that, that if the notice was given in ignorance of the limitation on HMRC's powers, the correct course may well be to amend the requirements of the notice. However, he says the position is different where the officer was aware of the limitation (as Mr Burns admitted he was) but chose to request 'everything', contrary to the limitation. Mr Firth submits that that is such a fundamental flaw in the decision-making process to issue the information notice, that it invalidates the decision. Mr Firth relied on the decision of this Tribunal in The Barty Party Company Limited v HMRC, [2017] UKFTT 697 (TC), as authority for this proposition. We do not consider that this case supports the view that asking for more information than the statute allows HMRC to require invalidates the whole of the notice. The question in that case was whether asking for information that investigated a period beyond that for which HMRC could issue an assessment suggested that the notice went beyond what was reasonably required to check the taxpayer's tax position, and so the information notice was not validly issued. The Tribunal held that this was indeed the case and quashed the notice accordingly. That is not the position here. Mr Burns issued the information notices to check the tax position of the Schemes and he was in a position to take action if he found a liability. That was not the position in Barty Party. In Khalid Mahmood v HMRC, [2018] UKFTT 297 (TC), this Tribunal held that asking for documents outside the paragraph 20 time limit did not invalidate the notice as a whole." (NBC (Administration Services) Limited v. HMRC [2024] UKFTT 120 (TC), Judge Baldwin)
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Information and documents relating to conduct of a pending appeal
"(1) An information notice does not require a person to provide or produce—
(a) information that relates to the conduct of a pending appeal relating to tax or any part of a document containing such information,
(aa) information that relates to the conduct of a pending appeal under the Savings (Government Contributions) Act 2017 or any part of a document containing such information" (FA 2008, Sch 36, para 19(1)(a), (aa))
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Must relate to the conduct of the appeal rather than just the tax question at issue in the appeal
“The exception is of limited ambit. It does not extend to documents relating to a pending appeal: it extends only to documents relating to the conduct of the appeal. It will accordingly be limited to documents which come into existence for the purpose of, and as part of, the conduct of the appeal and the burden is upon the party withholding documents on this ground to show that they fall within the provision and answer the statutory description. The exception is not limited to privileged documents, but may extend to other communications which answer the statutory description. But the exception cannot extend to transactional documents or (at any rate in the ordinary case) documents which will be in evidence on the appeal; in particular it can extend to very few (if any) of the documents requested by the Revenue.” (R v. IRC ex p. Banque Internationale a Luxembourg SA [2000] STC 708 at 722).
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Journalistic material
"(1) An information notice does not require a person to provide or produce—
[...]
(b) journalistic material (as defined in section 13 of the Police and Criminal Evidence Act 1984 (c 60)) or information contained in such material." (FA 2008, Sch 36, para 19(1)(b))
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Personal records
"(2) An information notice does not require a person to provide or produce personal records (as defined in section 12 of the Police and Criminal Evidence Act 1984) or information contained in such records, subject to sub-paragraph (3).
(3) An information notice may require a person—
(a) to produce documents, or copies of documents, that are personal records, omitting any information whose inclusion (whether alone or with other information) makes the original documents personal records (“personal information”), and
(b) to provide any information contained in such records that is not personal information." (FA 2008, Sch 36, para 19(2) -(3))
Communications data
(1)Section 12(2) of the Investigatory Powers Act 2016 (restriction of powers to obtain communications data) does not apply to a power falling within subsection (2).
(2)A power falls within this subsection if it is conferred (whether before, on or after the passing of this Act) by or under—
(a)any Finance Act of any year (including this Act and any other numbered Finance Act);
(b)the Taxes Acts (within the meaning of TMA 1970);
(c)the customs and excise Acts (within the meaning of CEMA 1979);
(d)any enactment relating to value added tax;
(e)any enactment, not falling within paragraphs (a) to (d), that relates to tax.
(3)But subsection (1) does not apply in relation to the exercise of such a power by a public authority in the course of a criminal investigation by the authority." (F(No.2)A 2023, s.352(1) - (3))
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Documents older than 6 years
"An information notice may not require a person to produce a document if the whole of the document originates more than 6 years before the date of the notice, unless the notice is given by, or with the agreement of, an authorised officer." (FA 2008, Sch 36, para 20)
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"[7] As far as HMRC are concerned, they now accept that the Notice was neither given nor approved by an Authorised Officer so the Notice could not have imposed an obligation to produce information or documentation originating more than six years previously. In the event that the Notice was approved in whole or in part, the appellant wished an express qualification to that effect to be inserted into the Notice. HMRC did not argue that point." (Asset House Piccadilly Limited v. HMRC [2023] UKFTT 385 (TC), Judge Scott)
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"[57] We have already found that Mr Ibrahim was not an authorised officer, and we agree that there is no evidence an authorised officer was asked to agree to the issuance of the Notice. Thus, if “the whole of” any of the documents requested by the Notice originate more than 6 years before the date of the notice, they cannot be required. However, that does not invalidate the Notice as a whole, because:
(1) para 20 says that “an information notice may not require a person to produce a document”. It does not say that if such a document is included in a Notice, the entire Notice is invalidated, and there is no reason to read the provision in that way. That was also the decision of Judge Thomas and Mr Law in Laxmi & Bhupatrai Chohan v HMRC [2017] UKFTT 0779 (TC) at [73]-[74] with which we agree;
(2) the Notice asks for information and documents “from the date the property was first owned” but continuing to the date the Notice was issued, so it clearly extends into a period after that six year cut off period; and
(3) para 20 refers only to “documents”, not to “information”. HMRC can therefore ask for information which goes back more than six years before the date of the Notice, without needing the approval of an authorised officer;
(4) in relation to documents, para 20 is only engaged if “the whole of” the document originates more than 6 years before the date of the Notice. Thus, it might apply, for example, to completion statements where the property transaction took place more than six years before the date of the Notice. But it would not apply to ledgers or books of account which cover periods both before and after that six year point; and
(5) for the avoidance of any possible doubt, schedules which Mr Mahmood is required to prepare to satisfy the Notice are not within the “old documents” provision." (Khalid Mahmood v. HMRC [2018] UKFTT 297 (TC), Judge Redston)
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Exception for pension matters: 10 years
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"(1) This paragraph applies to a third party notice or a notice under paragraph 5 if it refers only to information or documents that relate to any pensions matter.
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(4A) In relation to a notice to which this paragraph applies that refers only to information or documents relating to a matter within sub-paragraph (2)(d) or (e), paragraph 20 (old documents) has effect as if the reference to 6 years were to 10 years." (FA 2008, Sch 36, para 34B(4A))
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- Only documents, not information
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"[190] Paragraph 20 of Schedule 36 refers to the production of documents, not information. As such, it does not prevent HMRC asking, so far as Halkin and Headforte are concerned, NBC to produce year-end schedules of investments starting from 5 April 2012. We can understand why HMRC might want to know the investments held by those schemes at the beginning of the 2012/13 tax year as well as at the end, so schedules of investments as at those dates seem to us to be reasonably required for the purposes of checking NBC's tax position as far as those schemes was concerned.
[191] Paragraph 20 of Schedule 36 operates automatically and overrides any request made by HMRC. Accordingly, it does not need to be reflected in the information notices, simply borne in mind by HMRC and NBC." (NBC (Administration Services) Limited v. HMRC [2024] UKFTT 120 (TC), Judge Baldwin)
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Checking deceased's tax position
"An information notice given for the purpose of checking the tax position of a person who has died may not be given more than 4 years after the person's death." (FA 2008, Sch 36, para 22)
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Legal privilege
"(1) An information notice does not require a person—
(a) to provide privileged information, or
(b) to produce any part of a document that is privileged.
(2) For the purpose of this Schedule, information or a document is privileged if it is information or a document in respect of which a claim to legal professional privilege, or (in Scotland) to confidentiality of communications as between client and professional legal adviser, could be maintained in legal proceedings." " (FA 2008, Sch 36, para 23(1) - (2))
See further M6: Legal and litigation privilege
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Limited to professional lawyers
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"[37]...In their deliberations on 10 June 2008, the Committee actually discussed extending LAP to tax advice given by accountants through the medium of an amendment to what is now paragraph 23 of Schedule 36 to the 2008 Act – see the Hansard report of this discussion, (HC Debates), cols 606-608. No details were given to us as to what happened following those discussions, but what is clear is that Parliament none the less decided in Schedule 36 to the 2008 Act to maintain the difference between (i) a person with whom communications attracted "legal professional privilege" (in England and Wales, and a "professional legal adviser" in Scotland) in paragraph 23, and (ii) a "tax adviser" in paragraph 25. Although it could be said to beg the question which we have to decide, a combination of the general understanding as to the breadth of LPP and the absence of any suggestion of a Parliamentary intention to depart from TMA in this connection, leads to the clear conclusion, in my view, that paragraph 23 was intended to be limited to professional lawyers." (R (oao Prudential Plc) v. Special Commissioner of Income Tax [2013] UKSC 1)
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Engagement letter covered
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“LPP must extend not only to the content of the legal advice but the fact that a person sought legal advice on any particular matter. Therefore, to the extent that an engagement letter sets out what the advice will cover it must be subject to LPP.” (Behague v. HMRC [2013] UKFTT 596 (TC), §26, Judge Mosedale, applied in DAC Beachcroft LLP v. HMRC [2018] UKFTT 502 (TC), §55).
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Solicitor’s cash book and client ledger probably not covered by privilege
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“I have considerable doubt as to whether a clients' cash book, a clients' ledger and the supporting documents requested in the notice are covered by legal professional privilege. However, I do not have to decide that point as, even if they were, the authorities indicate that legal professional privilege can be excluded by express statutory provision.” (Guyer v. Walton [2001] STC (SCD) 75, §22, Dr Brice).
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Procedure for ​relying on privilege and determining disputes
"These Regulations apply where there is a dispute between HMRC and a person to whom an information notice has been given either—
(a) during the course of correspondence, or
(b) during the course of an inspection of premises under Schedule 36,
as to whether a document is privileged." (SI 2009/1916, r.3)
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Clock stopped whilst procedure followed
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"Where a taxpayer or third party who has received an information notice, or a person acting on their behalf, complies with the procedure set out in regulation 5 or, as the case may be, regulation 6, those persons shall be treated as having complied with the information notice in relation to the documents in dispute until the First-tier Tribunal decides the status of the document or until an agreement has been reached under regulation 10." (SI 2009/1916, r.7)
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“I think that the purpose of the regulations is to give the taxpayer a route by which a claim to LPP can be determined without the clock ticking on the information notice. It is of course open to the taxpayer to appeal the information notice and stop the clock ticking; but this is an inappropriate route if the taxpayer has no genuine grounds of appeal and merely wishes to withhold such information as is subject to LPP. The LPP regulations offer a route by which the claim to LPP can be determined. To the extent the outcome is unfavourable to the taxpayer, he avoids penalties for non-compliance because he followed the procedure: see Regulation 7 of the LPP regulations.” (EC Behague v. HMRC [2013] UKFTT 647 (TC), §14).
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Failure to follow procedure: document still privileged but clock not stopped
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“Nowhere in Schedule 36 or the LPP regulations is it stated that the effect of failing to take advantage of the dispute resolution mechanism offered by the LPP regulations would be to waive a claim to LPP…I think that there is no such waiver of LPP.” (EC Behague v. HMRC [2013] UKFTT 647 (TC), §§12…13).
Dispute during correspondence
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"(1) The following procedure applies where there is a dispute falling within regulation 3(a)." (SI 2009/1916, r.5(1))
Recipient to provide list within time limit for compliance
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"(2) On receipt of the information notice, the taxpayer, third party or person acting on their behalf shall—
(a) by the date given in the notice for providing information or producing documents, specify in a list each document, required under the information notice, which is in dispute, with a description of the nature and contents of that document;
(b) serve that list on HMRC.
(3) But no description of a document or type of document is required where such description would itself give rise to a dispute over privilege." (SI 2009/1916, r.5(2), (3))
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Service within a reasonable time (up to 20 working days), proof to be provided
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"(6) The taxpayer, third party or person acting on their behalf shall provide HMRC with proof of service under paragraph (2)(b).
(7) Service for the purposes of paragraph (2)(b) must take place within a reasonable time to be agreed between the taxpayer, third party or person acting on their behalf and HMRC but in any event no later than twenty working days after the date given in the notice for providing information or producing documents." (SI 2009/1916, r.5(6), (7))
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“[10] Combining the rather odd provisions of Regulation 5(2)(a) and (b), 5(6) and (7) it appears that the taxpayer is required to submit to HMRC his list of documents on which he claims LPP no later than twenty working days after the date that the information is required to be produced by the Information Notice.” (Behague v. HMRC [2013] UKFTT 596 (TC), Judge Mosedale, emphasis original)
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HMRC to notify disagreement within 20 days
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"(4) Within twenty working days of receiving the list referred to in sub-paragraph (2), HMRC must notify the person who served the list of any documents on the list that it requires to be produced and which it considers are not privileged." (SI 2009/1916, r.5(4))
Taxpayer to make application to tribunal within a reasonable time
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"(5) On receipt of notification under paragraph (4), the taxpayer, third party or person acting on their behalf must make an application to the First-tier Tribunal to consider and resolve the dispute and must include copies of the documents which remain in dispute with that application.
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(8) An application under paragraph (5) must be made within a reasonable time to be agreed between the taxpayer, third party or person acting on their behalf and HMRC but in any event no later than twenty working days of the date of the notification required under paragraph (4)." (SI 2009/1916, r.5(5), (8))
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Tribunal has no power to extend time limit for list
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"[14] I note in passing that the LPP Regulations give this Tribunal no power to extend time for service of the list of documents to HMRC. While Rule 5(3)(a) of this Tribunal’s rules may give this Tribunal power to extend time limits in other regulations, that can only be in relation to the conduct of proceedings before the Tribunal. So while it might give the Tribunal power to extend time for compliance with Regulation 5(5) and 5(8) which deal with the time for notification of the dispute to the Tribunal, although I express no view on this, it does not give power to extend time in relation to something which happened before notification. The Regulations give HMRC no power to extend time either." (Behague v. HMRC [2013] UKFTT 596 (TC), Judge Mosedale, emphasis original)
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"[41] I agree with Ms Nathan that HMRC have a wide managerial discretion, but I also agree with Mr Dixon that the Tribunal has no inherent jurisdiction to rule on whether HMRC should have exercised that discretion. Ms Nathan did not seek to argue that any statutory provision gave the Tribunal the necessary jurisdiction, and in my view she was correct not to do so.
...
[49] Sch 36 itself is therefore designed to reduce the risk that taxpayers can “delay or frustrate the investigation by lengthy or complex adversarial proceedings or otherwise”. It is entirely consistent with that purpose that the LPP Regs set out a series of steps which begin with the issuance of the Notice and ends a maximum of 60 working days later." (Draffan v. HMRC [2022] UKFTT 82 (TC), Judge Redston)
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Tribunal will not use care and management powers to circumvent time limit
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"[69] If the Tribunal were to direct a hearing in a case such as this, where the Applicants had failed to meet the statutory time limits, the Tribunal would in terms be extending the time for compliance, and undermining the very prescriptive LPP Regs. Instead, the Tribunal only has the jurisdiction to hold a separate hearing if the procedure in the LPP Regs is followed. The Rules cannot be used to by-pass the strict time limits there set out.
[70] Even if I were to be wrong in this, so that the Tribunal retains jurisdiction despite the LPP Regs, I would have found that it was not in the interests of justice to direct a separate hearing of this LPP dispute, because it would further delay the substantive appeals against the Notices." (Draffan v. HMRC [2022] UKFTT 82 (TC), Judge Redston)
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Dispute during inspection
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(1) The following procedure applies where there is a dispute falling within regulation 3(b)." (SI 2009/1916, r.6(1))
Indicate dispute
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"(2) On receipt of the information notice, the taxpayer, third party or person acting on their behalf shall indicate to the officer carrying out the inspection each document, required under the information notice, which is in dispute." (SI 2009/1916, r.6(2))
Taxpayer places documents in sealed container
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"(3) The taxpayer, third party or person acting on their behalf must place the document or documents in dispute, or a copy of such document or documents, in an appropriate container which prevents the contents being visible.
(4) The container shall be—
(a) sealed, labelled and signed by that person;
(b) countersigned by the officer; and
(c) given into the custody of the officer." (SI 2009/1916, r.6(3), (4))
HMRC deliver container to FTT within 42 days
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"(5) The officer shall deliver the container to the First-tier Tribunal with the seal intact within forty-two working days of having taken custody of it together with an application to that Tribunal to consider and resolve the dispute." (SI 2009/1916, r.6(5))
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FTT to determine dispute
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"When an application is made under regulation 5(5) or 6(5), the First-tier Tribunal shall—
(a) resolve the dispute by confirming whether and to what extent the document, is or is not privileged;
(b) direct which part or parts of a document (if any) shall be disclosed." (SI 2009/1916, r.8)
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Documents to be kept confidential
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"The First-tier Tribunal must ensure that any document in dispute, or any copy of such document, is not inappropriately disclosed to any person pending the Tribunal's consideration of the status of the document." (SI 2009/1916, r.9)
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Resolution by agreement
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"A dispute falling within regulation 3 may be resolved at any time by HMRC and the person to whom an information notice has been given reaching an agreement, whether in writing or otherwise." (SI 2009/1916, r.10)
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Auditors and tax advisers
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Auditors not required to provide documents held or produced in the course of performing functions
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"(1) An information notice does not require a person who has been appointed as an auditor for the purpose of an enactment—
(a) to provide information held in connection with the performance of the person's functions under that enactment, or
(b) to produce documents which are that person's property and which were created by that person or on that person's behalf for or in connection with the performance of those functions.
(2) Sub-paragraph (1) has effect subject to paragraph 26." (FA 2008, Sch 36, para 24)
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Tax advisers not required to provide communications for the purpose of giving tax advice
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"(1) An information notice does not require a tax adviser—
(a) to provide information about relevant communications, or
(b) to produce documents which are the tax adviser's property and consist of relevant communications.
(2) Sub-paragraph (1) has effect subject to paragraph 26." (FA 2008, Sch 36, para 25(1) - (2))
Tax adviser
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"“tax adviser” means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that person or by another tax adviser of that person)." (FA 2008, Sch 36, para 25(3))
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Relevant communications
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"“relevant communications” means communications between the tax adviser and—
(a) a person in relation to whose tax affairs he has been appointed, or
(b) any other tax adviser of such a person,
the purpose of which is the giving or obtaining of advice about any of those tax affairs" (FA 2008, Sch 36, para 25(3))
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Exceptions
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"(1) This paragraph applies where paragraph 24(1) or 25(1) is disapplied in relation to a document by paragraph 26(1) or (2).
(2) An information notice that requires the document to be produced has effect as if it required any part or parts of the document containing the information mentioned in paragraph 26(1) or (2) to be produced." (FA 2008, Sch 36, para 27)
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Exception: information explaining document the tax accountant assisted in preparing for HMRC
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"(1) Paragraphs 24(1) and 25(1) do not have effect in relation to—
(a) information explaining any information or document which the person to whom the notice is given has, as tax accountant, assisted any client in preparing for, or delivering to, HMRC, or
(b) a document which contains such information." (FA 2008, Sch 36, para 26(1))
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Exception: information identify a person under a person unknown notice
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"(2) In the case of a notice given under paragraph 5, paragraphs 24(1) and 25(1) do not have effect in relation to—
(a) any information giving the identity or address of a person to whom the notice relates or of a person who has acted on behalf of such a person, or
(b) a document which contains such information." (FA 2008, Sch 36, para 26(2))
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Unless information provided separately
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"(3) Paragraphs 24(1) and 25(1) are not disapplied by sub-paragraph (1) or (2) if the information in question has already been provided, or a document containing the information in question has already been produced, to an officer of Revenue and Customs." (FA 2008, Sch 36, para 26(3))
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No exception simply because auditor also prepares tax return
“I see no reason why HMRC should be entitled to disclosure of the documents and information simply because the Auditor also happens to act as the Taxpayers’ agent for the preparation and submission of corporation tax returns.” (HMRC v. A Taxpayer [2018] UKFTT 541 (TC), §36, Judge Jonathan Richards).
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Uncertain whether patient confidentiality prevails
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“Convention rights may be relevant. These were considered in Guyer (at paragraphs 36-45). For example, the European Court of Human Rights observed in Z v Finland 25 EHRR 371 at 405-406, paragraph 95, that “Respecting the confidentiality of health data is a vital principle in the legal systems of all the Contracting Parties to the Convention. It is crucial not only to respect the sense of privacy of a patient but also to preserve his or her confidence in the medical profession and in the health services in general.”…Questions of proportionality may arise. However, I did not hear full argument from either party on these matters. I do not think it would be prudent to express a concluded view on this delicate topic in the absence of full submissions from both sides when it is not essential that I do so. While I am inclined to the view that, in certain circumstances, the statutory provision referred to above in Schedule 36 will prevail over the duty of confidentiality, it is unnecessary to decide whether this is such a case.” (Long v. HMRC [2014] UKFTT 199 (TC), §§22…23, Judge Gordon Reid QC).
Human rights: question of proportionality
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“In the light of all those authorities I conclude that, so far as the service of the notice in this appeal does interfere with rights protected by art 8(1), there was ample justification as required by art 8(2). The notices were issued according to law, in pursuit of a legitimate aim, and were necessary in a democratic society for protecting the taxation system and the revenue.” (Guyer v. Walton [2001] STC (SCD) 75, §45, Dr Brice – re solicitor cash book and client ledger).
Variation by FTT to exclude documents and information HMRC not entitled to
“I note that it is possible that such bank statements may include details of a payment relating to the matters listed in s 12 PACE as the appellant argues. This can be addressed by allowing the appellant to remove any such items from the statements in accordance with para 19(3) of schedule 36. I have provided for the variation of the information notice in this respect.” (Cherian v. HMRC [2016] UKFTT 316 (TC), §90).