[2013] UKFTT 132 (TC)
TC02561
Appeal number: TC/2012/847
INCOME TAX – Information
notice – need for clarity – whether required to be issued by authorised officer
– whether reasonable grounds for issue: to be determined by reference to facts
known at issue not later
FIRST-TIER TRIBUNAL
TAX CHAMBER
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MICHAEL JARVIS
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE CHARLES HELLIER
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PHILIP GILLETT FCA
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Sitting in public at Brighton on 4 February 2013
Peter Clarke for the Appellant
Gloria Orimoloye for the
Respondents
© CROWN COPYRIGHT
2013
DECISION
1.
Paragraph 1 schedule 36 FA 2008 provides:
"1 (1) An officer of
[HMRC] 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 purposes of checking the
taxpayer's tax position.
(2) In this schedule,
"taxpayer notice" means a notice under this paragraph."
2.
Mr. Jarvis appeals against a notice issued under this provision
requiring the production of certain documents and information. The notice, in a
letter dated 12 December 2011, contains the following :
"Documents or information that we need
[there follows an irrelevant paragraph on the extended
meaning of "documents"]
1. Sight of your bank statements for all your
accounts you have an interest [in] or have been interested [in] for the period
between April 2010 and April 2011.
2. Full details of your personal income and expenditure
for the period between April 2010 and April 2011."
3.
Before us Mr. Clarke raised three objections to the notice (other
objections had been made in correspondence but Mr. Clarke, rightly, did not
pursue them before us). These were: (1) the dates issue; (2) the authorised
officer issue; and (3) the reasonably required issue.
Background
4.
We heard oral evidence from Mr Pulling, the officer of HMRC who had
issued the notice, and had before us a bundle of documents including copy
correspondence and telephone attendance notes.
5.
Mr Jarvis’ last tax return was for the year 2005/06. He notified HMRC in
May 2007 that he had ceased to carry on his trade as a painter and decorator.
His last tax return indicated that thereafter his income would have been
confined to pension and annuity income. At sometime in 2011 it seems that HMRC
had a tipoff that Mr. Jarvis had income from a decorating trade in addition to
his pension income. In 2011 Mr. Pulling of HMRC wrote to Mr. Jarvis asking for
details of undeclared self-employment income. There followed some
correspondence between Mr. Pulling and Mr. Clarke about the legality of Mr.
Pulling’s request. On 12 December 2011 Mr. Pulling issued the information
notice described above.
6.
We note that following the issue of that notice, inter alia details of
income and expenses (giving rise to a net loss) arising from a flat in
Eastbourne owned by Mr. Jarvis and his wife were disclosed to HMRC. For reasons
we shall later explain we consider that information irrelevant to the issues
before us.
1. Dates.
7.
Mr. Clarke says that paragraph 29 schedule 36 provides a right to appeal
(1) against a notice given under paragraph 1, or (2) against any requirement in
that notice. We agree.
8.
Mr. Clarke says that for a notice to be validly given it must specify
what is required. The taxpayer must be able to determine from the notice what
he is required to do. We agree.
9.
But we believe that if a notice contains one or more requirements that
are adequately specified and one or more requirements which are not, that will
not make the whole notice invalid but will deprive the notice of effect in
relation to the inadequately specified items.
10.
As a result we believe that an appeal against such notice may be
properly determined if the decision addresses the inadequately specified
elements of the notice without setting aside the notice as a whole.
11.
Mr. Clarke says that the notice inadequately specifies the period for
which the relevant documents and information were required. It says, both under
1. and 2.: "April 2010 and April 2011"; it does not specify which
dates in April in either case. As a result he says the taxpayer could not
determine from the notice what his obligations were.
12.
We agree that the notice is deficient in that respect. It is not clear
whether the period is 1 April to 1 April or 30 April to 1 April or some other
combination of April dates. But it is clear that anything following 30 April
2010 and before 1 April 2011 is required.
13.
Subject to the other issues, we therefore find that the notice may
properly be taken to impose obligations to produce documents and provide
information relating to the period from 30 April 2000 to 1 April 2011. We do
not find that the uncertainty as to dates in April 2010 and April 2011 invalidates
the notice as a whole.
2. Authorisation.
14.
Mr. Clarke asserts that Mr. Pulling (who gave the notice) was not an
authorised officer within paragraph 59 Schedule 56 and was required to be such
for the notice to be valid. Paragraph 59 provides:
"A reference in a provision of this Schedule to an
authorised officer of [HMRC] is a reference to an officer of [HMRC] who is, or
is a member of a class of officers who are, authorised by the Commissioners for
the purposes of that provision."
15.
Mr. Clarke points to HMRC's manuals which indicate that authorised
officers are specifically trained and identified, and that where intrusive
powers are used, authorisation should be by an authorised officer different
from the caseworker.
16.
Mr. Pulling accepted that he was not an authorised officer for the
purposes of paragraph 59.
17.
However, we do not believe that the involvement of an authorised officer
is necessary for the proper issue of information notice under paragraph 1
schedule 36. That is because:
(1)
there is no such requirement in the words of paragraph 1;
(2)
by contrast, in paragraph 3 of schedule 36, it is specified that a
tribunal may not approve the giving of the notice to a third party, ie a notice
under paragraph 2 of schedule 36, unless the application is made by or with the
agreement of an authorised officer. Similarly in paragraph 5A of schedule 36
the power to obtain information about persons whose identity is not
ascertained from a third party is reserved to an authorised officer;
(3)
the statutory policy appears clear: more intrusive powers, and in
particular those which require information or documents from persons other than
the taxpayer, require greater safeguards before they are used. In the case of
seeking information from a taxpayer the provision of such protection is seen as
less important because the provision of the information is part of the duty of
the taxpayer to satisfy HMRC that his tax is correct.
18.
We conclude that paragraph 1 does not require the involvement of an
authorised officer and that a notice issued by an unauthorised officer is not
invalid on that account. We do not regard the statements in HMRC’s manuals as
capable of affecting the requirements of this legislation.
3. Reasonably required.
19.
Mr Clarke says that the information sought by HMRC was not reasonably
required for the purpose of checking Mr Jarvis’ tax position.
20.
Paragraph 1 provides that an officer may by notice require a taxpayer to
provide information or produce a document "if the information or document is
reasonably required by the officer for the purposes of checking the taxpayer's
tax position" [our emphasis].
21.
We highlight “is" in the statutory language. A notice may be issued
only if at the time it is issued its information is reasonably required by the
officer for the relevant purpose. That requires us to have regard only to what
the officer knew or did not know at the time of the issue of the notice. It
means that anything subsequently discovered is irrelevant to whether the notice
was validly issued.
22.
For that reason the information about Mr. Jarvis's rental income
recounted at paragraph 6 above is irrelevant to this appeal: not only was no
suggestion made that Mr. Pulling had the information on 12 December 2011, but
also the SDLT return (from which Mr Pulling gleaned knowledge of Mr Jarvis’
ownership of the flat) in the bundle before us shows a date of 4 January
2012, after the date of the information notice. For this reason we also
disregard concerns expressed by Mr. Pulling in his evidence which touched upon
matters which came to light after the date of the information notice.
23.
Mr. Pulling told us that before he had issued the information notice he
had the following information:
(1)
Mr. Jarvis's last return was for 2005/06 and HMRC's records indicated
that his trade had finished on 17 May 2006. HMRC's telephone log recorded a
call from Mr. Jarvis on 10 May 2007 indicating that he had ceased to trade. His
reported income, other than that from his trade was from pension and annuities;
(2)
information from someone that Mr. Jarvis was not being taxed upon
certain trading income;
(3)
a printout from HMRC's computer system which relied upon statutory
reports from the Nationwide Building Society to HMRC of interest earned by Mr.
Jarvis in 2006/07 and 2007/08. The programme behind the printout estimated that
a further in investment of £3,000 had been made into the account in 2007/8; Mr
Jarvis wanted to check whether this derived from taxable but untaxed sources ;
(4)
an Experion credit report dated 28th of September 2011 showed that Mr
Jarvis had a mortgage with an outstanding balance of £73,776 at 31 July 2011
(and monthly payments of £309);
(5)
HMRC also put in the bundle before us another Experion credit report
which showed that the balance of this mortgage was £65,200 on 4 December 2011
(in other words that some £7,500 had been repaid in 6 months). This report did
not bear a date but it seemed to us possible that it had been received either
before or after the issue of the information notice. In his evidence to us Mr.
Pulling could not be certain that he had seen this second report before he
issued information notice. On balance, however, we think it likely that he did:
he was part of the Hidden Economy Group, and we accept his evidence that
obtaining such reports before sending an information notice would have been his
normal practice.
24.
As regards (2) above, the evidence before us was wholly insufficient for
it to give rise to a reasonable requirement for further information. We had no
details about what was said and were provided with no way to test its reliability.
Mr. Pulling declined to give further details. The onus must be on HMRC to show
why something is reasonably required: unspecified information from an
unspecified source does not discharge that onus.
25.
However, the combination of (1), (3), and (4), were in our view
sufficient for an officer to reach a reasonable conclusion that Mr. Jarvis
might have had sources of untaxed income. Seeking bank statements and details
of income and expenditure were in our view reasonable items to seek in these
circumstances.
Our jurisdiction
26.
Paragraph 32 Schedule 36 provides that, on an appeal, a tribunal may
confirm, vary or set aside an information notice or any requirement in it.
Conclusions
27.
We decided that we should not set the notice aside.
28.
We consider however that we should vary the notice to extend and specify
the period to which it relates so that it covers the whole of the 2000/11
period. Thus we vary the notice so that "April 2010 and April 2011"
is replaced by 6 April 2010 and 5 April 2011".
29.
We require that the notice be complied with within 30 days of the issue
of this decision.
30.
This document contains full findings of fact and reasons for the
decision. Any party dissatisfied with this decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be
received by this Tribunal not later than 56 days after this decision is sent to
that party. The parties are referred to “Guidance to accompany a Decision from
the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this
decision notice.
CHARLES HELLIER
TRIBUNAL JUDGE
RELEASE DATE: 19 February 2013
