Assessing whether or not the requested information and documents are reasonably required is rarely a simple task, usually because of the lack of context as to the check being carried out – reasonableness may not be assessed in a vacuum.
In the recent decision of Avonside Roofing Limited v Revenue and Customs [2021] UKFTT 158 (TC), the FTT offers direction in relation to the reasonableness of requests for information and documents in light of the purpose for which that is being requested.
The appellant entered into a disguised remuneration arrangement in the accounting period ended 31 December 2009.
On 5 April 2016, HMRC issued a Regulation 80 Determination for the PAYE due for the year ended 5 April 2010. Notably, this was on the basis that the appellant was careless, thus accessing the extended time limits.
On 9 November 2018, HMRC sought to determine the penalty position of the appellant and as a result, issued an Information Notice as means of identifying this. Notably, HMRC sought to rely on Condition D in Paragraph 21, Schedule 36, Finance Act 2008, whereby notwithstanding Conditions A-C, where a Corporation (or Self-Assessment) Tax Return has been submitted, an Information Notice may only be issued for the purpose of checking the position in relation to PAYE.
The appellants appealed the notice on the basis that, alongside a separate ground, the information requested was not reasonably required.
The FTT confirmed that, in assessing whether a request for information and documents is reasonably required, it must first be determined which aspect of the taxpayers’ tax position HMRC was checking.
The FTT went on to reiterate the decision of Simler J in Derrin Brother Properties v Revenue and Customs [2014] EWHC 1152 (Admin), whereby HMRC’s request for information and documents must be directed to the purpose for which the notice was given, this being, whether a penalty should be issued.
In addition to this, in application of the decision in Gold Nuts Limited v Revenue and Customs [2017] UKFTT 84 (TC), an information notice may not be issued entirely without foundation, wholly speculatively or as a means of fishing for information. That being said, it does not mean that there may not be an element of speculation on HMRC’s part.
Identifying the purpose for which an Information Notice has been issued is imperative and where this is not clear, should be expressly requested. Without doing so, the context to which the information is being requested cannot be assessed and HMRC may be provided with information and documents they are not entitled to under the law.
If you are dealing with a HMRC enquiry and a Schedule 36 notice is issued to which you are unsure if you need to comply with it, then please speak with Chris Watts or Thomas Slipanczewski. For general enquiries please do not hesitate to contact us.
