HMRC’s Information Powers come under the spotlight

This recent case before the First Tier Tax Tribunal (FTT) is highlighting how a penalty originally imposed by HMRC was quashed due to their lack of judgement and failure to prove that the taxpayer had even received the information notice in the first place. As clearly shown in this case, HMRC does not always get it right.
This recent case before the First Tier Tax Tribunal (FTT) highlights how HM Revenue and Customs (HMRC) was held to have issued an invalid information notice resulting in the quashing of a £300 penalty imposed by HMRC for not responding.

The point at issue concerned is whether HMRC failed to meet the requirements of ‘certainty and precision’ in an Information Notice issued under FA 2008, Sch 36, and if a penalty for the taxpayer who had not been compliant was justified.

Initially, HMRC wrote to the taxpayer saying it had information that gave them ‘reason to suspect that the taxpayer had committed serious fraud’. Some two years later, during the course of the on-going enquiry, HMRC issued the taxpayer with an information notice, which the taxpayer did not respond to and received the £300 non-compliance penalty. The taxpayer appealed stating that he did not receive the said notice.

The FTT stated that HMRC had not proved that the taxpayer had received the information notice, which is a necessary precondition for a penalty to be imposed. Although HMRC ‘assured’ the tribunal that the letter had been sent, the judge said “assertions of advocates do not amount to evidence” and that on this basis alone, the taxpayer’s appeal had to succeed. The judge commented that the “drafting of the letter was so poor that it would be perverse to conclude that the recipient of it could know precisely what he was required to provide.” Therefore, the penalty was quashed. 

The judge further commented that this case also highlighted HMRC’s misjudgement on how access to third party information was to be made. The expectation from the taxpayer to produce third party documentation was found to be unreasonable. The FTT reminded HMRC that it had “ample powers to obtain information from third parties and if that is desired, then the proper procedures should be adopted.”

Mark Taylor, Head of Tax Investigations and Dispute Resolution at Buzzacott, believes that while the penalty amount being appealed in this case was minimal, the fact that HMRC could not prove that the information notice had been received was an interesting development. This could result in HMRC changing the manner in which such notices are delivered to taxpayers.

This decision also highlights that HMRC officers must properly consider whether the information or documents requested are realistically obtainable by the recipient.

While FA 2008, Sch 36 does give HMRC wide-ranging powers to require taxpayers and third parties to provide documents and information ‘reasonably required’ to check someone’s 'correct tax position', these powers are not unlimited.

Should anyone receive an information notice from HMRC and have any concerns then they should immediately seek expert advice.  As clearly shown in this case, HMRC does not always get it right.

For more information or advice please contact:

Mark Taylor
Head of Tax Investigations and Dispute Resolution
T | +44 (0)20 7556 1243
E |

Aadil Masood
Assistant Manager - Tax Investigations and Dispute Resolution
T | +44 (0)20 7556 1475
E |

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