HMRC have extensive powers to request information from taxpayers, but the law is designed to ensure the taxpayer understands what he must supply and when. This structure is necessary because the taxpayer can suffer a penalty if he does not comply with an information notice from HMRC.
HMRC need to understand a taxpayer’s tax position, so they ask questions and request that certain documents be provided. That is fair enough, but the taxpayer needs to be clear about what information is requested, and it must be information which is within his power to produce.
Fergus Anstock received a shocking letter from HMRC dated 1 April 2014, which said “we have reason to suspect that you have committed tax fraud”. A number of meetings were held between Anstock and HMRC over the next two years, and information was also provided by letter. It is not clear whether Anstock was professional represented during this enquiry process.
On 5 July 2016 HMRC issued a formal information notice to Anstock, but he claimed he didn’t receive it. On 16 August 2016 HMRC issued Anstock with a penalty of £300 for not complying with the information notice, which he appealed to the tax tribunal.
The tribunal judge ruled that the information notice was invalid for the following reasons:
• HMRC could not prove that the notice was sent, or received by the taxpayer;
• The notice requested third-party documents which were not within the taxpayer’s power to supply;
• The information request was made in such general terms that it was impossible to understand exactly what had to be provided; and
• Some of the documents requested were subject to legal professional privilege.
In squashing the penalty the judge concluded: “the notice offends just about every tenet for the proper drafting of a document which is intended to have legal effect”.
This case illustrates how HMRC officers may ignore the strict legal requirements relating to information notices. If you receive such a notice, check it against the criteria set down by the judge in this case, and if it fails, submit an appeal. Our office are happy to help you draft such an appeal.
For more information contact DFC Accountants in Cardiff