< Go Back HMRC Score a Late winner in the Court of Appeal - Schedule 36 Information Notices can be lawfully issued to non-resident taxpayers and third parties Posted: Jun 22, 2019
Tony Jimenez, the former co-owner of Charlton
Athletic FC, has not been resident in the UK since circa 2002. The Court of Appeal (COA) was asked to hear HMRC's appeal against earlier
decisions by the First Tier Tribunal (FTT) and a Judicial Review, which
had both concluded that HMRC acted beyond its powers in seeking information
from Jimenez once he was no longer UK resident. This led to the widely held belief that anyone outside the UK was beyong HMRC's standard information powers. Jimenez, a UK national, resides in
Dubai, having previously lived in Cyprus and then the UAE after leaving the UK. He
also has a Spanish passport. The COA was advised that he has been a UK taxpayer
for an undetermined part of this time and
that his historical and current tax position are currently being investigated by HMRC. As part of the investigation, HMRC issued a notice under
paragraph 1 of Schedule 36 FA 2008 to Jimenez
at his address in Dubai in May 2016. As is customary, attached to the notice was a schedule of the
information required by HMRC; including details of bank and
credit card accounts held since 6 April 2004 and a schedule of visits to
The only issue considered, by the COA and in the earlier appeals, was whether
Para 1, Schedule 36 FA 2008 permits a taxpayer notice to be issued by HMRC to a taxpayer who, at the relevant time, was resident outside the
UK. At judicial review, the judge held that the power could not be
exercised extra-territorially and quashed the notice; the COA then considered the arguments put
forward to suggest HMRC's powers stop at the UK border.
One of the three appeal judges stated: "
A paragraph 1 notice
can only be given to someone who is or may be a UK taxpayer and it is
this status rather than his place of residence which is key to
availability and operation of the power". He went on to say: " In the case of taxpayers resident abroad
HMRC can reasonably require production to take place in England unless
an alternative is agreed".
A second judge considered that most of the substantial argument made
on behalf of Jimenez, sugested that interpreting Para 1, Schedule 36 having extra-territorial effect would be contrary to international law by violating the principle that a
state cannot enforce its laws on the territory of another state
without that other state's consent. The Judge dismissed this argument and stated; "
Delineating the precise boundary between
prescriptive or legislative and enforcement jurisdiction in
international law is far from straightforward...but I do not accept that sending a notice by post to a person in a
foreign state requiring him to produce information that is reasonably
required for the purpose of checking his tax position in the UK violates
the principle of state sovereignty...such a measure does not involve the performance of any official act
within the territory of another state as would, for example, sending
an officer of Revenue and Customs to enter the person's business
premises in a foreign state and inspect business documents that are on
the premises pursuant to paragraph 10 of Schedule 36...nor does it seem to me objectionable that the notice is expressed as
a command rather than a mere request for the supply of information".
HMRC's appeal was allowed, meaning its powers to seek
information from non-UK individuals regarding their UK tax affairs after they
have left the UK have been confirmed and the previous decisions in the FTT and the subsequent Judicial Review have been reversed. See...
Queen on the application of Tony Michael Jimenez and the First Tier
Tribunal (Tax Chamber) Her Majesty's Commissioners for Revenue and
Customs,  EWCA Civ 51
HMRC can, lawfully, issue notices to produce information and documents reasonably required to check the UK tax position of a taxpayer, even if they are not resident in the UK at the time, this will also, presumeably, apply to third party notices sent to non-resident parties in connection with checking the UK tax position of a first party.
A Schedule 36 Notice is a formal request by HMRC for information and may be issued:
Unless Mr Jimenez decides to appeal to the Supreme Court, this
decision will stand as binding precedent for other non-resident
taxpayers who are under HMRC enquiry where a Schedule 36 notice may be
deemed necessary to assist with that enquiry. To the taxpayer themselves, under paragraph 1 of the schedule. To third parties, without the taxpayer's knowledge. Third party notices must be FTT approved unless the taxpayer agrees,
or there are special circumstances; notices to taxpayers require FTT
consent but not that of the taxpayer.
Understanding the extent and limits of HMRC's various powers is never easy, as this case demonstrates, although there are no territiorial limits for Schedule 36 notices there may be other, perfectly valid, reasons why an information notice may be unlawful, invalid or onerous. This case tells us little about how, if an overseas recipient of a Schedule 36 notice does not respond, HMRC can enforce the notice or any penalties that would ordinarily apply for non compliance. Certainly seeking funds from UK residiary assets or upon any subsequent return to the UK is an option but enforcement of UK penalties overseas appears significantly more burdensome.
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