The Judge noted
that the "...appeals very clearly highlight the balance that must be struck between
giving the Respondents sufficient latitude in relation to their
information and enquiry powers so as to allow them to properly do their
jobs and the taxpayer’s right to finality and privacy. What would have
been helpful for me in coming to this decision is to have been given an
understanding of HMRC’s reasons for opening the enquiries in the first
place. I can well understand HMRC’s concerns not to put into the public
domain methodology or sources which rely upon a degree of
confidentiality for their effectiveness; but I find myself groping for
the underlying reasons which would have informed my view on the
the events leading up to these appeals have resulted in a degree of
scepticism and wariness on both sides. This seems to have fed on its
self in a vicious circle – with the Appellants viewing each new request
for information with suspicion and with HMRC seeking yet more assurance
and information when confronted with apparent reticence..
The Judge then went on to consider the matter of the Information Notices and decided..."The test
that is to be applied is whether or not the items sought are
“reasonably required” for the purpose of checking the tax payer’s tax
position. It was submitted by counsel for the Appellants that the
dividing line as to what was reasonably required when it came to the
provision of personal bank statements, as demonstrated in other relevant
lay between those cases where the officer could show a reason to
suspect under-assessment and those where the officer was simply on a
“fishing expedition”. This proposition was not challenged by the
Respondents and I found it to be a helpful summation". The Judge added, "In
the present case I cannot see why the Respondents require to know what
Dr Price chooses to spend his money on given that the latter’s means are
not in issue...No
reason to suspect that Dr Price may have under-assessed his tax
liability was put before me".
This case is typical of many; the desire by HMRC to continually dig for information and once requested ensure it is provided but the Judge demonstrated that there has to be a balance and, at all times, a demonstrable reasonableness for the requests in order to check a 'tax position'. In a case where means are not an issue and there is no evidence, or reasonabale suspicion, of any understatement then does it really matter what a taxpayer may have spent his money on? How can that information be reasonably required to check his tax position? The Judge also noted that..."One must remember that
information or documents must be in the possession or control of the
person from whom the request is being made", so, Prima facie, a company is
a separate legal entity and questions about how it chooses to record transaction are questions for its board and not an individual.
The Tribunal decided that HMRC must issue Closure Notices but gave HMRC enough time to consider the information it was entitled to see before doing so but this case reinforces the need to critically oversee what HMRC are doing and if their requests, actions and conduct is within the confines of the legislation in which they operate.
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