HMRC will normally seek to obtain all the information they need to carry out a compliance check or enquiry by making an informal request. If this is not successful they will issue an information notice.

 

An information notice can be used to obtain information as follows:-

 

    • From the person who’s tax position is being checked (see more under taxpayers notice)

 

    • From a third party to check the tax position of another person (see third party notice for further information)

 

    • About a person who’s identity is not known to HMRC (see identity unknown notice for more information).

 

The information or documents required by an information notice must be reasonably required for the purpose of checking a person’s tax position.

 

The notice may specify:-

 

Each type of notice has its own rules but there are some rules that apply to all three types of information notice.

 

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Complying with a Notice

 

The conditions for complying with a notice are set out in FA 2008, Sch. 36, para. 7. To comply with an information notice, a person must provide the information or produce the documents:-

 

    • Within such period and

 

    • (If they are specified in the notice) at such time, by such means and in such form as is reasonably specified or described in the notice.

 

A person can provide a copy of the document and this will normally be acceptable unless the original has been specifically requested by the notice or the officer decides that they need to see the original because:-

 

    • The copy is unclear or incomplete

 

    • There are doubts about its authenticity.

 

If the information that is contained in the document is provided in a different form instead of the document itself, the officer may decide that this is sufficient for carrying out the check of the person’s tax position. If so, they will accept this instead of the document.

 

Once the document has been received, the officer can take a copy of the whole or part of it, or make an extract from it.

 

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Copying or Removing Documents

 

The provisions of para. 15 and 16 permit the officer to take a copy of a document (at HMRC’s expense), make an extract from it or remove it – for example to use the copying facilities in an HMRC office.

 

A document can only be removed if it is necessary to do so and at a reasonable time, and it must only be kept for a reasonable period. If it is needed by the person from whom it is removed, the officer must provide a copy free of charge.

 

Receipts should always be requested when the documents are removed and given when they are returned.

 

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Date by which Information or Documents are Required

 

The notice must specify a reasonable period for providing the information or producing the documents. Para. 7 (1) says that where a person is required by an information notice to provide information or produce a document, the person must do so within such a period as is reasonable.

 

What is a reasonable time will depend on the nature of the information or document required and how easy it will be for the person to produce it. HMRC generally specify 30 days but the practitioner should contact the officer immediately they become aware the deadline is too tight. Officers must consider any reasonable request for an extension to the time-limit or risk:-

 

    • The notice being invalid for not allowing a reasonable time or

 

    • The taxpayer having a reasonable excuse for failing to comply due to not being allowed a reasonable time to comply.

 

An officer examining business records at the business premises may issue a notice on the spot, requiring immediate production of other documents if the examination indicates that these are required to complete the check. The taxpayer may be happy to produce them or they may indicate either that they would want to appeal the notice or at least given time to ensure that none of the documents contain protected information.

 

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Definitions

 

FA 2008, Sch. 36 uses various words and expressions for which HMRC have provided further explanation in their instructions for their officers. These include:-

 

    • Providing information

 

    • Producing documents, including guidance on what is a document or part of a document and on electronic documents and records

 

    • The meaning of ‘to specify’ or ‘describe’

 

    • The date by which information or documents can be required

 

    • Where and when documents should be produced

 

    • Copying or removing documents.

 

 

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Approval

 

In most cases, where an officer is carrying out a compliance check or enquiry issues a taxpayers notice, no approval or agreement has to be sought although they may seek the approval of the Tribunal in certain circumstances.

 

In the case of a third party notice the taxpayer’s agreement or the Tribunal’s approval must normally be sought and the Tribunal’s approval will normally be required before an identity unknown notice can be issued.

 

All requests for approval from the Tribunal must be made by or with the agreement of an authorised officer.

 

The conditions that have to be met before the Tribunal can give its approval depend on the type of notice being sought and whether HMRC are asking the Tribunal to supply some of the conditions.

 

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Identity Unknown Notice

 

An identity unknown notice can be issued under FA 2008, Sch. 36, para. 5 to require the production of information or a document reasonably required for checking the tax position of:-

 

    • A person who’s identity is not known to the officer

 

    • A class of persons whose individual identities are not known to the officer.

 

A notice can only be issued by an authorised officer and only with the approval of the Tribunal. However no approval is required for an identity unknown notice issued to:-

 

    • A partner for the purpose of checking the tax position of one or more of the other partners in their capacity as such (Para. 37 (6)).

 

    • A parent company for the purpose of checking the tax position of one or more of its subsidiaries (Para. 35 (5)).

 

The conditions that have been met before the Tribunal can give its approval for an identity unknown notice are set out in the Finance Act 2008, Sch. 36, para. 5 and are as follows:-

 

    • The authorised officer does not know the identity of the person or individual identities of a class of persons.

 

    • There are reasonable grounds for believing the person or class of persons may have failed to comply or may fail to comply with the tax provision.

 

    • The failure to comply with the tax provision is likely to have led or to lead to serious prejudice to the assessment or collection of UK tax.

 

    • The information or document is not readily available from any other source.

 

Para. 5 (5) defines UK tax as any tax apart from the relevant foreign tax.

 

HMRC will consider there was a serious prejudice to the collection or assessment of tax if there was a risk of:-

 

    • Tipping off a person suspected of committing a serious civil offence.

 

    • The loss of significant amounts of tax.

 

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Taxpayers Notices

 

Normally the officer carrying out a compliance check or an enquiry would have the authority to issue an information notice without further approval or agreement.

 

However if the notice requires the production of old documents they must have an agreement of an authorised officer.

 

HMRC can, if they wish, seek the approval of the Tribunal for issuing a taxpayer notice. The circumstances when an officer will consider seeking the Tribunal’s approval are where:-

 

    • The tax at risk is large, the time limit for making an assessment is close and an appeal may mean the tax cannot be quantified and assessed.

 

    • The taxpayer has a history of making appeals to delay matters and then withdraws them at the last moment.

 

    • There is a history of refusing to provide information.

 

    • The officer wishes to protect their information from being disclosed at an appeal hearing on the notice. For example where they hold information from an informer or a third party.

 

    • They have reason to believe that documents may be destroyed and it is necessary to consider criminal proceedings.

 

The taxpayer has no right to be present at or make representation to the hearing of an application for approval for issuing a taxpayer notice. However, if the taxpayer makes any representations to the officer, these must be fairly summarised and placed before the Tribunal. If the representations are in writing, the written document should be given to the Tribunal.

 

There is no appeal against the taxpayer notice that has been approved by the Tribunal (FA 2008, Sch. 36, para. 29 (3)).

 

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Third Party Notices

 

Unless a third party notice is given to a partner or a parent company or relates to certain parts of Statutory Records, HMRC must always obtain either:-

 

    • The agreement of the person who’s tax position is being checked.

 

    • The approval of the Tribunal.

 

No approval or agreement is required for a third party notice issued to:-

 

    • A partner for the purpose of checking the tax position of one or more of the other partners in their capacity as such (Para. 37).

 

    • A parent company for the purpose of checking the tax position of one or more of its subsidiaries (Para. 35).

 

Para. 34 provides that no appeal is needed for a third party notice that refers only to information or documents that form any part of a person’s statutory records and relate to:-

 

    • The supply of goods or services.

 

    • The acquisition of goods from other member states

 

    • The importation of goods from a place outside the member states in the course of carrying on a business.

 

Neither the taxpayer nor the third party has the right to be present at or make representations to the hearing of an application for approval for issuing a third party notice. However if they make representations to the officers, these must be fairly summarised and placed before the Tribunal. If the representations are made in writing, the written document must be given to the Tribunal.

 

There is no appeal against a third party notice which has been approved by the Tribunal (FA 2008, Sch. 36, para. 29 (3)).

 

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Mistakes in a Notice

 

If an information notice contains a substantial error it must be withdrawn and a new notice must be issued.

 

However, if a notice meets the intentions and meaning of the law and the person affected by the notice is adequately identified, it will not be invalid because:

 

    • It is not in a correct form

 

    • It contains a mistake or defect

 

    • There is an omission

 

 

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Procedure and Delivery

 

Procedure

FA 2008, Sch. 36, para. 56 applies the provisions of TMA 1970 s.108 (responsibility of company officers), s.114 (want of form) and s.115 (delivery and service of documents) to the issuing of information notices. These provisions apply to information notices for both direct tax and VAT purposes.

 

Delivery

 

An information notice can be served on a person either by delivery or by post.

 

Service of an information notice by delivery can be made by delivering it to the person or by leaving it at their usual or last known place of residence.

 

Service by post can be made by addressing it to the person:-

 

    • At the person’s usual or last known place of residence, or place of business or employment.

 

    • In the case of a company, at ‘any other prescribed place’.

 

    • In the case of a liquidator at a company, at the liquidator’s address for the purposes of the liquidation or ‘any other prescribed place’.

 

There are as yet no regulations prescribing other places for companies or liquidators.

 

A notice may also be served on a company by serving it on its ‘proper officer’ that is, the company secretary, or person acting as the company secretary, or its treasurer.

 

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Producing Documents

 

A document must already exist when the notice is issued for HMRC to be able to require that it is produced.

 

‘Producing’ does not mean delivering, so it is enough to make it available for examination. The officer can take a copy (at HMRC’s expense) or make extracts from the document, or remove it and retain it for a reasonable period.

 

What is a Document?

 

A document is ‘anything in which information of any description is recorded’, including information held electronically. A document can also be part of a document.

 

Part of a Document

 

Para. 58 defines document to include part of a document (unless the context requires otherwise).

 

If part of a document is protected from the information powers, compliance with the notice can be by way of providing a copy of the non-protected parts or a copy of the whole document with the protected parts blacked out. The whole of the original document must be produced, however, if required, with the protected parts covered up.

 

If none of the document is protected, the officer will only accept that the notice has been complied with if part only is produced if they can be satisfied that the parts withheld have no bearing at all on the person’s tax position.

 

Electronic Documents and Records

 

There are special provisions in FA 2008, s.114 covering electronic documents. An electronic document or record includes such things as:-

 

    • A computer or server hard drive

 

    • An external hard drive

 

    • Magnetic tape

 

    • Optical Disk

 

    • Memory stick

 

    • CV or DVD

 

    • Floppy Disk

 

A person is permitted to produce a copy of the information held electronically where an electronic document or record is required by an information notice. The copy can be on paper or in another electronic format, such as a CD or DVD.

 

The officer can specify that the document is produced in such form as is reasonable. If, therefore, a printed version is produced, the officer can specify that it should be produced as an electronic copy if they have reasonable grounds for doing so.

 

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Providing Information

 

‘Providing’ means delivering, not just making available so that a person has to collect it.

 

The ‘information’ that HMRC can require is restricted to knowledge and facts, not opinion or speculation. But they can ask for information about the reason why something was done – for example why a particular transaction took place.

 

HMRC say that:-

 

“Providing information can be answering specific factual questions, but information can also be provided by creating a document that did not previously exist in order to conveniently provide the information required. For example, it can cover computations, calculations, analyses, translations of documents written in a foreign language, and so on.”

 

It may be convenient to provide information by creating a document but the officer cannot ask the taxpayer to create a document so that it can then be required by an information notice. It is up to the taxpayer, therefore, to decide if it is more convenient to provide the information by creating a document, for example capital statements.

 

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Specify or Describe

 

FA 2008, Sch. 36, para. 6 (2) requires the officer to specify or describe the information or documents to be provided or produced.

 

An assurance was given in Parliament that the information powers would not be used for speculative enquiries – or ‘fishing expeditions’. This, and the need to avoid a notice being unreasonably burdensome so that it is invalid, means that the officer must frame his information request as tightly as possible.

 

As far as possible a notice should ‘specify’ the precise documents required, for example ‘the letter to X Bank dated 01/02/2015, 12/09/2015 and 15/11/2015’. If this is not possible, the notice should describe the documents required as closely as possible, for example ‘all correspondence with X Bank during 2015’.

 

Practitioners should always seek to ensure that the information or documents sought are needed to check the person’s tax position. They should not hesitate to challenge a notice that is so general that it requests irrelevant material and is therefore invalid due to it being unreasonable.

 

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Where and When Documents should be Produced

 

Para. 7 (1) says that where a person is required by an information notice to provide information or produce a document, the person must do so at such time, by such means and in such form (if any) as is reasonable.

 

The officer doesn’t have to specify where and when the information or documents have to be produced and will usually be prepared to agree a convenient time and place with the taxpayer. It was established in Johnson v Blackpool Commissioners and CIR (1996) BTC 237, that it is not reasonable for the person to suggest production of a document at an unsocial hour of the day or in an unreasonable location.

 

If a reasonable place and time cannot be agreed, the officer can specify them either when issuing the notice or after it has been issued. They cannot, however, specify a place that is used solely as a dwelling.

 

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