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Yet more powers for HMRC!

A consultation has recently completed, marking yet another proposed extension of powers for HMRC – ‘Amending HMRC’s Civil Information Powers.’


The present position

Schedule 36 Finance Act 2008 (“FA 2008”) provides a series of extensive powers for HMRC to obtain information and documents:

  1. From the taxpayer directly;
  2. From a third party about a known taxpayer;
  3. From a third party about a taxpayer whose identity is not known;
  4. From a third party about a taxpayer whose identity can be ascertained.


HMRC’s proposals relate to 1. And 2. only.


Taxpayer notices

If information or documents reasonably required by HMRC to check a taxpayer’s tax position are in the power or possession of the person whose tax position they are checking, an officer of Revenue and Customs may issue a taxpayer notice, requiring the taxpayer to provide the relevant information or documents to HMRC.  The taxpayer must comply with the notice within a ‘reasonable’ time-limit, usually 30 days. If the information requested forms part of the taxpayer’s “statutory records” they have no right of appeal against a notice. For notices that require items other than statutory records the taxpayer may appeal against the notice, or any requirement in it, to an independent tribunal.


An officer of HMRC may, but is not required to, ask for the approval of the tribunal to the issuing of a taxpayer notice. Where a notice is issued with tribunal approval, the taxpayer has no right of appeal against the notice. The tribunal has to be satisfied that various conditions are met before it can approve the giving of a taxpayer notice (paragraph 3(3) of Schedule 36).


HMRC say in the consultation document that:


‘Applying for tribunal approval prior to issuing a taxpayer notice may be appropriate where, for example, prior knowledge of the taxpayer indicates that they are likely to appeal against the notice with the sole intention of delaying having to comply with the notice.’


Third party notices

If information or documents reasonably required by HMRC for the purpose of checking a taxpayer’s tax position are in the power or possession of a third party (that is, somebody other than the taxpayer), an officer may issue a third party notice. The notice would require the third party to provide the relevant information or documents to HMRC.


Before a third party notice can be issued there are a number of requirements set out in the legislation:


  • HMRC may not issue a third party notice without either obtaining the agreement of the taxpayer (that is, the person whose tax position is being checked), or the approval of the tribunal;
  • An approach to the tribunal by HMRC must be made, or approved by, an authorised officer of Revenue and Customs;
  • Before approaching the tribunal, HMRC must contact the person to whom the notice will be addressed, tell them what information or documents are required and give a reasonable opportunity for them to make representations to HMRC (a summary of those representations must then be given to the tribunal);
  • The taxpayer must have been given a summary of the reasons why the information or documents are required;
  • Requirements 3 and 4 do not apply to the extent that the tribunal is satisfied that taking those actions might prejudice the assessment or collection of tax (likewise the taxpayer may not be named in the notice where this condition is met).


The taxpayer and third party have no right to attend the hearing. As explained above, the third party may make representations to the tribunal via HMRC. The taxpayer, however,  has no right to make representations (either in writing or at the hearing).


Where a tribunal has approved a notice, the third party to whom it is given has no right of appeal. Where the notice is not approved by the tribunal but is issued with the agreement of the taxpayer instead, the third party may appeal on the ground that the request is unduly onerous (although there is no appeal against a requirement to provide information or documents forming part of the taxpayer’s statutory records). In either case, the taxpayer has no right to appeal against the giving of the notice to the third party.


Keeping up to date

HMRC’s view is that these powers are now out of date. The consultation paper states:


‘Many of these powers mirror provisions that date back to the 1970s… 

  • The UK has seen a continuing decline in the use of cash resulting in many more payments being handled electronically.
  • Securities trading has become almost entirely electronic.
  • The use of paper bank statements is starting to decline.
  • Traditional banks and building societies are seeing new competition from start- up “banks” which often have no physical branches.
  • As explained below, there are also new international agreements to facilitate the exchange of bank data between countries……

 The global context has also been fundamentally altered by the advent of the Common Reporting Standard (CRS), which the UK played a leading role in developing……. Under the CRS, UK financial institutions are now required to collect data on all relevant customers and pass this to HMRC, without the need for an information notice or right of appeal, so that it can be sent to the tax authority where the customer is resident. This contrasts markedly with the process required under Schedule 36 for third party information notices…….

 In the UK’s last Global Forum report in 2013 the UK was rated as “Largely Compliant”, this marking is internationally recognised as indicating a satisfactory performance in meeting the international standards and is shared by most major economies. However, the UK requirement for tribunal approval was heavily criticised for adding significantly to the time taken to respond to requests for banking information from other jurisdictions, and for requiring more information to justify the request than is expected under the international standard5. Some jurisdictions have found the UK system to be so onerous that they are discouraged from making a request for third party information……..

 Obtaining approval from the tribunal and its associated processes (please see paragraph 2.5 above) can add a great deal of time to the information gathering process, and ultimately prolongs the course of a domestic enquiry or the time taken to exchange information internationally. As set out in the previous section, these older processes not only leave the UK out of line with the rest of the world, but also out of step with new innovative approaches to sharing information, such as the CRS.’


HMRC’s proposals

HMRC’s proposal is to align the issuing of third party notices with that for taxpayer notices. This change would see the removal of the requirement to seek approval from the tribunal or the taxpayer before a third party notice could be issued  (the third party would have a right of appeal against the notice on the grounds that it is ‘too onerous’).

HMRC would still retain the ability to seek approval from a tribunal to issue the notice.  The consultation document states that ‘HMRC would most likely continue to seek approval to issue a notice where it believed, based on previous experience, that a particular third party was likely to seek to deliberately delay the provision of information or documents.’


A new Financial Institution Notice?

The consultation states:

‘The majority of third party information requests received by HMRC are requests for banking information. A more targeted alternative to the above suggestion would be to introduce a new notice specifically for this type of information. As the international comparisons show, many countries comparable to the UK can require the production of third party information, by issuing an information notice to the bank within, for example, around one month. Such a notice does not have to be approved by a court and there is no right of appeal.’



A range of penalties apply in this area:

  • For supplying HMRC with inaccurate information in response to an information notice, the recipient may be liable to a penalty not exceeding £3,000;
  • For an initial failure to comply with a notice, the recipient is liable to pay a fixed penalty of £300, unless they had a reasonable excuse for this failure. If the recipient still does not comply with the notice after the initial penalty of£300 has been imposed, they are liable to a penalty not exceeding £60 for each subsequent day on which the failure continues;
  • For non-compliance with a notice about persons whose identity is not known, HMRC may apply to a tribunal to impose increased daily default penalties. The amount of these are set by the tribunal and can reach a maximum of £1,000 per day;
  • A tax-related penalty may also be charged. These are considered where someone continues not to comply with a taxpayer notice after an initial penalty is charged. If this failure to comply leads an officer to believe the amount of tax paid by that person is ‘considerably less than it otherwise would have been,’ they may apply to the Upper Tribunal to impose a tax- related penalty. The Upper Tribunal will then decide the amount of the penalty.


Currently increased daily penalties can only be charged upon a failure to comply with a notice which requires information about a person whose identity is unknown. HMRC propose harmonising the penalty regime across Schedule 36 by extending the scope of increased daily penalties to cover all of the notices contained in Schedule 36.  The consultation document states:


‘This would bring about a consistent and robust penalty regime. Daily penalties can be useful in encouraging compliance with an obligation in a timely manner. This change would help HMRC deter long periods of non-compliance with an information notice. As with the existing daily penalties the tribunal’s permission would be needed before such penalties could be charged.’


Notifying the taxpayer

As explained above the tribunal may give HMRC permission not to give the taxpayer a summary of the reasons explaining why they require information and documents under a third party notice. The tribunal can also give HMRC permission not to name the taxpayer in the notice or to send a copy of the third party notice to the taxpayer. However, there is currently nothing to prevent a third party from notifying the taxpayer about the notice despite a tribunal having already decided such action might prejudice the assessment or collection of tax.


HMRC propose to put an obligation on the third party not to inform the taxpayer about the notice where the tribunal has disapplied the requirement to send a summary to the taxpayer under paragraph 3(3)(e) and (4) of Schedule 36.


Levy and Levy comment

As stated above, HMRC’s proposal is to align the issuing of third party notices with that for taxpayer notices. This change would see the removal of the requirement to seek approval from the tribunal or the taxpayer before a third party notice could be issued  (the third party would have a right of appeal against the notice on the grounds that it is ‘too onerous’.  Given that the world has indeed moved on since the introduction of the information powers, the change is inevitable.


Levy and Levy – the tax resolution specialists.

Non-party may inspect private documents at the First-tier Tribunal

An important new decision of the First-tier Tax Tribunal will enable taxpayers not party to a hearing to obtain details of HMRC’s written arguments – see Hastings Insurance Services Limited v [2018] UKFTT 0478 (TC)



KPMG LLP (‘KPMG’) applied to the First-tier Tribunal (“FTT”) for copies of HMRC’s statement of case and both parties’ skeleton arguments in this appeal, despite not representing either party.  It made the application solely in order to better understand HMRC’s arguments which, according to KPMG, were relevant to their own arguments in a different case in which they were instructed. In support of their application for access to the documents, KPMG relied on a decision of the Upper Tribunal (“UT”)  in Aria Technology Limited v HMRC [2018] UKUT 111 (TC) (‘Aria Technology’).


Legal background

In the civil courts, i.e. the rules of Court governing proceedings in the High Court, County Court and Court of Appeal, Rule 5.4C of the Civil Procedure Rules (‘CPR’) provide that a person who is not a party to civil proceedings may obtain certain documents from the records of the court as of right and other documents with the permission of the court.  However, there is no such provision in the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (‘FTT Rules’).   Accordingly, the First-tier Tribunal can only allow a non-party to have access to documents if it has an inherent jurisdiction to do so.  The inherent jurisdiction of a court or tribunal to allow a member of the public to have access to and inspect documents relating to proceedings in that court or tribunal is founded on the fundamental constitutional principle of ‘open justice.’


The FTT’s judgement

The Tribunal began by stating that the FTT Rules do not expressly allow the First-tier Tribunal to allow a non-party to inspect or have access to documents relating to proceedings. However, there  were two possibly relevant rules:

  1. Rule 14 of the FTT Rules which enables the FTT to make an order prohibiting the disclosure or publication of specified documents or information, suggesting that  there was no general rule against disclosure of the same;
  2. Rule 32(1) of the FTT Rules which provide that, subject to very limited exceptions,  all hearings must be held in public, thus engaging the principle of open justice is engaged in the First- tier Tribunal as it is in other


In Aria Technology, the UT had observed that CPR 5.4C provides that a non-party can, with permission, obtain access to any documents that have been filed and are in the court records and the right to access to such documents is not limited to documents that have been referred to in open court nor is there any requirement that a hearing must have taken place. The UT said:

‘Although CPR5.4C does not apply to the First-tier Tribunal, I do not consider that means that the Tribunal is unable to allow non-parties access to such documents……..The right to obtain a copy of the statement of case or judgment is an expression of the principle of open justice which applies to the First-tier Tribunal as it does to the courts. I consider that the First- tier Tribunal has an inherent jurisdiction to allow a non-party to inspect documents in its records that are the equivalent of the documents in CPR5.4C(1).…….In Cape Intermediate Holdings Ltd v Dring (Asbestos Victims Support Group) [2018] EWCA Civ 1795 (‘Cape’, Hamblen LJ, with whom the other members of the Court agreed, summarised the position at [112] as follows:

 “(1) There is no inherent jurisdiction to allow non-parties inspection of:

  • trial bundles;
  • documents which have referred to in skeleton arguments/written submissions, witness statements, experts’ reports or in open court simply on the basis that they have been so referred
  • There is inherent jurisdiction to allow non-parties inspection of:
    • Witness statements of witnesses, including experts, whose evidence stands as evidence in chief and which would have been available for inspection during the course of the trial under CPR 13.
    • Documents in relation to which confidentiality has been lost under CPR 31.22 and which are read out in open court; which the judge is invited to read in open court; which the judge is specifically invited to read outside court, or which it is clear or stated that the judge has
    • Skeleton arguments/written submissions or similar advocate’s documents read by the court provided that there is an effective public hearing in which the documents are
    • Any specific document or documents which it is necessary for a non-party to inspect in order to meet the principle of open ”
  1. It is clear from [92] of Cape that the “similar advocate’s documents” referred to in [112(2)(iii)], includes chronologies, dramatis personae, reading lists and written closing submissions and any other documents provided to the court to assist its understanding……..

 At [129], Hamblen LJ stated that the factors relevant to the exercise of the inherent discretion to provide access to documents are likely to include the same factors as under CPR5.4C, namely:

 “(1) The extent to which the open justice principle is engaged;

  • Whether the documents are sought in the interests of open justice;
  • Whether there is a legitimate interest in seeking copies of the documents and, if so, whether that is a public or private
  • The reasons for seeking to preserve
  • The harm, if any, which may be caused by access to the documents to the legitimate interests of other ”


HMRC’s objections

Unsurprisingly, HMRC objected to KPMG’s request “on the basis of taxpayer confidentiality, pursuant to s18 Commissioners for Revenue and Customs Act 2005, and that the First- tier Tribunal Rules make no provision for disclosure or inspection of a party’s skeleton argument by a third party.”

The FTT did not agree.

‘ HMRC’s first objection is misconceived and can be dealt with quite shortly. Section 18 of the 2005 Act provides that HMRC officials may not disclose information held by HMRC subject to various exceptions. KPMG has not sought disclosure from HMRC but from the Tribunal……HMRC’s second objection is that the First-tier Tribunal has no power to allow a non-party to have access to and inspect documents because the FTT Rules do not contain any provision equivalent to CPR 5.4. I have already dealt with this objection in my discussion of the inherent jurisdiction of the Tribunal. The fact that the FTT Rules do not specifically provide that the First-tier Tribunal may allow a non-party to inspect documents does not mean that the Tribunal may not do so if, as I have concluded for reasons set out above, it has an inherent jurisdiction to allow such access.’


Legitimate purpose

The FTT also considered that KPMG has a ‘legitimate purpose’ in requesting access to the documents. The FTT said:

‘……..I consider that the concept of legitimate interest is a broad one and certainly not confined to journalistic purposes. It is clear from [135] and [136] of Cape that an entirely private or commercial interest, such as an interest in related litigation, in a document can qualify as a legitimate interest. The public interest of a pressure group involved in lobbying and promoting knowledge about asbestos and its safe use, as in Cape, can also qualify as a legitimate interest. KPMG say that they are seeking access to better understand HMRC’s arguments in the appeal which are relevant to HMRC’s arguments in a different case in which they are instructed. In the light of Hamblen LJ’s comments in [135] and [136] of Cape, I consider that a legitimate interest does not require a direct personal or professional interest in the outcome of proceedings. In my view, an interest in other related litigation, whether actual or in contemplation, is sufficient. Accordingly, I find that KPMG have a legitimate interest in obtaining access to the documents requested.’


Levy and Levy comment

It is worth bearing in mind that in this case the Appellant also objected to KPMG’s application as well as HMRC and this is a measure of how controversional the FTT’s judgement is, because it erodes some of the privacy that a taxpayer taking a case to the FTT may feel entitled to.  On the other hand, it does have the effect of upholding the ‘open’ nature of justice and enabling taxpayers to understand and anticipate the arguments which may be raised against them at their own hearings, and of course to ensure that HMRC acts fairly towards them by not adopting a contradictory stance.

Given its importance, we suspect that this case will be appealed to the Court of Appeal so watch this space!


Levy and Levy – the tax controversy specialists


Defeat for the taxpayer on Project Blue

The Supreme Court have now released their eagerly awaited decision on Project Blue Limited (Respondent) v Commissioners for Her Majesty’s Revenue and Customs (Appellant) [2018] UKSC 30.


The facts

In 2007 the Respondent (“PBL”) purchased the former Chelsea Barracks in London from the Ministry of Defence (“MoD”) for £959m. In order make the purchase, PBL obtained finance from a Qatari Bank, Masraf al Rayan (“MAR”), which specialises in Islamic finance. Islamic finance complies with Shari’a law, which forbids the payment of interest in connection with the lending of money. In this respect, the Shari’a- compliant funding model used is known as Ijara finance.

On 5 April 2007, PBL and the MoD entered into a contract to purchase the barracks. On 29 January 2008, PBL contracted to sub-sell the freehold to MAR.  Also on 29 January 2008, MAR agreed to lease the barracks back to PBL. Upon completion, on 31 January 2008, the following occurred: (a) MAR and PBL entered into put and call options respectively requiring or entitling PBL to repurchase the freehold in the barracks; (b) the MoD conveyed the freehold in the barracks to PBL; (c) PBL conveyed the freehold in the barracks to MAR, and (d) immediately after that, MAR leased the barracks back to PBL.

On 22 February 2008, PBL lodged a tax return in relation to the contract between it and MoD and claimed that there was no liability to Stamp Duty Land Tax (“SDLT”) because of the “sub-sale relief” provision in s45(3) of the Finance Act 2003 (“FA 2003”). A return lodged by MAR relating to the sale agreement between PBL and MAR claimed “alternative property finance relief” under s71A of FA 2003. Section 71A relief was also claimed in relation to the lease by MAR to PBL on 31 January 2008. Consequently, the parties to the scheme transactions claimed that nobody incurred a liability to SDLT.


HMRC challenge the arrangements

HMRC challenged the return made by PBL and in the FTT argued that the correct amount of SDLT should be £50m (based on the total consideration which MAR agreed to provide PBL). Upon appeal to the Upper Tribunal (“UT”), PBL changed its position and argued that MAR was not entitled to s71A relief because, on a proper understanding of the related provisions of the FA 2003, MoD was the “vendor” of the barracks in terms of s71A(2). However, the UT concluded that PBL was the “vendor.”

The Court of Appeal (“CoA”) found, amongst other things, that the “vendor” was MoD, and not PBL, with the result that s71A(2) did not exempt MAR from charge. The CoA found that PBL could not be the “vendor” due to s45(3), which disregarded the contract between MoD and PBL for the purchase of the barracks. As a result of this disregard, PBL had no chargeable interest so as to be regarded as entering into the sub-sale contract with MAR. The result was a rare success for the taxpayer.  Unsurprisingly, HMRC appeal.


Before the Supreme Court (“SC”)

The principal question in the appeal to the SC was whether PBL was due to pay SDLT of £50m arising out of its purchase from the MoD.  The SC found that it was.

In the Court’s view, the UT correctly concluded that PBL was the “vendor” under s71A(2) and therefore that MAR’s purchase of the barracks from PBL was exempt from SDLT.  The Court pointed to the fact that there was nothing within s71A which suggested that the exemption in s71A(2) will not apply when the sale by the customer to the financial institution is a sub-sale which takes place contemporaneously and in connection with the customer’s purchase of the major interest in land The disregard in the tailpiece of s45(3) has no bearing on the operation of s71A(2)[30].  In this case, but for s75A FA 2003 the combination of the sub-sale relief under s45(2) and s45(3) and the exemption under s71A(2) relieved the sale by the MoD to PBL and exempted the sale by PBL to MAR from a charge to SDLT.

The Court stated that it was unsurprising that s75A was only introduced over one year after the combination of s45 and s71A could operate in this way. S75A was enacted by Parliament to close such lacunas.  In this case, the party referred to as “V” in s75A is the MoD. Looking at s75 as a whole, and taking a purposive approach to interpretation, “P” as referred to in s75A was PBL.  PBL did not obtain a chargeable interest on 31 January 2008, because the contract between it and the MoD fell to be disregarded under s45(3). PBL acquired its chargeable interest, a leasehold interest, following the sub-sale to MAR and the lease back to PBL. These transactions were transactions “involved in connection with” the disposal by MoD of its chargeable interest (s75A(1)(b)). S75A(1)(c) required that the sum of the amounts of SDLT payable in respect of the scheme transactions (which in this case is £nil) were less than the amount that would be payable on a notional land transaction effecting the acquisition of V’s chargeable interest by P on its disposal by V. In this case, the relevant notional land transaction involved PBL acquiring MoD’s interest in the barracks. S75A(5) provided that the chargeable consideration on the notional transaction was the largest amount (or aggregate amount) given by any one person for the scheme transactions. HMRC correctly asserted that the relevant sum was £1.25bn (the purchase price which MAR contracted to pay to PBL). SDLT due thereon was £50m (although this  subject to PBL’s right to make a claim under s80 of FA 2003).

An addition argument raised by PBL to the effect that s75A(5) and s75B read together indirectly discriminates against those of Islamic faith (who may be expected to adopt Shari’a financing techniques) contrary to the European Convention on Human Rights was also dismissed.



In the authors’ view, this is pretty much ‘game set and match’ for SDLT avoidance arrangements and a ‘political’ decison by the SC not to allow tax revenue to be impeded by such ‘schemes.’   The  anti-avoidance provision of s.75A has been shown to have teeth; indeed it might truly be described as ‘broad spectrum antibiotic’ for SDLT tax avoidance as it was once hoped (by HMRC) that the ‘Ramsay’  doctrine would be, but never was.

When is a worker not a worker?

The tax treatment of workers is a current and often controversial theme in UK tax law.  Now, a recent decision of the Supreme Court in Pimlico Plumbers Ltd and another (Appellants) v Smith (Respondent) [2018] UKSC 29 has shed some light on this difficult area.


The facts

The respondent Mr Smith was a plumbing and heating engineer and between August 2005 and April 2011 worked for the First Appellant, Pimlico Plumbers Ltd, owned by the Second Appellant Mr Charlie Mullins. Mr Smith had worked for the company under two written agreements (the second of which replaced the first in 2009) that were found by the Supreme Court to be ‘’drafted in quite confusing terms.’


In August 2011 Mr Smith issued proceedings against the Appellants before the employment tribunal alleging that:

  1. He had been unfairly dismissed;
  2. An unlawful deduction had been made from his wages;
  3. He had not been paid for a period of statutory annual leave; and
  4. He had been discriminated against by virtue of his disability.


The employment tribunal decided that Mr Smith had not been an employee under a contract of employment, and therefore that he was not entitled to complain of unfair dismissal, but that Mr Smith (i) was a ‘worker’ within the meaning of s.230(3) of the Employment Rights Act 1996, (ii) was a ‘worker’ within the meaning of regulation 2(1) of the Working Time Regulations 1998, and (iii) had been in ‘employment’ for the purposes of s.83(2) of the Equality Act 2010.  These findings meant that Mr Smith could legitimately proceed with his latter three complaints. The Appellants appealed this decision to an appeal tribunal and then to the Court of Appeal, but were unsuccessful. They consequently appealed to the Supreme Court.


In the Supreme Court

The Supreme Court unanimously dismisses the appeal. The tribunal was entitled to conclude that Mr Smith qualified as a ‘worker’ under s.230(3)(b) of the Employment Rights Act 1996 (and by analogy the relevant provisions of the Working Time Regulations 1998 and the Equality Act 2010), and his substantive claims could proceed to be heard.


The key issue for the Court was the construction of the term ‘worker’ within the meaning of s.230(3)(b) of the Employment Rights Act 1996 (otherwise known as a ‘limb (b) worker’).  This was because regulation 2(1) of the Working Time Regulations defines ‘worker’ in identical terms to s.230(3)(b), and case law has suggested that the meaning of ‘employment’ in s.83(2) of the Equality Act is also essentially the same. S.230(3)(b) provides:


In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

 (a)a contract of employment, or

 (b)any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker’s contract shall be construed accordingly.


Proceeding on that basis, if Mr Smith was to qualify as a ‘limb (b)’ worker under s.230(3)(b) then it was necessary for him to have undertaken to personally perform his work or services for Pimlico Plumbers, and that the company be neither his client nor his customer.


The Supreme Court took into account that, when working for Pimlico Mr Smith had a limited facility (not found in his written contracts) to appoint another Pimlico operative to do a job he had previously quoted for but no longer wished to undertake.  However, the Court found that in this case the terms of the contract (which referred to ‘your skills’ etc.) were clearly directed to performance by Mr Smith personally, and any right to substitute was significantly limited by the fact that the substitute had to come from the ranks of those bound to Pimlico in similar terms. Consequently, the tribunal was entitled to hold that the dominant feature of Mr Smith’s contract with the company was an obligation of personal performance.


On the issue of whether Pimlico Plumbers was a client or customer of Mr Smith, the tribunal had legitimately found that there was an umbrella contract between the parties, i.e. one which cast obligations on Mr Smith even when he was between assignments for Pimlico.  On the one hand, Mr Smith was free to reject a particular offer of work, and was free to accept outside work if no work was offered by any of Pimlico’s clients. He also bore some of the financial risk of the work, and the manner in which he undertook it was not supervised by Pimlico. However, there were also features of the contract which strongly militated against recognition of Pimlico as a client or customer of Mr Smith. These included Pimlico’s tight control over Mr Smith’s attire and the administrative aspects of any job, the severe terms as to when and how much it was obliged to pay him, and the suite of covenants restricting his working activities following termination. Accordingly, the tribunal was entitled to conclude that Pimlico cannot be regarded as a client or customer of Mr Smith.



Smith’s case is the first time the UK’s highest court has been required to consider employment rights in the context of the so-called ‘gig economy’. In November 2017, the Employment Appeal Tribunal had ruled that two drivers engaged by Uber should be classed as ‘workers’ and be entitled to paid rest breaks. holidays and the National Minimum Wage.  Uber has appealed to the Court of Appeal, which will hear the case later this year.  Issues of status and how such individuals are treated from an employment law and tax perspective are high on employers’ agendas. The case sends out a warning note to firms ‘employing’ gig workers that the Courts may be sympathetic to cases brought by such workers.  HMRC will also no doubt be studying the judgement carefully.



Trusts and the right to privacy – welcome news for taxpayers

In ‘olden times,’ the settlors and beneficiaries of UK and offshore trusts could generally be certain that the details of their arrangements would remain confidential.


Enter the EU

Along came yet another EU Directive to change the landscape, in the form of the EU’s Fourth Anti-Money Laundering Directive (“the MLD”).  The intentions, as set out in the MLD, are clear:


“Flows of illicit money can damage the integrity, stability and reputation of the financial sector……. ……. Legal professionals, as defined by the Member States, should be subject to this Directive when participating in financial or corporate transactions, including when providing tax advice…… It is important expressly to highlight that ‘tax crimes’ relating to direct and indirect taxes are included in the broad definition of ‘criminal activity’ in this Directive…

…….. With a view to enhancing transparency in order to combat the misuse of legal entities, Member States should ensure that beneficial ownership information is stored in a central register located outside the company, in full compliance with Union law. Member States can, for that purpose, use a central database which collects beneficial ownership information, or the business register, or another central register. Member States may decide that obliged entities are responsible for filling in the register. Member States should make sure that in all cases that information is made available to competent authorities and FIUs and is provided to obliged entities when the latter take customer due diligence measures. Member States should also ensure that other persons who are able to demonstrate a legitimate interest with respect to money laundering, terrorist financing, and the associated predicate offences, such as corruption, tax crimes and fraud, are granted access to beneficial ownership information, in accordance with data protection rules. The persons who are able to demonstrate a legitimate interest should have access to information on the nature and extent of the beneficial interest held consisting of its approximate weight.”


Where we are now

The result of the MLD is that since 26 June 2017, trustees of UK trusts and of non-UK trusts with UK tax liabilities have been required to maintain accurate and up-to-date records of all the beneficial owners of the trust. They are also required to report beneficial ownership information annually to HM Revenue & Customs (HMRC) to be kept on a UK register of trusts.


Legitimate interest

Who exactly has a ‘legitimate interest’ is obviously a critical point, and it is every settlor and beneficiaries nightmare (and every tax adviser who assists them) that intimate details of their financial arrangements become public. Trustees are required to provide information on the identities of the settlors, other trustees, beneficiaries, all other natural or legal persons exercising effective control over the trust, and all other persons identified in a document or instrument relating to the trust, including a letter or memorandum of wishes.

It would that such fears are unfounded however, according to John Glen, Economic Secretary to the Treasury. Mr Glen has recently stated:


“While the register is a valuable tool for law enforcement authorities that can access information held on it, the government is opposed to granting public access to such information so as to protect individual privacy rights,” it reads.

“The provisional political agreement on these proposals gives members states the right to define who should be considered to have ‘legitimate interest’ in information held on national registers of trust beneficial ownership.

We will consider how best to consult with interested stakeholders on how this definition should be applied in the UK in view of the fact that many trusts are established for personal or family reasons.”



Given the current public attitude towards all forms of financial planning, it remains to be seen how long this very welcome right of privacy will be maintained.  Watch this space…..!


Levy and Levy – the tax resolution specialists

Ouch! Penalties for Follower Notices – The floodgates open

The trickle of Follower notices (‘FN’s) (FA2014, Part 4, Chapter 2) has begun to turn into a flood and hapless taxpayers who have entered, often many years previously, into tax efficient schemes are now finding themselves subject to FN’s on the back of decisions in other cases.


Condition C

Under s. 204 an FN may be given if four conditions, A, B, C and D are met.

‘((2) Condition A is that—

(a) a tax enquiry is in progress into a return or claim made by P in relation to a relevant tax, or

(b) P has made a tax appeal (by notifying HMRC or otherwise) in relation to a relevant tax, but that appeal has not yet been—

(i) determined by the tribunal or court to which it is addressed, or

(ii) abandoned or otherwise disposed of.

(3)  Condition B is that the return or claim or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular tax arrangements (“the chosen arrangements”).

(4) Condition C is that HMRC is of the opinion that there is a judicial ruling which is relevant to the chosen arrangements.’


Section 205 sets out what is ‘relevant’.

205 “Judicial ruling” and circumstances in which a ruling is “relevant”

(1) This section applies for the purposes of this Chapter.

(2) “Judicial ruling” means a ruling of a court or tribunal on one or more issues.

(3) A judicial ruling is “relevant” to the chosen arrangements if—

(a) it relates to tax arrangements,

(b) the principles laid down, or reasoning given, in the ruling would, if applied to the chosen arrangements, deny the asserted advantage or a part of that advantage, and

(c) it is a final ruling.

(4) A judicial ruling is a “final ruling” if it is—

(a) a ruling of the Supreme Court, or

(b) a ruling of any other court or tribunal in circumstances where—

(i)  no appeal may be made against the ruling,


The legislation is widely drafted and very much in HMRC’s favour.  Firstly, HMRC need only to hold an opinion that there is a relevant judicial ruling.  Presumably, this requirement is subject to reasonableness on HMRC’s behalf, i.e. in accordance with the usual public law principles HMRC must not act irrationally in forming that opinion.  Secondly, the relevant ruling need only be at the level of the First-tier Tribunal (“FTT), so that a taxpayer who ‘gives up’ at the FTT will be the trigger for HMRC having the power to issue FN’s.  Thirdly, the term ‘principles laid down or reasoning given’ is unclear, but presumably refers to the ‘ratio decidendi’ of a case;  if so the taxpayer may not be able to challenge an FN even if his or her fact pattern is not on all fours with those in the FN judicial ruling.  Fourthly, there is no right of appeal to a Tribunal against the issue of an FN.


The sting in the tail

The penalty regime under s.208 is draconian.

‘(1)  This section applies where a follower notice is given to P (and not withdrawn).

(2)P is liable to pay a penalty if the necessary corrective action is not taken in respect of the denied advantage (if any) before the specified time.

(3) In this Chapter “the denied advantage” means so much of the asserted advantage (see section 204(3)) as is denied by the application of the principles laid down, or reasoning given, in the judicial ruling identified in the follower notice under section 206(a).

(4) The necessary corrective action is taken in respect of the denied advantage if (and only if) P takes the steps set out in subsections (5) and (6).

(5) The first step is that—

(a)in the case of a follower notice given by virtue of section 204(2)(a), P amends a return or claim to counteract the denied advantage;

(b)in the case of a follower notice given by virtue of section 204(2)(b), P takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing the denied advantage.

(6) The second step is that P notifies HMRC

(a) that P has taken the first step, and

(b) of the denied advantage………

(8) In this Chapter—

“the specified time” means—

(a )if no representations objecting to the follower notice were made by P in accordance with subsection (1) of section 207, the end of the 90 day post-notice period;

(b) if such representations were made and the notice is confirmed under that section (with or without amendment), the later of

(I )the end of the 90 day post-notice period, and

(ii) the end of the 30 day post-representations period;

“the 90 day post-notice period” means the period of 90 days beginning with the day on which the follower notice is given;

“the 30 day post-representations period” means the period of 30 days beginning with the day on which P is notified of HMRC’s determination under section 207.

The penalty under section 208 is 50% of the value of the denied advantage.’


It may be seen that, in the context of the above legislative scheme, ‘corrective action’ is a legal euphemism for ‘giving up.’


Cooperation – a partial solution only

As for all penalties legislation, the amount of a penalty may be reduced for co-operation. S. 208 is no different in this respect.

(1) Where—

(a) P is liable to pay a penalty under section 208 of the amount specified in section 209(1),

(b) the penalty has not yet been assessed, and

(c) P has co-operated with HMRC,HMRC may reduce the amount of that penalty to reflect the quality of that co-operation.

(2) In relation to co-operation, “quality” includes timing, nature and extent.

(3) P has co-operated with HMRC only if P has done one or more of the following—

(a) provided reasonable assistance to HMRC in quantifying the tax advantage;

(b) counteracted the denied advantage;

(c)  provided HMRC with information enabling corrective action to be taken by HMRC;

(d)provided HMRC with information enabling HMRC to enter an agreement with P for the purpose of counteracting the denied advantage;

(e) allowed HMRC to access tax records for the purpose of ensuring that the denied advantage is fully counteracted.

(4) But nothing in this section permits HMRC to reduce a penalty to less than 10% of the value of the denied advantage.


Here is the real sting in the tail. How many taxpayers will be prepared to risk not taking corrective action where the ‘worse case’ scenario is a huge 50% penalty and the very best- case scenario 10%?  We suggest, not many.


The right of appeal – a toothless power for the taxpayer?

An appeal against a section 208 penalty may be made.

‘(1) P may appeal against a decision of HMRC that a penalty is payable by P under section 208.

(2) P may appeal against a decision of HMRC as to the amount of a penalty payable by P under section 208.

(3) The grounds on which an appeal under subsection (1) may be made include in particular—

(a) that Condition A, B or D in section 204 was not met in relation to the follower notice,

(b) that the judicial ruling specified in the notice is not one which is relevant to the chosen arrangements,

(c)that the notice was not given within the period specified in subsection (6) of that section, or

(d)that it was reasonable in all the circumstances for P not to have taken the necessary corrective action (see section 208(4)) in respect of the denied advantage.

(4)An appeal under this section must be made within the period of 30 days beginning with the day on which notification of the penalty is given under section 211.

The appeal in theory gives the taxpayer some scope to challenge the issue of a penalty and in particular to argue that the judicial ruling relied upon by HMRC is not relevant to the chosen arrangements.  The problem is that the underlying FN cannot be challenged and this means that, assuming the taxpayer’s representations are not accepted, there will be no escape from the imposition of a penalty with the risk of a huge 50% charge as above, the more so as the penalty appeal will not doubt be construed as a lack of co-operation by HMRC.  How many taxpayers will risk an appeal under these circumstances? We suggest, not many.


Tax efficient arrangements

We suggest that the FN regime is playing its part in sounding the death knell of a wide variety of tax planning arrangements and it seems likely that most taxpayers will take the necessary ‘corrective action’ rather than take a gamble and incur a large penalty.  HMRC are very much ‘on the front foot’ in their relentless campaign to crack down on all forms of tax efficient arrangements.



Levy and Levy – the tax resolution specialists.

The fear factor – business tax evasion under the Criminal Finances Act 2017

From 30 September 2017 it is a criminal offence in the UK if a business fails to prevent its employees or any person associated with it from facilitating tax evasion under the Criminal Finances Act 2017. The new offence will be committed where a relevant body fails to prevent an associated person criminally facilitating the evasion of a tax, and this will be the case whether the tax evaded is owed in the UK or in a foreign country.


HMRC’s motives

The legislation is part of HMRC’s ongoing campaign to ‘modify taxpayer behaviour’ and its underlying purpose is to introduce the fear factor at the most senior levels of the company.

Here is HMRC’s description of the purpose of the new legislation:

‘Previously, attributing criminal liability to a relevant body required prosecutors to show that the senior members of the relevant body were involved in and aware of the illegal activity, typically those at the Board of Directors level. This had a number of consequences:

  • It can be more difficult to hold a large multinational organisation to account. In large multinational organisations decision making is often decentralised and decisions are often taken at a level lower than that of the Board of Directors, with the effect that the relevant body can be shielded from criminal liability. This also created an un-level playing field in comparison to smaller businesses where the Board of Directors will be more actively involved in the day-to-day activities of a business
  • The common law method of criminal attribution may have acted as an incentive for the most senior members of an organisation to turn a blind eye to the criminal acts of its representatives in order to shield the relevant body from criminal liability
  • The common law may also have acted as a disincentive to internal reporting of suspected illegal tax activity to the most senior members, who would be required to act upon such reporting since otherwise the corporate entity might be criminally liable. 

The cumulative effect was an environment that could do more to foster corporate monitoring and self-reporting of criminal activity related to facilitating tax evasion. The new corporate offence therefore aims to overcome the difficulties in attributing criminal liability to relevant bodies for the criminal acts of employees, agents or those that provide services for or on their behalf.  The new offence, however, does not radically alter what is criminal, it simply focuses on who is held to account for acts contrary to the current criminal law. It does this by focussing on the failure to prevent the crimes of those who act for or on behalf of a corporation, rather than trying to attribute criminal acts to that corporation. The legislation aims to tackle crimes committed by those who act for or on behalf of a relevant body. The legislation does not hold relevant bodies to account for the crimes of their customers, nor does it require them to prevent their customers from committing tax evasion.’


The offences

There are two new offences. The first offence applies to all businesses, wherever located, in respect of the facilitation of UK tax evasion. The second offence applies to businesses with a UK connection in respect of the facilitation of non-UK tax evasion.

The offences apply to both companies and partnerships. They effectively make a business vicariously liable for the criminal acts of its employees and other persons ‘associated’ with it, even if the senior management of the business was not involved or aware of what was going on.

There are two stages for the new corporate offences to apply:

  • criminal tax evasion (and not tax avoidance) must have taken place; and
  • a person/entity who is associated with the business must have criminally facilitated the tax evasion whilst performing services for that business.
  • ‘Associated persons’ are employees, agents and other persons who perform services for or on behalf of the business, such as contractors, suppliers, agents and intermediaries.

In relation to UK tax, the offence will apply to any company or partnership, wherever it is formed or operates.  Where non-UK tax is evaded a business will commit an offence if the facilitation involves a UK company or partnership, any company or partnership with a place of business in the UK, including a branch, or if any part of the facilitation takes place in the UK. In addition, the foreign tax evasion and facilitation must amount to an offence in the local jurisdiction and involve conduct which a UK court would consider to be dishonest.

A business will have a defence if it can prove that it had put in place reasonable prevention procedures to prevent the facilitation of tax evasion taking place, or that it was not reasonable in the circumstances to expect there to be procedures in place see – HMRC have set out some guidelines here see – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672231/Tackling-tax-evasion-corporate-offences.pdf

In their guidelines HMRC stress:

  • risk assessment;
  • proportionality of risk-based prevention procedures;
  • top level commitment;
  • due diligence;
  • communication, including training; and
  • monitoring and review.


Levy and Levy comment

The new offences will mean significant compliance costs, because businesses will be obliged to undertake detailed risk assessments in order to protect senior members from the risk of a criminal investigation and possible prosecution.  Psychologically, it will keep tax very much ‘top of the Board’s agenda’ and this is exactly HMRC’s aim.  Whether the new offences will actually reduce tax crime is, however, another matter.


Levy and Levy – the tax resolution specialists


HMRC’s offshore tax campaign – where we are now


Tax – the press fever continues

The November 2017 Paradise Papers release of 13.4 million documents, obtained from offshore law firm Appleby and corporate services provider Estera, allegedly contained details of the way individuals, companies and investment funds utilise offshore jurisdictions including Bermuda and the Cayman Islands to structure their businesses.

The Paradise Papers have generated widespread public interest and detailed press coverage, thus fuelling the onward march of HMRC’s anti-avoidance campaign.


HMRC’s strategy to date

The government published a strategy to tackle offshore tax evasion in 2013. The strategy defines offshore tax evasion as “using another jurisdiction’s systems with the objective of evading UK tax.”

To implement this strategy, the government introduced a number of important measures:

  • Early adoption of the Common Reporting Standard, a ground-breaking multinational tax transparency agreement under which over 100 jurisdictions, including the UK, will automatically exchange financial account information. Under the Common Reporting Standard, HMRC will receive information about overseas accounts, insurance products and other investments, including those held through overseas structures such as companies and trusts. This includes details of the account holder or owner, including name, address, date of birth, balance of the account, and payments into the account;
  • Increased civil sanctions for offshore evaders (FA 2015 and 2016), including a new asset based penalty of up to 10% of the value of the underlying asset;
  • A new criminal offence for offshore evasion (FA 2016) – this offence removed the need to prove intent for serious cases of failure to declare offshore income;
  • New civil and criminal sanctions for ‘enablers’ of offshore evasion (Finance Act 2016 and Criminal Finances Act 2017) – they hold enablers, including corporates and partnerships, to account concerning evasion facilitation; and
  • A new legal Requirement to Correct (FA (No. 2) 2017) any past failure, as at 5 April 2017, to pay UK tax on offshore interests must be disclosed, with new tougher sanctions from 1 October 2018 for those who fail to do so.


Latest developments

Not content with the aforementioned, HM Revenue and Customs (HMRC) will now be able to look at 12 years’ worth of back taxes in cases involving an offshore element from April 2019, if the UK government goes ahead with a proposal announced in the last Budget.22 Feb 2018

HMRC has opened a consultation on plans to change the time limits from four years, or six years where a suspected underpayment has been brought about due to carelessness. The time limit will remain 20 years where the taxpayer has acted deliberately or dishonestly.

The consultation sets out the government’s proposed changes in relation to income tax, capital gains tax and inheritance tax, along with associated safeguards. It also proposes applying the new time limits in respect of corporation tax, “given that many offshore structures involve corporate entities”.

It has also proposed a “proportionate and targeted” application of the new time limits where HMRC has received information about offshore income and assets automatically, under the various international automatic information exchange agreements.

The government intends to apply the new time limits with effect from 1 April 2019 in relation to inheritance tax and corporation tax, and from 6 April 2019 in relation to income tax and capital gains tax. The limits will apply to any year that is still in date for assessment when the new legislation comes into effect, but will not apply to any tax year for which the time limit has already expired.

The consultation closes on 14 May 2018.



HMRC is continuing with its relentless drive to increase powers and beef up direct action against taxpayers with undisclosed offshore assets.  There is no sign of any slow down and indeed in our view, this trend is likely to increase in the near to medium term future.


Levy and Levy – the tax resolution specialists

Practice Note: Settling up – how tax mediation can help resolve disputes

In this Practice Note, we look at mediation and the circumstances in which it may be helpful in resolving tax disputes.


What is mediation?

Traditionally tax disputes have been settled either by litigation or, in the majority of cases, by out of court agreement often following protracted discussions between the two parties. This can be a lengthy and expensive process for the business/individual concerned.


Alternative dispute resolution (ADR) occurs when a third party is brought in with the agreement of both parties to a dispute either to determine the outcome as an arbitrator or to ‘facilitate agreement’ as a mediator. In principle, ADR can be used to resolve disputes relating to any taxes and for a range of taxpayers including small and medium-sized enterprises (SMEs), and large and complex cases. The form of ADR most commonly used for tax disputes is facilitated mediation.


Increasing use of ADR

ADR is becoming more popular: HMRC’s records show that that total applications for ADR had increased from 581 in 2015-16 to 1,265 in 2016-17, with a success rate for resolving cases through ADR  79.39%.  However, most ADR takes place at the lower level of individuals and small to medium size companies, not inn larger and complex disputes.  A major reason for this is HMRC’s Litigation and Settlements Strategy (“LSS”) which may be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/655344/HMRC_Resolving_tax_disputes.pdf.  This makes clear that when HMRC believes that it is ‘likely to succeed in litigation ‘and that litigation would be both effective and efficient,’ it will not reach an out of court settlement for less than 100% of the tax, interest and penalties (where appropriate) at stake.  If, therefore, HMRC believes that it is right in a dispute with a large corporate and the dispute cannot be settled, it is unlikely that HMRC will agree to mediation because most mediations lead to a compromise which inevitably involve HMRC agreeing to forgo some or all of the tax.


Where mediation can help

HMRC have developed internal mediation training with the aim of having at least one facilitator in each of its regional centres who will be able to discuss with decision-makers the suitability of cases for mediation. HMRC have also issued guidance which sets out clearly where they will consider the use of mediation and where mediation will not be entertained https://www.gov.uk/guidance/tax-disputes-alternative-dispute-resolution-adr.


The guidance states as follows:


When ADR might help

ADR can be useful if:

  • you and HMRC have different views on exactly what’s happened – the facts
  • communication between you and HMRC has broken down
  • you need to know why HMRC haven’t agreed evidence that you’ve given them and why they want to use other evidence
  • HMRC need to explain why they need more information from you
  • you’re not clear what information HMRC has used and think they may have made wrong assumptions


Disputes not suitable for ADR

ADR isn’t right for disputes about:

  • requests for time to pay or similar issues
  • fixed penalties on the grounds of reasonable excuse
  • tax credits
  • PAYE coding
  • HMRC delays in using information
  • cases that HMRC’s criminal investigators are dealing with
  • default surcharges


The scope for mediation is, therefore, very wide and it is perhaps surprising that mediation has not hitherto been applied to the often protracted, long running and complex disputes between HMRC and the large corporates.


 The mediation process

An external mediator may be appointed by agreement between the parties, or HMRC may supply an internal person with the relevant experience.   Generally, the taxpayer will prepare a ‘position paper,’ giving an outline summary of the facts, legal issues and the taxpayer’s initial negotiating position.  The position paper should be as succinct as possible.  HMRC should also be asked to identify who the ultimate decision maker is on their side.


On the day

Generally, the day will start with the parties and the mediator sitting down together around the table for a preliminary session.  This session will give the parties a chance to set out their position in brief and raise any specific points that they wish the mediator and/or the other party to take into consideration.  The mediator will generally make an opening statement. This outlines the role of the participants and demonstrates the mediator’s neutrality. Some mediators will make comments about what they see as the key issues. The parties then retire to separate rooms and the mediator then shuttles between the parties.  A skilled mediator will assess the strengths and weaknesses of each party’s case and use this and his private conversations with the parties to enable both sides to take a more independent and realistic view of their prospects of success should the matter have to be litigated.  The mediator will also attempt to defuse any resentment or ill feeling between the parties which may have been built up during the course of their previous dealings.


A successful mediation is concluded when common ground is reached and both parties agree to settle the dispute.



The advantages of mediation are as follows:

  • It offers a more cost-effective solution to a dispute that traditional litigation;
  • Even if the matter cannot be settled, the issues may conveniently be clarified, thus removing the costs of litigating unnecessary issues of fact or law;
  • Mediation can be conducted without prejudice to the arguments put forward at a tribunal;
  • The mediation settlement is entirely confidential, whereas a hearing before the Tribunals is in public;
  • Mediation is encouraged by the Tribunal.


In our experience, tax meditation can be surprisingly effective particularly in ‘non-tax avoidance’ cases and where small or medium sized companies and individuals are concerned.  Certainly, mediation is worth a try.


Levy and Levy – the tax resolution specialists



The High Court has confirmed in Bilta (UK) LTD (in Liquidation) & Ors v RBS and Ors [2017] EWHC 3535 (Ch) that legal professional privilege can, under the right circumstances, apply to investigations.


The facts

The claimants, Bilta (UK Ltd) and various other associated companies in liquidation acting by their liquidators, issued an application notice on 25th September 2017 seeking disclosure and inspection of certain documents held by the first defendant, the Royal Bank of Scotland plc (‘RBS’).  RBS’s answer to this application was to claim that these documents were subject to ‘litigation privilege.’

The substantive claim brought by the claimants arose from an alleged missing trader intra-community fraud (‘MTIC fraud’).  The MTIC fraud in question involved companies trading in EUAs failing to account to HMRC for the value added tax (‘VAT’) which accrued and instead paying their VAT receipts to third parties before going into liquidation. The claimants argued that the directors of the companies in liquidation breached their fiduciary duties and/or acted with fraudulent purposes by causing their respective companies to execute such a fraud. The trades involved in the claimed fraud were carried out by representatives of RBS.

The documents in question were described as:

“The documents created after 29th March 2012 during the course of the investigation that led to the report by Pinsent Masons LLP on behalf of RBS to the Commissioners for Her Majesty’s Revenue and Customs [‘HMRC’] dated 28th January 2014 [the ‘PM report’] and any documents created after 28th January 2014 that formed part of that investigation…..They include some 29 transcripts of interviews with key RBS employees and ex-employees which I shall call the “interviews.”


The meaning of Legal Professional Privilege (“LPP”)

There are two types of LPP.  These are;

  • Legal advice privilege (confidential communications between lawyers and their clients made for the purpose of seeking or giving legal advice).
  • Litigation privilege (confidential communications between lawyers and their clients, or the lawyer or client and a third party, which come into existence for the dominant purpose of being used in connection with actual or pending litigation).

This case concerned litigation privilege.


Litigation privilege

All parties agreed that the test for whether litigation privilege can be claimed was accurately stated by Lord Carswell in Three Rivers District Council v Governor & Company of the Bank of England (No 6) [2005] 1 AC 610 (‘Three Rivers’) at para.102 as follows:


“(a) litigation must be in progress or in contemplation;

(b) the communications must have been made for the sole or dominant purpose of conducting that litigation;

(c) the litigation must be adversarial, not investigative or inquisitorial.”


The issue in dispute was (b), whether the documents were made for the “sole or dominant purpose of conducting that litigation.”


The arguments of the parties

The Claimants argued that the documents were simply prepared as an essential part of the preparation of the PM report to HMRC and pursuant to RBS’s general duties and obligations as a tax payer.


RBS, on the other hand, contended that HMRC had spent two years investigating the situation prior to writing its 29th March 2012 letter to RBS (the ‘HMRC letter’). The HMRC letter constituted a ‘watershed moment’ at which HMRC had decided to make an assessment, albeit that they were prepared to wait to consider RBS’s considered comments before they did so. At that stage, RBS instructed outside litigation lawyers. The dominant purpose of producing the documents was to defend HMRC’s claim.


Dominant purpose

This is set out in The Law on Privilege, Second Edition (2011) at para.3.76:


“Dual Purpose Documents: Where a communication has been made for two or more purposes it is necessary to identify the dominant purpose. It is not sufficient if the relevant litigation purposes are merely secondary or even an equal purpose. When faced with the difficulty of deciding between two apparent purposes courts have sometimes concluded that two apparent purposes are merely inseparable parts of a single purpose and then just examined that overarching purpose … at base the question of dominant purpose is one of fact, hence previous decisions are not particularly helpful except as exemplifying various techniques of analysis …”


Were the documents and/or interviews created for the sole or dominant purpose of conducting litigation?

The court had no doubt that they were.


‘It seems to me that the HMRC letter did indeed amount to a watershed moment. Following an investigation into the facts, which had lasted more than two years, HMRC stated for the first time in the HMRC letter that it considered that it had sufficient grounds to deny RBS nearly £90 million by way of input VAT. The HMRC letter analysed the relevant law and applied the law to the facts as they understood them before asking for RBS’s comments on those facts. It was, therefore, similar in nature to a letter before claim…..…….I am not sure that it much matters whether the litigation purpose was the sole or merely the dominant purpose…….. one has to take a realistic, indeed commercial, view of the facts…….

I have, therefore, concluded that the documents and interviews were brought into being by RBS and its litigation solicitors for the sole or at least the dominant purpose of the expected litigation in the FTT following the expected assessment in respect of overclaimed input VAT. The documents and interviews were, therefore, covered by litigation privilege.’


Levy and Levy comment

This case contains important guidance on the circumstances in which advice given to taxpayers will attract the important protection of litigation privilege, one of the two types of LPP.  The key to this case was the ‘watershed moment’ of the 29th March 2012 letter to RBS, when HMRC announced its intention to make an assessment, albeit that they were prepared to wait to consider RBS’s considered comments before they did so.  The subsequent action by RBS of instructing lawyers crystallised the protection of litigation privilege.  The moral of the story is that lawyers should be instructed as soon as any such ‘watershed moment’ occurs.


Levy and Levy – the tax investigations and litigation specialists.


The sting – penalties for failure to take corrective action for follower notices

Anyone with an open enquiry or appeal concerning a tax avoidance scheme may have to deal with follower notices and accelerated payment notices to be issued under Part 4, Finance Act 2014.

A follower notice brings an appeal or an enquiry to an end by requiring the taxpayer to make the necessary “corrective” amendments to his return (and pay the disputed tax) or face a 50% penalty.

The legislation

By FA 2014 s.208:

Penalty if corrective action not taken in response to follower notice

‘(1) This section applies where a follower notice is given to P (and not withdrawn).

(2)  P is liable to pay a penalty if the necessary corrective action is not taken in respect of the denied advantage (if any) before the specified time.

(3)  In this Chapter “the denied advantage” means so much of the asserted advantage (see section 204(3)) as is denied by the application of the principles laid down, or reasoning given, in the judicial ruling identified in the follower notice under section 206(a).

(4)  The necessary corrective action is taken in respect of the denied advantage if (and only if) P takes the steps set out in subsections (5) and (6).

(5)  The first step is that—

(a)in the case of a follower notice given by virtue of section 204(2)(a), P amends a return or claim to counteract the denied advantage;

(b)in the case of a follower notice given by virtue of section 204(2)(b), P takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing the denied advantage.

(6)  The second step is that P notifies HMRC—

(a) that P has taken the first step, and

(b) of the denied advantage and (where different) the additional amount which has or will become due and payable in respect of tax by reason of the first step being taken.

(7) In determining the additional amount which has or will become due and payable in respect of tax for the purposes of subsection (6)(b), it is to be assumed that, where P takes the necessary action as mentioned in subsection (5)(b), the agreement is then entered into.

The penalty under section 208 is 50% of the value of the denied advantage.


The penalty

S.209 does provide for mitigation as follows:

‘Reduction of a section 208 penalty for co-operation

(1) Where—

(a) P is liable to pay a penalty under section 208 of the amount specified in section 209(1),

(b) the penalty has not yet been assessed, and

(c) P has co-operated with HMRC,HMRC may reduce the amount of that penalty to reflect the quality of that co-operation.

(2) In relation to co-operation, “quality” includes timing, nature and extent.

(3) P has co-operated with HMRC only if P has done one or more of the following—

(a) provided reasonable assistance to HMRC in quantifying the tax advantage;

(b) counteracted the denied advantage;

(c) provided HMRC with information enabling corrective action to be taken by HMRC;

(d) provided HMRC with information enabling HMRC to enter an agreement with P for the purpose of counteracting the denied advantage;

(e) allowed HMRC to access tax records for the purpose of ensuring that the denied advantage is fully counteracted.

(4) But nothing in this section permits HMRC to reduce a penalty to less than 10% of the value of the denied advantage.’


The sting

A taxpayer may appeal against the imposition of a penalty for failure to take corrective action.  However, the result of the above legislation is that a taxpayer who wishes to dispute a follower notice and pursue his or her appeal to the Tribunal will be faced with, at the least, a penalty of 10% even if subsequently successful in his or her appeal.



Follower notices represent a clear attempt by HMRC to shorten enquires and stifle  appeals by taxpayers in ‘tax avoidance’ cases by the use of what in effect is a 50% tax premium should a taxpayer challenge HMRC and lose.  This is draconian legislation and no doubt capable of being challenged under the general principles of judicial review, including a potential breach of the right to access to justice for a punitive penalty under Article 6 of the European Convention on Human Rights. However, given the hostility of the Courts against all forms of ‘tax avoidance,’ it may take a well-funded and adventurous taxpayer to do so.


Levy and Levy – the tax investigations and resolution specialists.


Claiming costs in the Tribunal – is it worth it?

Starting down the litigation route

If a tax dispute cannot be settled to the satisfaction of the parties, then the only option is litigation before the Tax Tribunals, and the Higher Courts if the matter proceeds that far.  Right from the start, the issue of how best to fund such litigation must be considered.

This article deals with costs at the First-tier Tax Tribunal (“FTT”) and Upper Tier Tribunal (“UT”).   The majority of costs will be incurred at the FTT, because this is where the facts of the case must be examined, as well as the legal arguments.  We focus mainly on FTT costs, therefore, in this article.


UT costs

The UT has a discretionary power to award costs in proceedings transferred by, or on appeal from the FTT (UT Rules r.10(1)(a)).


FTT costs

For the simpler cases, costs may not be an issue.  There is no power to award costs in the FTT in default paper and standard cases.   (Both the FTT and the UT may make awards of ‘wasted’ costs and costs for ‘unreasonable conduct’.  Wasted costs are those incurred by a legal or other representative improperly, unreasonably or negligently.  Costs for unreasonable conduct may be awarded if a party or their representative have acted ‘unreasonably in bringing, defending or conducting the proceedings.’  Such awards are unusual and are outside the scope of this article).


Complex cases

Where costs really come into play is in Complex category cases.  Here, the FTT has jurisdiction to award costs.  Complex category cases are those which will:

  • Require lengthy or complex evidence or a lengthy hearing;
  • Involve a complex or important principle or issue; or
  • Involve a large financial sum (FTT Rules r.23(4)).

Once the FTT assigns a case to the complex track, the taxpayer is at risk of costs if he loses as is HMRC.


To opt out or not to opt out?

The taxpayer, but not HMRC, has the right to opt out of the Complex track costs regime provided he (or she, or it in the case of a company), notifies the FTT within 28 days of receiving notice that the case has been allocated to the Complex category (FTT Rules r.10(1)(c)(ii)).

The issue of whether to remain in the Complex track costs regime can only be taken with knowledge of how the costs system works.   The following points need to be taken into consideration.


The limits of a costs award

The Tribunals, Courts and Enforcement Act 2007 s.29 provides that the FTT has a discretion to award the costs of and incidental to all proceedings before it.  The key point, therefore, is that such costs must be referable to the proceedings before the Tribunal, so it would not be possible to recover, for example, the costs incurred in instructing advisers during the course of an HMRC enquiry or investigation that led up to the litigation.

In assessing costs, the Tribunal will look to the system of costs contained in the Civil Procedure Rules 1998  (“CPR”), which apply to litigation before the County Court and the High Court.


How costs are assessed by the Tribunal

FTT Rules r.10 sets out the costs system.  Essentially, the winner, called the ‘receiving person’, will make a written application to the FTT and enclose a schedule of the costs and expenses claimed against the loser, called the ‘paying person.’  The application must also be served on the paying person.  The time limit for making this application is 28 days from the date of the Tribunal’s decision which disposes of all the issues under appeal.   The paying person must be given an opportunity to make representations before any final order is made against him.

There are three ways, thereafter, that costs can be ascertained.

  • By summary assessment by the Tribunal (generally, for short hearings lasting no more than a day);
  • By agreement between the parties; or
  • By a detailed assessment of costs if the parties cannot agree. In such a case, either the paying or the receiving person may apply for the costs to be decided by a Costs Judge at the County Court or High Court.


The principles that will be applied by the Tribunal

As a general rule, costs will be awarded, on the principles laid down by the CPR,  on the ‘standard basis.’   In assessing standard basis costs, the Tribunal will examine all the circumstances of the case, and ask itself whether the costs were ‘proportionately or reasonably incurred,’ or were ‘proportionate and reasonable in amount.’  Any doubt which the Tribunal may have as to whether costs were reasonably and proportionately incurred, or were reasonable and proportionate in amount, will be resolved in favour of the paying party.

It is important to bear in mind that costs on the standard basis are awarded sparingly, and the receiving party can, as a rule of thumb, expect to receive back no more than 60% of the actual costs he has incurred.

Costs on the ‘indemnity’ basis are more generous, as the Tribunal will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.  However, awards of indemnity costs are comparatively rare, and are designed to punish the losing person for unreasonable behaviour, for example by continuing to contest a particular issue in circumstances where it is clear that there is no reasonable prospect of success.


Costs and evidence

The receiving person must bear in mind that he will have to produce clear and cogent evidence of time spent in order to be persuade the Tribunal to make an award of costs.  Each item of costs claimed will have to be particularised in a detailed schedule, (generally known as a ‘Bill of Costs’).  The Bill of Costs may cover, amongst other things, the following areas:

  • Time spent by the receiving person’s representative attending on the client;
  • Time spent by the representative attending Conferences with Counsel;
  • Time spent by the representative speaking to and corresponding with the paying person or his legal representative;
  • Time spent by the representative attending the hearing at the FTT and any prior case management hearings;
  • Time spent by the representative examining and working on documents;
  • Time spent by the representative instructing and liaising with any expert;
  • Time spent by the legal representative liaising with any witnesses of fact.


The Bill of Costs will also particularise any other items to be claimed, for example the fees of an expert.

The time must be broken down into small sections, detailing each occasion where an item of cost is claimed, so for a complex case the Bill of Costs may run into many pages.  Each item must also show the Grade of Fee Earner and their hourly rate, (these are prescribed by the CPR).

The paying person will be expected to produce documents to support the Bill of Costs at any  assessment hearing:  Such documents will include:-

  • Instructions and briefs to counsel together with all advices, opinions and drafts received and response to such instructions;
  • Reports and opinions of accounting and other experts;
  • Any other relevant papers;
  • A full set of any relevant statements of case
  • Correspondence, file notes, time sheets and attendance notes.



Given the detailed information that must be produced, it is important that accurate records are kept throughout the course of the litigation.  All time spent should be entered into a time recording system with an entry explaining the work done.  Notes of meetings, conferences and telephone attendance notes should be kept on file.  In the course of a busy practice, this is not always easy to do, but reconstituting a complex case from memory is unlikely to lead to full recovery of costs.


Is it worth it?

The decision as to whether to remain in the costs regime of the Complex category is not an easy one, and the advantages and disadvantages must be weighed carefully by the taxpayer and his representatives at the outset of the case.  On the plus side:

  • 60% recovery of costs will at least partially recoup the expenses of litigation;
  • It sends out a clear message that the taxpayer is confident of his case.

On the minus side:

  • The taxpayer may lose the case and have to pay HMRC’s costs;
  • It makes costing the litigation at the outset very difficult, because the taxpayer cannot know his ultimate exposure should he lose;
  • Recovery of costs is complex and time consuming, leading to increased costs. The Tribunal or Costs Judge may award the costs of preparing for and attending the costs assessment hearing, but recovery is again unlikely to rise above 60% of monies expended by the taxpayer.

In the authors’ experience, most taxpayers, even the larger corporates, opt out of the Complex category costs regime, taking the view that the advantages are outweighed by the disadvantages.


Levy and Levy – the tax resolution specialists

Tax Transparency – every little helps

This month sees the launch of the new register of beneficial ownership of trusts .


Tax transparency

The UK Government undertook obligations under the Fourth Money Laundering Directive, and as part of this has introduced a new Trust Register.  The idea is to open up the secretive world of trusts to greater external scrutiny via an online Trusts Register.


Open, but not open

Unlike the People with Significant Control (PSC) beneficial ownership register for companies, the Trust Register will not be open to the public. It will only be available to law enforcement bodies and the UK Financial Intelligence Unit.


Key points

  • There will be an online Government register;
  • The register will apply to all UK trusts;
  • The register will also apply to non-UK trusts in receipt of UK sourced income, or with assets in the UK carrying a UK tax liability;
  • Trustees will have an obligation to update the Register each year that a trust generates a ‘UK tax consequence;’
  • Trustees will need to give details on the Register of the settlors, the trustees, any person exercising effective control over the trust and any beneficiaries;
  • There will be a requirement to provide a statement of accounts for the trust, describing the trust assets and identifying the value of each category of the trust assets and the address of any property held by the trust).


Kick off

For trusts in existence at that time, the first filing deadline will be on or before 5 April 2018. For trusts created after on or after 6 April 2018, the first deadline for filing will be the date on which the trustees first become liable to pay UK taxes.


HMRC say

The Trusts Register will provide a single point of access for trustees and their agents to register and update their records online, replacing the current paper 41G(Trust) form and the ad hoc process for trustees to notify changes in their circumstances. The new service, known as the Trusts Registration Service, will provide a single online route for trusts and estates to comply with their registration obligations and the benefits include: 

  • no more forms lost or delayed in the post
  • you will only see those questions relevant to your particular type of trust or estate
  • you can print a copy of the summary page and keep this for your records. 


What is all this information going to be used for?

According to the government, the information will be used to give “law enforcement and compliance officers the tools they need to combat the misuse of trusts”.  HMRC will also be able to compare the Unique Taxpayer References and/or National Insurance Numbers of the parties to a trust and factor these into its wider understanding of those persons’ tax liabilities.


Levy and Levy comment

There are, of course, vast amount of laundered funds floating around the global financial system. According to the United Nations Office on Drugs and Crime:

 ‘The estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion – $2 trillion in current US dollars. Though the margin between those figures is huge, even the lower estimate underlines the seriousness of the problem governments have pledged to address.’

 It is to be hoped that the new Trust Register will contribute to making at least a small dent in the amount of laundered money.  Every little helps.


Levy and Levy – the tax investigations and resolution specialists


APN’S – no relief for the taxpayer

The First-tier Tribunal (FTT) has dismissed a taxpayerʼs appeal against penalties imposed for the late payment of accelerated payments – Nijjar [2017] TC 05667,

 The facts

Mr Nijjar appealed against two penalties that HMRC imposed, under s226 of FA  2014,  for  late  payment  of  accelerated  payments  demanded   in  an  accelerated payment notice (“APN”) issued pursuant to s219 of Finance Act 2014.  The Tribunal accepted that Mr Nijjar was ‘an honest and reliable taxpayer.’

On 19 May 2015 HMRC issued Mr Nijjar with an APN relating to the tax year to 5 April 2008 arising out of arrangements known as “Liberty 2” which HMRC considered to be notifiable under DOTAS. At the time HMRC issued the APN, there was an enquiry (under s9A of the Taxes Management Act 1970) open into Mr Nijjar’s self- assessment tax return for the 2007-08 tax year. The APN specified an accelerated payment due of £61,676.98.

Mr Nijjar made representations to HMRC under s.222 FA 2014on 17 August 2015, objecting to a number   of aspects of the APN. HMRC rejected those representations by letter dated 15 February 2016.  HMRC determined that Mr Nijjar was obliged to make the accelerated payment  by 21  March  20162.  It  was  common  ground  that  he  had  made no payment by that deadline, or by the date of the hearing.

As Mr Nijjar had not paid the accelerated payment demanded by the relevant deadline HMRC assessed Mr Nijjar to an initial 5% penalty under FA 2014  s. 226(2), followed by a further 5% penalty because the payment had not been paid within 5 months of the deadline under s. 226(3).

Mr Nijjar suffered from poor health and had financial difficulties.  He had also been the victim of a significant fraud. At  no  point however,  whether  prior  to  the  deadline  for  paying  the accelerated payment  or  after,  did  Mr  Nijjar  initiate  contact  with HMRC  with a view to agreeing a payment plan for that accelerated payment. Nor did he propose a payment plan and no such plan was in place at the date of the hearing.

On 26 April 2016, Mr Nijjar received a letter warning him that enforcement proceedings would be taken in respect of the accelerated payment unless he paid immediately. This made it clear to Mr Nijjar that HMRC were  not  giving  him  any  latitude,  whether  because  of  his  financial  situation   or otherwise, and prompted him to call to HMRC on the number quoted in that letter.

Mr Nijjar subsequently appealed to HMRC against the first penalty imposed on 11 May 2016 on the grounds that (i) a penalty should only have been imposed if the underlying tax was actually due; (ii)  he  had  not  actually obtained a  cash  flow  advantage from his participation in the Liberty 2 arrangements and (iii) he was in grave  hardship because of his financial situation and health problems. HMRC rejected that appeal on 6 June 2016 concluding, among other matters, that Mr Nijjar did not have a reasonable excuse for failing to pay the amount  due.  A subsequent review by HMRC upheld the penalty, on the basis that that Mr Nijjar did not have a “reasonable excuse” for failing to  pay the amount demanded and that there were no “special circumstances” that would allow HMRC to reduce the first penalty.  However, as the FTT found, Mr Nijjar notified his appeal against the second penalty to the Tribunal without first appealing to HMRC, and there was thus no evidence of HMRC’s reasoning in relation to the second penalty and it was clear that they had not considered the issue of special circumstances separately in relation to the second  penalty.

The FTT’s decision

The FTT reviewed the applicable legislation, under s.226 FA 2014 as applied to Schedule 56 FA 2009. The FTT recorded that, whilst there is no appeal to the Tribunal against the APN itself, there is a right of appeal against a penalty that is imposed for failure to make an accelerated payment. In this respect, no payment was due if the Taxpayer could satisfy the FTT that was a ‘reasonable excuse’ for the failure to pay the APN.  Alternatively, HMRC has a power under ‘special circumstances’ to reduce a penalty.

The FTT were not sympathetic to Mr Nijjr on grounds of ill health or financial difficulties.  The Tribunal said:-

‘Despite Mr Nijjar’s health problems, he has dealt competently with procedural issues relating to the APN…..Since Mr Nijjar’s health problems did not prevent him from taking those (procedural) steps, I do not consider that they would have prevented him making payment on time particularly given that HMRC told him on a number of occasions when the due date for payment was, and what he needed to do if he could not make payment on time.

I accept that Mr Nijjar’s financial difficulties are attributable to events outside his control (they have arisen as a result of his protracted poor health and the fraud of which he was a victim). They are not therefore excluded by paragraph 16 of Schedule 56 from being a reasonable excuse. However, by the time the accelerated payments fell due, Mr Nijjar had suffered from financial difficulties for a long time. He should have realised from the point at which he received a letter warning him that he was about to receive an APN that he would not be able to pay the amount demanded and taken steps to get in touch with HMRC to arrange a payment plan. It was not reasonable  for  Mr  Nijjar  simply to  assume that HMRC were aware of his  financial  situation and would make due allowance for it.’

Mr Nijjar’s arguments were similarly rejected on the issue of ‘special circumstances.’  The FTT said:-

 ‘HMRC have considered whether there are “special circumstances” in relation to the first penalty. However, as I have noted at [13], they did not take into account   that Mr Nijjar had been the victim of a fraud. I  have  concluded that  HMRC did  not  consider “special circumstances” at all in relation to the second penalty (although Mr Nijjar’s actions in notifying his appeal against the second penalty direct to the Tribunal have contributed to this result).

 It  follows  from  what  I  say  at  [36]  that  HMRC’s  conclusions  on   “special circumstances” are “flawed” in the sense set out in paragraph 15 of Schedule 56 of Finance Act 2009 and I therefore have the power to substitute my own decision on that issue for that of HMRC. I will not, however, alter HMRC’s decision. I do not think that that Mr Nijjar’s health problems have contributed to his failure to pay the accelerated  payment  to  such an  extent  as to  warrant  a special reduction. The   real reason why Mr Nijjar has not paid on time is his  financial situation.  That  is  an  “inability to pay” which is excluded by statute from being a “special circumstance”.  In any event, since I do not consider that Mr Nijjar has taken reasonable steps to address the consequences of the inability to pay, I would not anyway have reduced the penalty for this reason.’

 Levy and Levy comment

The key point is that any taxpayer faced with an APN cannot just plead financial circumstances and sit back and do nothing; he or she must proactively approach HMRC with a view to explaining those circumstances and attempting to agree a payment plan.  If such a plan cannot be agreed, at least the hard-pressed taxpayer can point to having made the effort in any subsequent proceedings before the FTT in relation to penalties.


Levy and Levy – the tax resolution and investigations specialists in London and Tunbridge Wells



Practice Note – closure notices

The legislation

TMA 1970, s. 28A(4) (for individuals), s. 28B(5) (for partnerships); and FA 1998, Sch. 18, para. 33(1) (for companies) enable a taxpayer to apply to the tribunal for a direction requiring the officer to issue a closure notice.

Reasonable grounds

Where an application is made, HMRC have to show that they have reasonable grounds for continuing their enquiries. If they cannot satisfy the tribunal in this respect, the tribunal will issue a direction to HMRC that they must issue a closure notice. In Jade Palace Ltd v R & C Commrs (2006) Sp C 540  the Tribunal indicated that those grounds should take account of both proportionality and the burden on the taxpayer.

Period of time for a closure notice

Once the tribunal has concluded that it should make a direction for a closure notice, it has to specify the period in which the notice must be given.  The period should reflect the circumstances and complexity of the case and the length of the enquiry. The longer the period of the enquiry to date, the greater is the burden on HMRC to show reasonable grounds for not issuing a closure notice. In Jade Palace, the Tribunal concluded that four months was adequate. The particular business was not large or complex. It consisted of a single restaurant and takeaway. By the time the closure notice took effect, over two years would have elapsed from the opening of the enquiry.


An application for a closure direction is heard in the same way as an appeal, giving the taxpayer the right to be present and to be heard. Although there is a presumption that an application to the tribunal to issue a closure notice must be granted, unless HMRC show that there are reasonable grounds to refuse it, the tribunal is unlikely to be impressed by an application for a closure notice if the taxpayer has failed to provide HMRC with the information that is reasonably required and caused the very delays that they were complaining about.

There are no limits to the number of applications for a closure direction that can be made in the course of an enquiry.

Opening of enquiries

An application for a closure direction cannot be used to prevent HMRC from opening an enquiry or to avoid the need to provide information required by HMRC. It does, however, give the taxpayer a practical remedy in a number of situations including those where:


A closure notice is an extremely important safeguard for a taxpayer where delay is being caused by HMRC, by failing to identify what is required in order to progress or close the enquiry or by the unreasonable actions of an HMRC officer.  With careful preparation, the Tribunal may usually be persuaded to issue a closure notice within a reasonable period of time, thus saving further administrative and compliance burdens on the hard-pressed taxpayer.


Levy and Levy – the tax investigatons and resolution specialists in London and Tunbridge Wells

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