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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> UK addresses holding Non-UK accounts, Re Application by Revenue and Customs [2009] UKFTT 224 (TC) (03 September 2009) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00174.html Cite as: [2009] STI 2717, [2009] UKFTT 224 (TC), [2009] SFTD 780 |
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[2009] UKFTT 224 (TC)
TC00174
Reference number: TC/2009/11128
NOTICES to 308 financial institutions under para 5 Sch 36 FA 2008 without naming the taxpayer – whether conditions satisfied – yes – whether approval should be given to the Notices – yes
FIRST-TIER TRIBUNAL
TAX CHAMBER
APPLICATION BY THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS TO SERVE 308 NOTICES UNDER PARA 5 OF SCH 36 TO THE FINANCE ACT 2008 ON FINANCIAL INSTITUTIONS IN RESPECT OF CUSTOMERS WITH UK ADDRESSES HOLDING NON-UK ACCOUNTS
TRIBUNAL: JOHN AVERY JONES CBE
NUALA BRICE (TRIBUNAL JUDGES)
Sitting in private in London on 12 August 2009
Timothy Brennan QC, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Commissioners for HM Revenue and Customs
NOT FOR PUBLICATION
DECISION
"5—(1) An authorised officer of Revenue and Customs may by notice in writing require a person—
(a) to provide information, or
(b) to produce a document,
if the condition in sub-paragraph (2) is met.
(2) That condition is that the information or document is reasonably required by the officer for the purpose of checking the UK tax position of—
(a) a person whose identity is not known to the officer, or
(b) a class of persons whose individual identities are not known to the officer.
(3) An officer of Revenue and Customs may not give a notice under this paragraph without the approval of the tribunal.
(4) The tribunal may not give its approval for the purpose of this paragraph unless it is satisfied that—
(a) the notice would meet the condition in sub-paragraph (2),
(b) there are reasonable grounds for believing that the person or any of the class of persons to whom the notice relates may have failed or may fail to comply with any provision of the Taxes Acts, VATA 1994 or any other enactment relating to value added tax charged in accordance with that Act,
(c) any such failure is likely to have led or to lead to serious prejudice to the assessment or collection of UK tax, and
(d) the information or document to which the notice relates is not readily available from another source.
(5) In this paragraph "UK tax" means any tax other than relevant foreign tax and value added tax charged in accordance with the law of another member State."
For this purpose "checking" includes carrying out an investigation or enquiry of any kind (para 58); UK tax is income tax, capital gains tax, corporation tax and VAT (para 63); and tax position includes past, present and future liability to pay any tax (para 64).
(1) Practical difficulties in particular Financial Institutions complying within the 90 days (or having to rely on HMRC's discretion in extending the time), which could lead to them needing to appeal within 30 days resulting in hundreds of appeals with which HMRC will have to deal individually.
(2) It is unlawful to issue generic notices.
(3) This procedure for giving consent to proposed notices is contrary to the Human Rights Act 1998 relating to a fair trial.
(4) The proposed notices are discriminatory under EU law in that it might deter persons from providing banking services outside the UK or customers from exercising their rights to free movement of capital.
(5) There is procedural unfairness in that the Financial Institutions have a legitimate expectation that there would be individual consultation before any application is made, and that there is unequal treatment of Financial Institutions.
(6) The proposed notices are vague, do not take into account the Financial Institutions' duty of confidentiality, there are unduly burdensome and oppressive and there is lack of proportionality.
(7) Some detailed points were made about the wording of the notices. To some extent the notices have been redrafted to meet these criticisms (for example deleting the question about arrangements within the group presumably in connection with arguments on possession or power to obtain the documents or information that are not included in the notices before us). Points made include that non-interest bearing accounts should be excluded; that accounts within the EU Savings Directive should be excluded for all periods; and that some of the terms used in the notice are unclear.
(8) The hearing of these applications should have been in public.
(9) Certain banks may not have possession or power over the documents or information.
(10) A particular institution has only a small number of relevant accounts, many relating to students.
(11) The Investment Management Association raises concerns about the possible extension of the present exercise beyond banks etc.
(1) The problem is that neither HMRC nor the Associations representing the Financial Institutions have any information about the circumstances of individual institutions. Given that HMRC have made these applications and similar applications in the past there is nothing about them that leads us to suppose that the proposed recipients will be unable to comply. Since there is an appeal process relating to the notices being unduly onerous we consider that this is a matter best tested in such proceedings. Naturally we hope that this Tribunal will not have to deal with hundreds of appeals but it would be wrong to refuse to grant the applications on the ground that it might save us some future work when Parliament has provided for an appeal process. In any case we expect that particular Financial Institutions will be able to agree with HMRC on matters such as extension of time where this is necessary. We accept that to some extent the appeal process will mean that HMRC will have to deal with Financial Institutions individually after the issue of the proposed notices but they assured us at the hearing that they were prepared to do this.
(2) There is nothing in the statute preventing the issue of many notices in the same form. Each Financial Institution will receive a separate notice addressed to it alone – we have signed 308 separate notices.
(3) We consider that the Human Rights provisions about a fair trial are irrelevant to applications of this kind which are not a trial at all. In any event the procedure relating to these applications is contained in primary legislation.
(4) We consider that the matter is covered by Art 58 of the EU Treaty, that a State is entitled "to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation." The matters mentioned in paragraphs 5 and 6 of this Decision indicate that such infringements are likely and we regard the notices as requisite measures.
(5) These applications represent the statutory safeguards to the issue of the Notices which must be considered on their own. We do not accept that because HMRC has acted differently on relation to other applications this requires them to act in the same way in all cases. We consider that the argument goes the other way; what was unusual was HMRC's negotiations in the earlier cases which are not required by the statute. When each Financial Institution receives its notice it will have an opportunity to discuss with the Revenue matters such as the time for reply.
(6) We consider that these fears are exaggerated. The proposed Notices are based closely on former ones negotiated with the addressees and the terms are an amalgamation of ones used for high street banks and private banking. We do not consider that their scope is uncertain or unduly burdensome or oppressive. Each institution will have a separate right to appeal against its notice if it regards the scope as being unduly burdensome.
(7) Dealing with the specific points: there is no reason to exclude non-interest bearing accounts as HMRC have at least as much interest in the capital going into offshore accounts (which may represent undeclared income) as the interest earned while it is there; there is no reason to exclude accounts for periods not covered by the EU Savings Directive because there is no reason to suppose that full disclosure has been made for earlier periods; since the notices follow the pattern of earlier ones we consider that the criticisms of the wording of the notices are unlikely to cause problems.
(8) The hearing in private was specifically dealt with at the preliminary hearing. We agree that our rules require us to determine specifically that an ex parte application is in private if that is to be the case, and it was so directed at the preliminary hearing. This issue was canvassed in R v Special Commissioner ex p Morgan Grenfell 74 TC 511 at [47]-[50] and we are following well established principles. The nature of the information given to us by HMRC about their previous enquiries required the hearing to be in private.
(9) If a financial institution does not have possession or power of documents or information that is a complete answer to its not complying with the notice and so this is not a matter we have to consider. We can well believe that there could be a dispute over whether this is in fact the case.
(10) The fact that many account holders are students does not seem to us to indicate that all account holders will have complied with their tax obligations.
(11) We have been shown by the witnesses how the Financial Institutions were selected and if any members of the Investment Management Association are included among them it is because of their banking activities.
JOHN AVERY JONES
NUALA BRICE
TRIBUNAL JUDGES
RELEASE DATE: 3 September 2009