Penalties for failure to comply with an information notice issued by HMRC can only be imposed if the information notice in question is unambiguous, clear and precise.
HMRC has formidable information powers at its disposal which enable it to compel taxpayers and third parties to provide it with information and documents, and it appears to be relying on such powers with increasing frequency.
HMRC’s main information powers are contained in FA 2008 Sch 36. A person who fails to comply with an information notice issued by HMRC is liable to penalties (both an initial penalty and daily penalties). Such penalties are regularly imposed by HMRC when it considers the recipient of an information notice has failed to comply with that notice.
The validity of such penalties was recently considered by the tribunal in Anstock v HMRC [2017] UKFTT 307 (TC). HMRC issued an information notice to Mr Anstock under FA 2008 Sch 36 para 1 in the context of an enquiry being conducted into his affairs. HMRC formed the view that the notice had not been complied with and issued penalties to Mr Anstock, who appealed to the tribunal.
The tribunal considered the requirements which must be satisfied in order for such penalties to be valid and lawful and confirmed that:
the notice must be properly sent and received (with the onus being on HMRC to demonstrate on a balance of probabilities that this has occurred); and
the notice must be precise, clear and unambiguous in its requests.
Only if the above two requirements are satisfied should the tribunal decide whether the information notice has been materially complied with.
The tribunal, in reviewing the evidence (or lack thereof) presented by HMRC, concluded that, on a balance of probabilities, HMRC had failed to satisfy the first requirement. HMRC had produced no evidence to indicate that the notice had been sent and received, and on that basis alone the appeal would have been allowed. However, the tribunal said that HMRC had not satisfied the second requirement and noted:
‘The notice offends just about every tenet for the proper drafting of a document which is intended to have legal effect … The notice is so poorly drafted that it would be perverse to conclude that the recipient of it could know precisely what it was that he was required to provide to the respondents by way of either information or documents.’
The tribunal has provided some helpful guidance in relation to the validity of penalties issued by HMRC for non-compliance with information notices. Penalties can only be imposed if the information notice is unambiguous, clear and precise. Furthermore, the requirements of the notice must be easily discernible from within the ‘four corners’ of the notice and cannot expect the recipient to have knowledge of third party documents.
Badly drafted information notices are not uncommon. Such notices should be challenged at the earliest opportunity. If HMRC fails to correct inadequacies that are drawn to its attention, it will have no one to blame but itself should the taxpayer subsequently successfully appeal to the tribunal against penalties imposed for non-compliance with the notice.
Penalties for failure to comply with an information notice issued by HMRC can only be imposed if the information notice in question is unambiguous, clear and precise.
HMRC has formidable information powers at its disposal which enable it to compel taxpayers and third parties to provide it with information and documents, and it appears to be relying on such powers with increasing frequency.
HMRC’s main information powers are contained in FA 2008 Sch 36. A person who fails to comply with an information notice issued by HMRC is liable to penalties (both an initial penalty and daily penalties). Such penalties are regularly imposed by HMRC when it considers the recipient of an information notice has failed to comply with that notice.
The validity of such penalties was recently considered by the tribunal in Anstock v HMRC [2017] UKFTT 307 (TC). HMRC issued an information notice to Mr Anstock under FA 2008 Sch 36 para 1 in the context of an enquiry being conducted into his affairs. HMRC formed the view that the notice had not been complied with and issued penalties to Mr Anstock, who appealed to the tribunal.
The tribunal considered the requirements which must be satisfied in order for such penalties to be valid and lawful and confirmed that:
the notice must be properly sent and received (with the onus being on HMRC to demonstrate on a balance of probabilities that this has occurred); and
the notice must be precise, clear and unambiguous in its requests.
Only if the above two requirements are satisfied should the tribunal decide whether the information notice has been materially complied with.
The tribunal, in reviewing the evidence (or lack thereof) presented by HMRC, concluded that, on a balance of probabilities, HMRC had failed to satisfy the first requirement. HMRC had produced no evidence to indicate that the notice had been sent and received, and on that basis alone the appeal would have been allowed. However, the tribunal said that HMRC had not satisfied the second requirement and noted:
‘The notice offends just about every tenet for the proper drafting of a document which is intended to have legal effect … The notice is so poorly drafted that it would be perverse to conclude that the recipient of it could know precisely what it was that he was required to provide to the respondents by way of either information or documents.’
The tribunal has provided some helpful guidance in relation to the validity of penalties issued by HMRC for non-compliance with information notices. Penalties can only be imposed if the information notice is unambiguous, clear and precise. Furthermore, the requirements of the notice must be easily discernible from within the ‘four corners’ of the notice and cannot expect the recipient to have knowledge of third party documents.
Badly drafted information notices are not uncommon. Such notices should be challenged at the earliest opportunity. If HMRC fails to correct inadequacies that are drawn to its attention, it will have no one to blame but itself should the taxpayer subsequently successfully appeal to the tribunal against penalties imposed for non-compliance with the notice.
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