A special commissioner upheld the Revenue's decision to issue notices under s. 19A of the Taxes Management Act 1970 (‘TMA 1970’) for the production of documents where he was satisfied that the tax inspector reasonably required the specified documents to complete enquiries into the taxpayer's tax returns and that the requirement did not contravene the taxpayer's human rights.

Facts

The taxpayer had been an Imam with the Muslim Association of Bradford since April 1996 for which he received a salary of £7,800 for tax year 2001–02. From November 2000 he was also employed as a para-legal with Khan solicitors, receiving an annual salary of £534 for tax year 2001–02. In January 2002 the taxpayer met with a Revenue officer to sort out his self assessment returns. She explained that he came within the self assessment scheme because he owned a number of properties and had a capital gains tax liability on some of the properties and should seek professional advice.

On 21 March 2003, the tax inspector opened an enquiry into the taxpayer's tax returns for six years ended 5 April 2002 and required information about travel and subsistence claims and the various properties owned by the taxpayer. On 23 April 2003 the taxpayer provided a response setting out the details of his travel and subsistence claims. He also stated that no properties were bought or sold except in 1998–99 and 1999–2000. He received rent from the letting of a property in all the tax years under enquiry except 1997–98. The taxpayer provided no information about other rents received.

On 26 August 2003 the tax inspector met with the taxpayer to further his enquiries and identified during the interview that the taxpayer owned or received rent from six properties during the six years in question. The taxpayer volunteered that he owned two other properties and the inspector queried how he had funded the purchase of those properties. The taxpayer replied that he had won about £30,000 in a competition in Saudi Arabia. When asked if he had sold any shares, the taxpayer stated that he had no evidence that he had done so but volunteered the name of his stockbroker. The taxpayer also mentioned that he had bank statements showing the payment of a discretionary educational grant. The inspector requested sight of the taxpayer's bank statements because of his concerns about the expense receipts and the accuracy of the tax returns but they were not forthcoming.

The taxpayer subsequently appealed against the requirement to produce documents under two notices issued under TMA 1970, s. 19A, including statements, cheque book stubs, paying in slips and passbooks all for accounts which he had power to operate, whether in the UK or elsewhere, including banking accounts, savings accounts, credit card accounts, loan accounts, deposit receipts and safe deposit boxes, Building Society and Co-operative Society accounts. The taxpayer was required to produce the documents within 30 days from receipt of the notices. The taxpayer took the view that the requirement under the two notices was general not specific, excessive, intrusive and irrelevant. Further the Revenue already had sufficient information to confirm the accuracy of the returns. Thus the documents specified in the notices were not reasonably required for the purpose of determining whether the relevant tax returns were incorrect or incomplete. The taxpayer also contended that the requirements for production breached his right to respect for his private and family life, his home and his correspondence under art. 8 of the European Convention on Human Rights.

Issues

Whether the production of the specified documents was reasonably required for the purposes of determining whether the taxpayer's tax returns were incorrect or incomplete; and whether the requirement to produce specified document infringed the taxpayer's human rights.

Decision

The special commissioner (Michael Tildesley) (dismissing the appeal) said that the taxpayer's tax returns were incomplete and inaccurate and inadequate in respect of rental income and capital gains. Further he had not been forthcoming about his shares transactions, property dealings and other income and had not complied with his legal duty to make a full declaration of his income and chargeable gains.

The Revenue had satisfied the first two conditions for the issue of a notice under s. 19A in that they were conducting an enquiry under TMA 1970, s. 9A(1) or s. 12AC(1) into the taxpayer's returns and the requirement was for production of documents in the taxpayer's possession or power. Moreover the notice was not confined to documents known to exist. The facts that the taxpayer might not have in his power or possession the documents specified and did not operate certain types of accounts named in the s. 19A notice did not invalidate the requirement to produce. The taxpayer met the requirement of production by declaring that those accounts and associated documents did not exist (Mother v HMIT (1999) Sp C 211, Accountant v HMIT (2000) Sp C 258 and R v IR Commrs, ex parte Ulster Bank Ltd [1997]BTC 314 applied).

As regards the third condition, the criterion laid down by s. 19A was what the officer reasonably required not what the taxpayer deemed relevant. The facts found provided ample justification for the tax inspector's concerns about the taxpayer's sources of income and capital gains. The production of the specified documents would supply relevant information to assuage his concerns. In all the circumstances, the documents specified in the s. 19A notices were reasonably required for the purposes of determining whether the taxpayer's returns were incorrect or incomplete.

The special commissioners’ powers under TMA 1970, s. 19 were either to confirm or set aside the notice and that decision was final. They had no explicit power to require the Revenue officer to carry out a review of the issue of the notice. The potential for injustice was significant if a commissioner was not entitled to take account of relevant circumstances that had arisen between the issue of the notice and the hearing, particularly as the decision was final. In all the circumstances, the two s. 19A notices were justified. The taxpayer's right under art. 8 was a qualified right which meant that the state might interfere with that right provided that such interference was in accordance with the law, pursued a legitimate aim and was no more than necessary in a democratic society. TMA 1970, s. 9A and 19A respectively provided the Revenue with the lawful authority to enquire into the taxpayer's tax return and required the provision of documents and information in connection with his tax return. The Revenue's powers to enquire and require production of documents pursued the legitimate aim of verifying the accuracy of self assessment tax returns for the purpose of protecting the UK's taxation system and revenue.

In all the circumstances, the requirements for production were proportionate. The requirements dealt with specific documents which could be easily identified by the taxpayer. The documents were either in the taxpayer's possession or could be obtained without considerable difficulty from the taxpayer's bank and or building society. The requirements were time limited to two tax years. The selection of those years was based on rational grounds, directed at resolving his concerns with the inadequacy of the taxpayer's tax returns. The requirements were proportionate and necessary for the purpose of protecting the taxation system and revenue (Taylor v Bratherton (2004) Sp C 448 distinguished).

(2006) Sp C 554. Decision released 31 July 2006.