A special commissioner granted the Revenue's application for consent to issue a notice under TMA 1970, s. 20 requiring the disclosure of documents without naming the taxpayers concerned, where information already obtained had raised serious questions that merited investigation which could not be carried out by any other means.

Facts

This was an ex parte application by the Revenue for consent to serve a notice under TMA 1970, s. 20(8A) on a financial institution (‘Fin3’). The notice sought documents about customers with UK addresses who held non-UK bank accounts with Fin3.

Fin3 operated in a number of foreign countries. It held information on its computers in the UK on individual customers with UK addresses and bank accounts in certain of those foreign countries. The Revenue were investigating the use of offshore accounts by UK residents, which they considered presented a significant risk to the proper collection of UK tax. The Revenue were aware, from information obtained from an identified source unconnected to Fin3, relating to debit cards, of a number of customers of Fin3 with offshore accounts of whom 25 per cent had completed the foreign income pages in their tax returns. Further investigation of cases where persons (not only customers of Fin3) who were UK resident and domiciled had not declared any foreign income had led to recovery in 26 per cent of cases with an average yield of £16,100. If granted, the notices would provide further information about transactions entered into by such people. The remaining cases in the sample had been cleared with no tax liability.

Details were given of other investigations involving undeclared offshore bank interest and undeclared trading profits yielding an average of £194,930 per case.

The notices sought documents containing the names and addresses of customers of Fin3 (other than public limited companies, Governments, charities, churches, mutuals, trade associations and clubs) having a UK address and a non-UK bank account in two specified foreign countries, together with documents containing the following information about the customer: whether any bank address was noted ‘gone away’ or ‘not at this address’, date of birth, sort code, branch to which the sort code referred, account number, date account opened, date account closed, annual interest for fiscal years for the six years prior to the notice and whether paid gross or net of withholding tax, and the balance on 5 April each year from 2001 to 2005. Accounts where the account holders had authorised the exchange of information for the purposes of the EU savings directive were excluded. No production of paper documentation was required.

No allegation was made against Fin3 which had agreed the form of the notice, but without agreeing that it should be issued. A time-limit of 90 days for complying was agreed; and the notice provided that if bona fide technical or other reasons arose which might prevent Fin3 from complying with the notice the inspector would engage in good faith discussions with a view to extending the period.

Issue

Whether consent should be given to the issue of a s. 20 notice without naming the taxpayers.

Decision

The special commissioner (Dr John Avery Jones) (granting the application) said that he was satisfied that in all the circumstances, the notice related to a class of taxpayers whose individual identities were not known. Secondly, in the light of the figures, that there were reasonable grounds for believing that any of the class of taxpayers to whom the notice related might have failed to comply with any provision of the Taxes Acts. Thirdly, in the light of those figures and the inspector's estimate of a yield of £36m, any such failure was likely to have led to serious prejudice to the proper assessment or collection of tax. Fourthly, the information which was likely to be contained in the documents to which the notice related was not readily available from another source (and in particular most of the information required by the notice was not known even for those whose identities were known to the Revenue). Accordingly, s. 20(8A) was satisfied.

Weighing up the burden imposed on Fin3 against the benefit to the Revenue, the inspector was justified in proceeding under s. 20(7). The information that the Revenue had already obtained raised serious questions that merited investigation and could not be investigated by any other means. Accordingly consent was given to the issue of the notice.

(2007) Sp C 582
Decision released 9 January 2007.