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

The Revenue made an ex parte application for consent to serve notices under TMA 1970, s. 20(8A) on a financial institution (‘Fin4’). The notices sought documents about customers with UK addresses with non-UK bank accounts with Fin4.

Fin4 operated in a number of countries. It held information on its computers in the UK on a number of customers with UK addresses and non-UK bank accounts. 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 relating to debit cards, of a number of customers of Fin4 with offshore accounts of whom 23 per cent had completed the foreign income pages in their tax returns. Out of the names identified by that source a sample, which was intended to be representative, had been chosen of 461 cases (not only customers of Fin4) out of about 11,000 taxpayers who had made self-assessment returns, were UK resident and domiciled, and had not declared any foreign income. Further enquiries had yielded an average of £16,100 of tax in 26 per cent of the sample cases. Ten cases involving had yielded an average of £384,950 per case.

The notices sought documents containing the names and addresses of customers of Fin4 (other than public limited companies, Governments, charities, churches, mutuals, trade associations and clubs) having a UK address and a non-UK bank account in certain named jurisdictions, including documents containing the following information: the name of the account holder, the UK address of the account holder, the date of birth of the account holder, the date the bank account was opened, the date the bank account was closed. The notices required documents showing the balance on 30 September in each of the years 2000 to 2005. Where the information about an account had been authorised to be exchanged under the EU savings directive the account was excluded. A separate notice required similar information relating to UK processed credit or charge cards including documents containing information about all financial transactions in September in each of the years 2001 to 2005.

Fin4 argued that the notices did not relate to a proper class of taxpayers and that the notices were a request for information rather than documents. In relation to the notice requiring credit or charge card documents Fin4 contended in addition that a request for specified information regarding all financial transactions occurring within specified months constituted a request for particulars or information rather than documents.

Issue

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

Decision

The special commissioners (Dr John Avery Jones) (granting the application) said that the inspector's estimates were the best estimates that could be made of the likely result of the issue of the notices.

Taxpayers with UK addresses having bank accounts in certain named jurisdictions formed a proper class of taxpayers, notwithstanding that it might contain a few who were not in fact taxpayers, because those with UK addresses were likely to be UK taxpayers. There was no other way of eliminating those who were not UK taxpayers, particularly as some of them might be people who were not, but should be, taxpayers. While Fin4 was clearly right in saying that a s. 20(3) and accordingly a s. 20(8A)) notice had to be in respect of documents, ‘document’ for this purpose was defined to mean anything in which information of any description was recorded. In practice the information was stored on a computer hard disc; indeed the notices provided that only documents held in electronic format were to be provided. In those circumstances the distinction between documents and information was much less clear-cut than with paper documents and the notices properly asked for documents containing certain listed information.

In relation to the notice requiring credit or charge card documents, the requested document was the same as the customer received in respect of that month's card transactions. That information had to exist as a document and so that was a request for a document rather than information. Fin4 had contracted with a third party for management and custody of the statements but it was reasonable to assume that Fin4 had a right to obtain that information. It seemed unlikely that the third party could not provide the documents within a 90-day time-limit.

None of the objections should prevent the issue of the notices. This was not a fishing expedition by the Revenue. The requirements of s. 20(8A) were satisfied and the inspector was justified in proceedings under s. 20. Accordingly consent to the issue of the notices was granted.

(2007) Sp C 583.
Decision released 9 January 2007.