A special commissioner upheld the issue of a notice under s. 19A of the Taxes Management Act 1970 (‘TMA 1970’) where the production of documents was reasonably required by the Revenue for the purpose of determining whether, and if so the extent to which, the tax return under investigation was incorrect or incomplete.

Facts

The taxpayer filed a tax return for 2004—05 showing income of £4,650 from employment with a company and no other income. By notice to the taxpayer dated 22 May 2006 an officer stated his intention of enquiring into the taxpayer's tax return for 2004-05 and made an informal request for certain information. Not having received the information the officer issued a notice under s. 19A of the Taxes Management Act 1970 (‘TMA 1970’) requiring the following information within 30 days: all bank and building society statements for the year to 5 April 2005, in respect of all accounts that the taxpayer held or on which he was named; all statements for all credit, debit or store cards that he held for the year to 5 April 2005; all documents relating to the sale of property that took place during the year and all documents relating to the mortgage (including mortgage application) which was in existence at the date of sale. The taxpayer was also asked to provide his capital gains tax computation and say why that was not included in the tax return together with a statement showing all of the income and outgoings (i.e. accommodation costs, food, entertainment etc) for the year.

The taxpayer appealed against the notice, electing for it to be heard by the special commissioners. His letter stated that the information and documents requested were superfluous for the Revenue's declared intent. He purported to appeal against the notice to enquire into the tax return which after some correspondence the Revenue (and the special commissioners) had taken to be a request to close the enquiry The taxpayer contended that the Revenue had no power to enquire into items where there was no entry in the tax return. The officer did not reasonably require the information. It was an enquiry into his lifestyle, not into the tax return. The return was complete. He had ordered his affairs in a way so as not to pay any tax. The Revenue contended that the officer had explained the reason for the questions in a letter of 5 September 2006 which stated: ‘However the remainder of your return is blank, showing that you are stating that you have no taxable income other than your salary. I need to check that this is in fact the case (and this will necessarily mean that I will need to look at whether such a salary is sufficient for you and your family to live on) and the only record which I could possibly look at in order to be satisfied of this would be the kind of documents which I have asked for.’ No information had been given in reply to the s. 19A notice except that the property disposed of was the taxpayer's principal private residence, which the Revenue had not accepted because the disposal was not of the house in which he was living before the disposal. The taxpayer appeared to have outgoings on the mortgage alone in excess of his income and it was reasonable for the officer to require answers to his questions. Since the officer knew no more than when the enquiry opened it was not appropriate to close the enquiry.

Issue

Whether it appeared that the production of the documents or the furnishing of the accounts or particulars was reasonably required by the officer for the purpose of completing his enquiry.

Decision

The special commissioner (Dr John Avery Jones) (dismissing the appeals) said that clearly the enquiry need not be limited to the entries in the return because the officer could require information to determine whether the return was incomplete. There was nothing unreasonable in any of the questions. The taxpayer said that he had ordered his affairs so as not to pay any tax but had not said how. Since his income could not support his expenditure it seemed entirely reasonable that the Revenue should check his taxable income. The questions were reasonably required for that purpose and since the Revenue were entitled to the information required by the s. 19A notice it was clearly premature to close the enquiry. The 30 days for answering the notice ran from the date of release of the decision.

(2007) Sp C 621.
Decision released 26 July 2007.