HM Revenue & Customs v Sokoya

A tax authority may use its statutory information-gathering power to investigate nil entries and omissions in a self-assessment return, not only positive entries. The power extends to documents reasonably required to determine whether the return is incomplete or incorrect. A construction confined to checking positive entries would deprive the word “incomplete” of real meaning. The reasonableness inquiry is directed primarily to whether the documents are likely to test the accuracy of the return, rather than whether the authority already has reasonable grounds for believing it inaccurate. Direct-tax administration falls outside article 6 of the European Convention on Human Rights, and a valid information notice is not invalidated by article 8 merely because compliance intrudes on privacy.

This was an appeal from the decision of Dr John Avery Jones, Special Commissioner, dated 26 July 2007. The Special Commissioner had confirmed a notice under section 19A of the Taxes Management Act 1970 requiring the appellant to produce bank, card, property, mortgage, capital gains and income-and-expenditure documents in connection with his 2004–2005 tax return.

The appellant argued that the notice could concern only positive entries relating to his employment income, that the documents were not reasonably required, and that the Revenue’s inquiry should be closed under section 28A. He also relied on articles 6 and 8 of the European Convention on Human Rights. The central issue was whether the Revenue could investigate aspects of the return recorded as nil entries.

1. Appeal dismissed. The notice under section 19A of the Taxes Management Act 1970 was properly confirmed.
2. The Revenue was entitled to investigate nil entries as well as positive entries. Section 19A(2)(a) expressly permitted production of documents for determining whether a return was incomplete or incorrect. Limiting the power to documents checking positive entries would deprive “incomplete” of meaningful effect. A nil declaration under a head of income could not shield the taxpayer from inquiry.
3. The objection that the documents were insufficiently connected with employment income therefore failed. Once the inquiry was legitimate in relation to all aspects of the return, the requested documents could be considered in assessing whether the return was accurate.
4. The judge expressed no concluded view on whether section 19A(11) deprived the High Court of jurisdiction to hear an appeal from the Special Commissioners. The point had not been fully argued and was left open.
5. The article 6 argument failed. Ferrazzini v Italy, application no 44759/98, was treated as highly persuasive authority that direct-tax administration falls outside article 6. The complaint about notice of the Revenue’s material also lacked substance on the facts.
6. The article 8 argument failed. Tax collection falls within the Convention’s recognised protection of the country’s economic well-being. A valid section 19A notice was not made ineffective by the privacy implications of compliance.

High Court (Chancery Division): Appeal dismissed from the decision of the Special Commissioner dated 26 July 2007. The Special Commissioner had confirmed the section 19A notice.