Derrin Brother Properties Ltd, R (on the application of) v HM Revenue and Customs & Ors

HMRC may use third-party information notices under Finance Act 2008, Schedule 36, to investigate the tax position of an identified taxpayer. A person whose documents may be relevant, but whose tax position is not the immediate focus of the notice, is not thereby a taxpayer entitled to a summary of reasons. The statutory safeguards require the Tribunal to verify both the officer’s justification and the specified factual conditions. Judicial review is not an appeal on how an investigation should proceed and intervention is exceptional. Properly issued notices may interfere with Article 8 rights, but that interference is proportionate where statutory safeguards and an effective judicial-review remedy are available.

The claimant companies sought judicial review of HMRC’s decisions to obtain First-tier Tribunal approval for third-party information and document notices addressed to banks and accountants. The notices followed a request from the Australian Tax Office under Article 27 of the UK/Australia Double Tax Convention concerning suspected tax-avoidance arrangements and the affairs of identified Australian taxpayers.

The claimants argued that the notices breached Schedule 36 of the Finance Act 2008 because many companies whose documents were sought had not received reasons or an opportunity to object. They also alleged breaches of Articles 6 and 8 of the ECHR and A1P1. The central issues were the meaning of taxpayer for Schedule 36 purposes, the adequacy and timing of summary reasons, the breadth of the notices, and whether the statutory procedure supplied an effective remedy.

1. The application was dismissed. The notices were not invalid under Schedule 36 of the Finance Act 2008.
2. A taxpayer for paragraphs 2 and 3 purposes is the person whose tax position is the immediate focus of the notice: the person whose affairs the required information or documents are intended to check. A person is not a taxpayer merely because the notice mentions that person, relates to that person, or seeks documents belonging to that person. The 21 claimants who were only connected with the investigation were therefore not entitled to summary reasons.
3. The Tribunal must be satisfied both that the officer is justified in giving the notice and that the factual safeguards in paragraph 3(3) are met. These include the recipient’s advance warning and reasonable opportunity to make representations, and the taxpayer’s receipt of a summary of the reasons for requiring the information. The presumption of regularity applied to the officer and Tribunal. The court should not use judicial review to second-guess the Tribunal’s supervision of an investigation, particularly where confidential material was considered ex parte.
4. Summary reasons under paragraph 3(3)(e) need not identify every document sought or be provided within a prescribed period. Their content depends on context. The letters to the three claimants adequately identified the investigation, the proposed third-party notices, the relevant tax liabilities and the direct relevance of the information.
5. The notices were not an impermissible fishing expedition. A notice must genuinely seek documents reasonably required to investigate the named taxpayer’s tax position, but it may seek conjectural documents which might not exist.
6. The notices engaged Article 8, but the interference was limited, lawful, pursued the legitimate aim of protecting tax revenue and proportionate. A1P1 added nothing to the analysis. Article 6 did not require participation in the ex parte approval hearing because judicial review provided an adequate and effective remedy capable of examining law and underlying facts. The claimants’ application accordingly failed.