HM Revenue & Customs v Ariel

The First-tier Tribunal has exclusive jurisdiction to approve a third-party notice under Schedule 36 to the Finance Act 2008, determine its scope and enforce compliance. A bankruptcy court exercising its supervisory jurisdiction under section 303(2) of the Insolvency Act 1986 cannot modify the notice, exempt the trustee from compliance or determine matters entrusted to the Tribunal. The trustee may make representations to the Tribunal about relevance, confidentiality, onerousness and costs. In complex cases, the Tribunal may hear the trustee directly or permit a further application. Judicial review is the available route for challenging the Tribunal’s decision.

HM Revenue and Customs appealed against directions made by Registrar Derrett following her judgment reported at [2015] BPIR 375. The Registrar held that the bankruptcy court had jurisdiction under section 303(2) of the Insolvency Act 1986 to give directions concerning a proposed third-party notice under Schedule 36 to the Finance Act 2008, including the documents to be produced, costs and safeguards for material obtained under compulsion or from foreign courts.

The appeal concerned whether the First-tier Tribunal had exclusive control over approval, content and compliance with the notice, and whether the bankruptcy court could give guidance before the Tribunal had approved it.

1. Appeal allowed. The Registrar’s directions were set aside, except insofar as the answer to question 1 stated that the trustee could properly comply with a notice.
2. Schedule 36 establishes a judicial monitoring scheme. HMRC decides whether to seek a third-party notice, while the First-tier Tribunal decides whether approval is justified and what the notice should require. Paragraph 6(4) makes the Tribunal’s decision final, subject to judicial review. The limited participation given to the third party is compatible with Article 6 because the third party may make representations to HMRC which must be summarised for the Tribunal.
3. Section 303(2) of the Insolvency Act 1986 gives the bankruptcy court general control of the trustee in matters arising under the bankruptcy. It does not confer a dispensing power enabling the court to alter rights created independently by tax legislation. The same conclusion follows from section 363: an obligation imposed by a validly approved notice arises under the general law, not in the bankruptcy.
4. The trustee’s concerns about confidentiality, documents obtained under compulsion or foreign court orders, relevance and compliance costs are matters for the Tribunal. A trustee in bankruptcy is not in a different legal position from another recipient merely because the material may be more extensive or sensitive. The Tribunal may, however, require HMRC to fund reasonable compliance costs where appropriate.
5. The application to the Registrar was premature and procedurally inappropriate because no notice had yet been approved. The First-tier Tribunal could not enlarge the Registrar’s jurisdiction by adjourning its own application. In a complex case, the Tribunal may use an inter partes hearing or give the trustee liberty to apply so that relevant issues are properly presented.

• High Court (Chancery Division): appeal from Registrar Derrett’s order dated 21 October 2015, following her judgment reported at [2015] BPIR 375. Appeal allowed and the directions set aside, subject to preserving the answer to question 1.