R (Jimenez) v First‑tier Tribunal (Tax Chamber)

The Court of Appeal considered whether paragraph 1 of Schedule 36 to the Finance Act 2008 authorises HMRC to give a taxpayer information notice to a person who is resident outside the United Kingdom. The court reviewed the statutory text and purpose of Schedule 36, the presumption against extraterritorial effect and relevant principles of international law, distinguishing prescriptive jurisdiction (power to require information) from enforcement jurisdiction (coercive official acts on foreign territory).

Having analysed the legislative scheme and comparable authorities (including Masri, Bilta, Perry and KBR), the court concluded that paragraph 1 can be read to have extraterritorial operation so far as is consistent with international law: sending a taxpayer notice to a person abroad does not amount to an unauthorised enforcement act in the territory of another state and does not, on the facts, breach international law. The appeal was allowed and the judge’s order quashing the notice was set aside.

Background and parties: The respondent, Mr Jimenez, a UK national then resident in Dubai, was the subject of an HMRC investigation into his tax residence and wider tax position. On 18 May 2016 HMRC issued a taxpayer information notice under paragraph 1 of Schedule 36 FA 2008 to his Dubai address requiring production of documents and information relevant to checking his tax position. The First-tier Tribunal had approved the notice and the respondent obtained permission for judicial review. Charles J in the Administrative Court quashed the notice on the ground that paragraph 1 did not have extra-territorial effect. HMRC appealed to the Court of Appeal.

Nature of the application and procedural posture: This was an appeal from the Administrative Court (Charles J), challenging the decision to quash the Schedule 36 taxpayer notice. HMRC submitted that paragraph 1 authorises the issuing and sending of a taxpayer notice to a person resident abroad; the respondent argued that such use would offend international law and that Schedule 36 should be read as territorial.

Issues framed by the court:

• Whether paragraph 1 of Schedule 36 FA 2008, properly construed, authorises a taxpayer notice to be given to a taxpayer resident outside the United Kingdom.
• Whether service of a taxpayer notice abroad amounts to an impermissible exercise of enforcement jurisdiction in the territory of another sovereign state contrary to international law.
• How the statutory scheme and related provisions (including the definition of "tax position" and the remedial and penalty regime in Schedule 36) bear upon the territorial reach of paragraph 1.

Court’s reasoning and conclusion: The court examined Schedule 36 as a whole and its investigatory purpose in the context of modern cross-border tax matters. It treated the question as one of statutory construction informed by principles of international law and relevant authorities (Masri, Re Seagull, Bilta, Perry, KBR among others). The judgment accepted the general presumption against extraterritorial operation of domestic measures but held that this presumption yields where the language, purpose and public interest of the statute support extraterritorial effect without infringing international law. The court distinguished measures that would require the United Kingdom to perform coercive official acts on foreign territory (such as entering premises abroad) from the sending of a notice requiring information to be produced in the UK. The civil penalty backstop for non-compliance did not convert the notice into an impermissible exercise of enforcement jurisdiction so long as enforcement steps were confined to the UK. Applying these principles, the Court of Appeal concluded that paragraph 1 may be exercised in relation to a taxpayer abroad and allowed HMRC’s appeal.

Other points: The court considered the relationship between Schedule 36 powers and mutual assistance arrangements but concluded that the existence of mutual assistance does not require a reading of paragraph 1 as purely domestic. The decision engaged with the distinction between prescriptive and enforcement jurisdiction in international law and confirmed that, as a matter of statute construction, Schedule 36 is intended to have the widest territorial reach consistent with international law.

The appeal was allowed. The Court of Appeal held that paragraph 1 of Schedule 36 to the Finance Act 2008 can be construed to permit a taxpayer information notice to be given to a person resident outside the United Kingdom where that construction does not involve a breach of international law. Sending a taxpayer notice to a person in a foreign state did not, in the circumstances, amount to an unlawful exercise of enforcement jurisdiction; the statutory scheme and public interest in investigating cross-border tax matters supported extraterritorial application consistent with international law.

Appeal from the Administrative Court, Queen's Bench Division (Charles J), which had quashed the Schedule 36 taxpayer notice: Charles J [2017] EWHC 2585 (Admin) (see text). The First-tier Tribunal had previously approved the notice on 18 May 2016.