Jimenez, R. (On the Application of) v The First Tier Tribunal (Tax Chamber)

Schedule 36 to the Finance Act 2008 has no implied territorial limit on taxpayer notices, subject to international law. Its scope depends on the statutory language, purpose, public interest and the extent to which enforcement would intrude on another state’s sovereignty. A notice under paragraph 1 may therefore be sent to a UK taxpayer resident abroad where the information is reasonably required to check the taxpayer’s UK tax position. Sending the notice and requiring information or documents does not itself amount to enforcement in the foreign state. Civil penalties may be imposed as domestic consequences, provided they are not enforced abroad. Criminally sanctioned disclosure powers and private civil enforcement powers were materially distinguishable.

HMRC was investigating the claimant’s tax position, including his residence and possible UK liabilities. An authorised officer issued a taxpayer notice under paragraph 1 of Schedule 36 to the Finance Act 2008 and sent it to the claimant at his address in Dubai. The First-tier Tribunal approved the notice. Charles J quashed it, holding that the statutory power had no extra-territorial effect: [2017] EWHC 2585 (Admin). HMRC appealed. The central issue was whether paragraph 1 authorised a taxpayer notice to be issued and sent to a person resident outside the United Kingdom.

The appeal was allowed. Patten LJ gave the leading judgment. Leggatt LJ agreed with it, and Nicola Davies LJ agreed with both judgments.

1. Where the Finance Act 2008 is silent on territorial scope, the question is one of statutory construction. The court must consider the language and structure of Schedule 36, its purpose and public interest, the taxpayer’s connection with the United Kingdom, practical effectiveness, and relevant international-law presumptions. The proper construction gives the Schedule the widest reach consistent with international law. The fact that different powers in the Schedule have different territorial limits does not require a uniform approach.
2. Paragraph 1 is an investigatory power directed at checking a taxpayer’s tax position. That expression includes liabilities which may affect persons resident abroad. A paragraph 1 notice may therefore be sent to a person outside the United Kingdom who is or may be liable to UK tax. The mutual-assistance provisions concerning foreign tax did not provide an exclusive alternative or restrict paragraph 1.
3. Sending the notice by post to Dubai did not involve an official act performed in the UAE. It was an exercise of prescriptive, rather than enforcement, jurisdiction. Requiring information and documents did not become unlawful merely because the notice was expressed as a command. Civil penalties for non-compliance could be imposed as domestic consequences and enforced against assets or persons within the United Kingdom, but could not be enforced in the UAE.
4. The criminal-sanctioned disclosure regime considered in Serious Organised Crime Agency v Perry was distinguishable. The private post-judgment enforcement regime in Masri was also materially different. By contrast, Re Seagull, Bilta and KBR demonstrated that strong public-interest purposes may justify an extra-territorial construction. The alleged customary international-law rule was not established because the necessary general state practice and opinio juris had not been shown.
5. The Court allowed HMRC’s appeal and declined to uphold the High Court’s quashing of the notice.

• Court of Appeal (Civil Division): [2019] EWCA Civ 51. Appeal allowed.
• High Court of Justice, Queen’s Bench Division, Administrative Court: Charles J, [2017] EWHC 2585 (Admin). The taxpayer notice was quashed because paragraph 1 of Schedule 36 was held not to operate extra-territorially.
• First-tier Tribunal (Tax Chamber): approved the taxpayer notice and concluded that residence abroad did not exclude the statutory power.