JJ Manangement LLP & Ors, R (On the Application Of) v Revenue And Customs & Anor

HMRC may investigate a taxpayer’s affairs informally, including after the statutory window for opening an enquiry has closed. That power arises from HMRC’s statutory functions of collecting and managing tax, together with their ancillary powers under the Commissioners for Revenue and Customs Act 2005. Voluntary requests for information may precede compulsory information notices.

The statutory scheme does not require HMRC to open a formal enquiry or use compulsory powers as the first step. Judicial review of a decision to investigate is highly exceptional. The Administrative Court will not ordinarily supervise the progress or scope of an investigation where the taxpayer retains rights of appeal against any later assessment or information notice.

Requests to overseas tax authorities were valid where the applicable treaties and Directive requirements were satisfied.

The claimants challenged HMRC’s investigation into Mr Robertson’s tax affairs and related corporate interests. HMRC had not opened enquiries under section 9A of the Taxes Management Act 1970, but had sought information informally and proposed using information notices under Schedule 36 to the Finance Act 2008.

The claim alleged that the investigation was ultra vires, deprived the claimants of access to justice, was irrational and disproportionate, and that requests to the Spanish and Portuguese tax authorities were unlawful. Certain grounds concerning First-tier Tribunal decisions were stayed and were not determined. The central issues were whether HMRC had power to conduct the investigation, whether its continuation was amenable to judicial review, and whether the overseas requests were valid.

1. Ground 1 dismissed. HMRC’s statutory functions include collecting the correct amount of tax, not merely the amount admitted by taxpayers. Investigating whether returns are accurate and complete is necessary, expedient, incidental or conducive to that function. Section 9(1) of the Commissioners for Revenue and Customs Act 2005 therefore authorises informal investigations and voluntary requests for information.
2. The statutory scheme is not confined to formal enquiries under section 9A of the Taxes Management Act 1970 and information notices under Schedule 36 to the Finance Act 2008. HMRC may investigate whether the conditions for a discovery assessment under section 29 of the Taxes Management Act 1970 are met. Schedule 36 proceeds on the basis that HMRC may check a taxpayer’s position, and gives compulsory powers in support of that function.
3. Ground 2A dismissed. An informal investigation has no immediate legal consequences and does not deprive a taxpayer of access to justice. Judicial review remains available for unlawful public-law conduct, including improper purpose or undue delay. Formal assessments and information notices carry the statutory rights of appeal or supervision provided by Parliament.
4. Ground 2B dismissed. The decision to investigate was far removed from a judicial determination. Applying the principle illustrated by Fayed, judicial review of such a decision is available only in a wholly exceptional case. HMRC needed a proper concern, but no particular degree of confidence in the eventual outcome. There was no sufficient basis to review or micro-manage the investigation.
5. There was no general duty requiring HMRC to disclose the source of its information or provide further reasons. In any event, the correspondence and evidence sufficiently identified HMRC’s concerns.
6. Ground 3 dismissed. The reciprocity provisions in the UK-Spain and UK-Portugal conventions concern the ability to obtain and exchange similar information, not the ability to obtain the very same information domestically. Even if the United Kingdom could not obtain similar information, that would give the requested state an option to decline the request, not invalidate it. The requests also satisfied the Directive requirements because the investigation was lawful and the usual information sources had been exhausted.
7. The judicial review claim was dismissed.

First-instance judicial review decision. The judgment states that certain grounds challenging First-tier Tribunal decisions had been stayed because permission to appeal to the Upper Tribunal had been granted. Those grounds were not determined in this claim.