JJ Management Consulting LLP & Ors v Revenue And Customs Respondents

HMRC may use the ancillary power in section 9(1) of the Commissioners for Revenue and Customs Act 2005 to conduct an informal investigation into a taxpayer’s affairs. This includes external enquiries and voluntary requests for information outside a section 9A enquiry and without first using compulsory powers under Schedule 36 of the Finance Act 2008. The statutory requirement for a reason to suspect underpayment applies to compulsory information notices, not voluntary requests. The taxpayer may refuse further cooperation. Judicial review remains available for public-law error, but a wholly exceptional case on its legal merits is required to review HMRC’s discretionary decision to investigate. The court should not micromanage a lawful investigation or apply a general fruits-of-the-poisoned-tree rule.

HMRC investigated Mr Bryn Robertson’s tax affairs and those of associated entities after the ordinary time for opening enquiries under section 9A of the Taxes Management Act 1970 had largely expired. HMRC initially sought information voluntarily, later issued a taxpayer information notice under Schedule 36 of the Finance Act 2008, and pursued third-party notices.

The appellants sought judicial review, arguing that section 9(1) of the Commissioners for Revenue and Customs Act 2005 did not authorise an informal investigation outside the statutory enquiry and information-notice regimes; that review should be available on ordinary principles without an exceptional threshold; and that the investigation lacked a rational foundation and could not be cured by information later obtained. Nugee J rejected the challenge: [2019] EWHC 2006 (Admin). The appeal concerned whether that dismissal was correct.

1. Appeal dismissed. Simler LJ gave the judgment, with which Popplewell LJ agreed. Nugee J was correct to reject all three grounds.
2. The primary function of HMRC is the collection and management of tax. That includes collecting, so far as reasonably possible, the correct amount of tax. Under section 9(1) of the Commissioners for Revenue and Customs Act 2005, HMRC may do anything they think necessary, expedient, incidental or conducive to that function. Investigating whether tax has been correctly paid falls within that ancillary power.
3. The statutory scheme does not confine investigations outside the section 9A enquiry window to compulsory information notices under Schedule 36 of the Finance Act 2008. Section 29 of the Taxes Management Act 1970 permits discovery assessments in specified circumstances, and investigation may be necessary to determine whether those circumstances exist. Schedule 36 proceeds on the basis that HMRC already have power to check a taxpayer’s position; it supplies compulsory information-gathering powers and safeguards, rather than the exclusive source of investigative authority.
4. An informal investigation is voluntary. A taxpayer may decline to provide information or cease cooperating. References to penalties and publication of details do not make the investigation compulsory because those consequences concern any established underpayment and statutory cooperation incentives, not failure to comply with an information notice. HMRC may then use a section 9A enquiry, if available, or Schedule 36 powers, subject to the relevant safeguards.
5. Judicial review of HMRC’s decision to conduct an informal investigation remains available where HMRC act for an improper purpose, in bad faith, irrationally or otherwise unlawfully. However, the decision is discretionary, polycentric and entrusted to HMRC, and satellite litigation is undesirable where statutory routes exist. Applying the reasoning in Fayed, Bermingham and Corner House, a wholly exceptional case on its legal merits is required.
6. The appellants had not established such a case. The lower court’s findings showed that HMRC’s concerns had been communicated and were not irrational or misconceived. There is no general fruits-of-the-poisoned-tree principle preventing continuation of an investigation or use of material obtained during it. The court should not micromanage the investigation or dictate its scope.

• Court of Appeal (Civil Division): dismissed the appeal against the judgment of Nugee J: [2020] EWCA Civ 784.
• High Court (Administrative Court): Nugee J dismissed the judicial review claim: [2019] EWHC 2006 (Admin).