Sarah Jane Turcan & Ors v The Commissioner For HMRC

It is the Appellants’ case that some of the Required Documents are privileged and fall within Sch 36, para 23. Most, or all, of the Appellants’ appeals were previously stayed behind the final decision in (TC/2020/01360) and the onward appeal from that judgment to the Upper Tribunal under reference UT/2020/000345. Judge Bailey who determined the application on the papers at first instance granted Mr Wiseman’s application as respects 10 of the 12 documents for which LPP was claimed, and permission to appeal against the refusal decision over the remaining two documents. Mr Wiseman withdrew his appeal to the Upper Tribunal, and Judge Bailey’s decision was published as Wiseman v HMRC [2022] UKFTT 0075 (TC).

Most, or all, of the Appellants’ appeals were previously stayed behind the final decision of Mr Wiseman’s LPP application in Wiseman v HMRC (TC/2020/01360) and the onward appeal to the Upper Tribunal under reference UT/2020/000345.

In common with Mr Wiseman, Mazars represented the 16 other Appellants in relation to their appeals against the Notices. Mazars is of the view that some of the Required Documents for its clients are privileged and fall within Sch 36, para 23. An outline description of these documents had been provided to HMRC. On the basis of that description, HMRC did not agree that the LPP Documents were privileged, as evidenced by HMRC’s letter of 4 October 2019. The parties were therefore in dispute over the LPP Documents before the contended Notices were issued in November 2019.

To resolve the dispute as to the status of the LPP Documents, the first 12 Appellants in these proceedings (as tabulated above) applied to the Tribunal on 3 December 2020 (the ‘LPP Applications’) under the procedure as set out in Information Notice: Resolution of Disputes as the Privileged Communications Regulations 2009, SI 2009/1916 (the ‘LPP Regulations’). In response, HMRC made a strike-out application on the grounds that the LPP Applications were out of time for the Tribunal to determine the dispute under the LPP Regulations.

The interlocutory matter was heard by Judge Redston, who agreed with HMRC that the LPP Applications were out of time by the strict time limit set out in the LPP Regulations, and the Tribunal has no jurisdiction to hold a separate hearing for determining the LPP Documents for which privilege was asserted for the 12 Applicants, (being the same as the Appellants in these conjoined proceedings, and excepting the 4 Appellants who have waived privilege and Mr Wiseman whose LPP application was separately made as determined by Judge Bailey).

Nevertheless, Judge Redston concluded that ‘the issue whether the LPP Documents are privileged must be decided as part of the hearing of the appeals against the Notices’, and issued directions that gave rise to the current proceedings.

Judge Redston’s directions issued on 28 February 2022 concerned the first 16 Appellants, and lifted the stay of their appeals behind Wiseman v HMRC, and for their appeals to be joined and heard together. The directions relevant to setting out the background and the file management of these proceedings are the following (all emphasis original):

Judge Redston’s Directions of 28 February 2024 were concerned with the first 16 appeals that have been joined. Mazars applied for Mr Wiseman’s appeal to be joined with the 16 appeals, and the Tribunal granted the application on 5 December 2022 to add Mr Wiseman as the seventeenth Appellant in the current proceedings.

A listing (pp43-68 of HB) of 501 documents as concerns the other Appellants which are not produced in the hearing bundle in reliance on Direction 17(4)(c)(i) as related above.

By email dated 6 January 2023, Mr Lewis of Mazars wrote to the Tribunal to state that it was a ‘joint application with the Respondent’ to vary the directions in relation to the dates for lodging the parties’ skeleton argument to be lodged simultaneously on Friday 13 January 2023, and for the Authorities Bundle to be lodged on 18 January 2023. The application was granted on referral to me on 9 January 2023, on the basis that it was ‘joint’ as agreed by both parties, The extension of time was granted without me having any prior knowledge of Judge Redston’s Directions to realise the extent of the complexity in the number of bundles to be lodged, and the file management aspects peculiar to these proceedings, and that the Directions had built in the reasonable (and very necessary) provision for the lead-in time for the sequential and orderly lodgement of bundles and various documents relating to these proceedings.

Following the grant of the extension of time, the parties provided their respective skeleton arguments as follows:

The reading day for pre-hearing application was set to be Friday 20 January 2023, and on 19 January 2023, in reply to my chasing for the Hearing Bundle, the tribunal clerk informed me that the Bundle did not appear to have been uploaded to the Tribunal. The clerk chased HMRC to send through the Bundle, perhaps without realising that it was the Appellants who had been directed to produce the Bundle.

The email correspondence of 19 January 2023, Mr Dixon for HMRC wrote to the Tribunal and the Appellants’ representative was marked ‘Urgent’, and was under the subject heading of ‘Request for documents and Bundle errors’, attaching documents which were noted to be missing in the hearing bundle lodged by Mazars. There were points being raised in Mr Dixon’s email in response to the Appellants’ skeleton argument. Of substance, it is noted that:

The bundle errors highlighted by Mr Dixon were addressed in an Amended Bundle. In summary, the Appellants have lodged the following:

In addition to the core hearing bundles for the substantive Schedule 36 appeals, bundles and documents were lodged for the LPP ground of appeal at the same time, which comprise:

On 16 January 2023, the Tribunal centre forwarded links for uploading (1) to (4) listed above; on 20 January 2023, the email containing the multiple attachments in relation to (5) was forwarded for my receipt, when I was at the same time trying to sort out the core hearing bundles and correspondence notifying bundle errors.

Of relevance to the appeal proceedings is the Additional Hearing Bundle of 53 pages which was lodged by email attachment to the Tribunal on 23 January 2023 when the hearing was underway; this bundle was produced consequent on Mr Dixon’s challenge of the Appellants’ Skeleton Argument (at §20 of ASA2), where counsel stated for the Appellants that ‘where documents have been requested and been refused’. Mr Dixon’s email correspondence of 19 January 2023 highlighted that it is not in line with the overriding objective’ to withhold this evidence, only to ambush the Respondents with it on the day of the hearing’; hence the Additional Bundle being furnished in the course of the hearing.

On 24 January 2023 when the hearing was underway, Mr David Lewis of Mazars provided the following by email attachments in ‘three tranches’, being ‘the email correspondence sent to HMRC from Mazars on 29 and 30 January 2020’.

Keeping track of the multiple email attachments within the parties’ email communications forwarded as attachments to the Tribunal is like opening multiple sets of Russian dolls all at once – email attachments attaching emails with attachments, and so on and so forth. For the sake of completeness, I have noted here the email lodgements, the contexts of which and the attachments therein are not immediately obvious, and there is an attachment (regarding Ms Woods) which clearly does not relate to any of the Appellants.

I have not sought to address each of the documents in these chains of email attachments in turn. I consider their relevance has been dealt with in the parties’ attempt to establish the extent of their agreement of which Items of requests have been fully complied with. The contexts of the email attachments will be more immediately obvious to the parties, and as respects where each document is supposed to sit within the categories of Items on the Information Notices under appeal.

Some further documents were provided to HMRC on 20 March 2020 after the appeal against Information Notices were lodged but are not included in the core bundle. These were furnished to the Tribunal in the course of the hearing by email attachments, being Dr Draffan’s (a) Columbia Insurance Policy; (b) Lloyds Insurance Policy; (c) Tenon Engagement Letter.

During the hearing, Mazars also forwarded a copy of the Turcan family tree, and diagrams to illustrate the flow of funds from the transferor trusts to transferee trusts associated with the Appellants, which help summarise the trust entities and their respective beneficiaries, the relevant details are tabulated above.

The hearing did not complete within the scheduled time for the Tribunal to hear the Respondents’ closing submissions (in part due to connectivity issues). The Tribunal issued Directions on 1 February 2023 for the following to be served on the Tribunal and the opposing party in the post-hearing period. The documents for service pursuant to these Directions are summarised below.

Apart from directing for the sequential lodgement of closing submissions in writing, (after the Appellants’ oral closing submissions at the end of the hearing), the Directions were also issued in part to enable that state of affairs to be set out and for any discrepancies to be particularised by the contending party, as there are Items on the Information Notices that the Appellants contend to be fully complied with, while the Respondents do not agree in every instance that the documents sought had been fully provided.

The parties complied with the post-hearing Directions and the closing submissions were furnished to the Tribunal as follows.

The Appellants applied for the production of transcript of the evidence, which was approved by me and the transcript of the hearing on 24, 25 and 26 January 2023 is made available to the Tribunal and the Respondents.

I have found the file management aspect in these proceedings a huge challenge, due in part to the sheer volume of the multiple Bundles and LPP Bundles being lodged all at once in the run up to the hearing, and the complications in the multiple submissions and applications that had followed in quick succession, not to mention the bundle errors and issue of ‘ambush’ highlighted by Mr Dixon and brought to my attention on the reading day. Another part of the file management challenge is to ensure that the LPP documents are not inadvertently mistaken to be documents that enter the public domain as part of these proceedings.

The file management challenge was compounded by the fact that I was not privy to the set of detailed Directions by Judge Redston that gave rise to the specific file management aspects of these proceedings until Friday of 20 January 2023, being the reading day allotted for the preparation for the 5-day hearing, and without the requisite time to supposedly make determination of the LPP documents on the papers prior to the commencement of the substantive hearing on 23 January 2023 as envisaged by the Case Management Directions.

File management challenges apart, the post-hearing period coincided with family illnesses and bereavements, which necessitated overseas trips and sojourns. My sincere apologies to the parties for the delays in releasing this long overdue Decision, the length of which has also contributed to the delays.

The hearing followed the order of the parties’ opening submissions (Day 1), then the Appellants’ witnesses were called (Days 2, 3, and 4) followed by HMRC’s witness (Day 4), and finished with the closing submissions for the Appellants on the morning of Day 5, with the respondents’ closing commencing scheduled for the afternoon. However, due to technical issues, HMRC’s closing submissions did not conclude, and were furnished in writing post-hearing, and the Appellants were given a right of reply to HMRC’s closing.

The following witnesses were called for the Appellants, who appeared on:

For the Respondents, the evidence of Officer Bentley was called on Day 4 after Dr Draffan and Mr Wiseman.

I have no issue with the credibility of any of the witnesses, and accept their evidence as to matters of fact.

HMRC’s powers to obtain information and documents from a taxpayer are provided under Sch 36 of FA 2008, of which para 1 states as follows:

Part 4 of Sch 36 provides for the restrictions on powers on HMRC to make information requests; para 18 states, under the heading ‘Documents not in person’s possession or power’:

In relation to information requests for production of ‘old documents’, para 20 provides:

Statutory conditions to set limitations on the issue of a notice are provided under para 21, which, so far as relevant, states as follows:

Under the heading of ‘Privileged communications between professional legal advisers and clients’, the scope of HMRC’s information powers is restricted in terms as follows:

The legislation governing appeals against information notices is provided under Part 5 of Sch 36, of which para 29 states:

The provisions in relation to an appeal against an information notice to the Tribunal are under para 32, and under sub-paras 32(3) and (5), it is stated:

The term ‘tax position’ for Sch 36 purposes is relevantly defined at para 64 as follows:

The Appellants’ Self-Assessment Tax Returns (‘SA returns’) for the year ended 5 April 2003 were filed on various dates, 11 of which were filed in January 2004 before the deadline of 31 January 2004, 3 of which in February 2004 (within a month after the deadline), and 3 of which in May and July of 2005.

HMRC notified the Appellants of their intention to enquire into their SA returns under section 9 of the Taxes Management Act 1970 (‘TMA’). All enquiries were notified in 2005, 14 of which in January of 2005, and for the three returns filed in 2005, enquiries were opened within days of the return filing. All enquiries were therefore opened within the statutory time limit of 12 months after the date of return filing for s 9A TMA purposes.

Mazars had acted as agents to Wiseman and Draffan prior to the tax year 2002-03. As to the other 15 Appellants, Mazars’ engagement as their advisers in relation to their HMRC’s enquiries into their 2002-03 SA returns commenced in September 2014. The other 15 Appellants were previously represented by RSM Tenon Ltd, which was acquired by Baker Tilly LLP (‘Baker Tilly’) in August 2013 when Tenon Group PLC, the original proposer of the MIIFF scheme, went into insolvent administration in August 2013. Baker Tilly served notice in September 2014 to terminate the contract which Tenon Ltd had with the 15 Appellants, on ground of a perceived conflict of interest.

Mazars, on being instructed by the 15 Appellants in 2014, wrote to Baker Tilly to obtain copies of all correspondence of Tenon/Baker Tilly had had with HMRC, and also to Clyde & Co, solicitors to the two insurers of the Scheme.

The judicial decisions on MIIFF which are material to the background of the Information Notices are as follows:

Mazars were advised by Tenon that discussions with HMRC took place in January 2012, with a view of reaching some form of settlement. However, according to Mr Mackenzie, Mazars were given to understand that HMRC would only accept full payment of the tax from the Appellants following the Herman decision, and that HMRC were expecting Bowring FTT would be upheld by the Upper Tribunal, and to become a binding authority for future cases.

Given the Bowring case was still being litigated, the settlement discussions that started in January 2012 did not proceed any further. There was little correspondence between Tenon/Baker Tilly and HMRC in 2013 and 2014, until HMRC wrote to the Appellants on 11 August 2014 with a summary of decided cases in their favour (i.e. Herman and Bowring FTT), and invited the Appellants to make an offer of outstanding tax and interest, stating that:

HMRC’s letter of 11 August 2014 was before Bowring UT was released. It fell on Mazars to respond on behalf of the Appellants in the ongoing enquiries opened into the Appellants’ SA returns for 2002-03. The communications between HMRC and Mazars since HMRC’s 11 August 2014 letter are as follows.

In a conference call on 22 April 2016 chaired by Officer Bentley and attended by Mr Mackenzie with a second attendee on both sides, HMRC’s note of the call recorded:

After the conference call of 22 April 2016, there is an absence of correspondence in the hearing bundle until 7 June 2017, and that was when HMRC wrote to the Appellants before the first issue of Sch 36 Notices on 7 July 2017.

According to Mr Mackenzie’s evidence, between 22 April 2016 and 29 March 2017, Mazars had ‘extensive correspondence’ with Turcan Connell to obtain on behalf of its clients as much of the information requested by HMRC. Mazars’ intention was to provide a full file (being a mixed file of documents for Mrs Thomson and Mr Wiseman) to the insurers ‘for approval in accordance with the information requirements’, with a view to identify documents that may be (a) legally privileged, or (b) not reasonably required, or (c) not in the Appellants’ possession or power to produce. That is to say, the documents so identified by the Insurers in the representative file were then ‘extracted’, and what was left after the extraction, being ‘the balance’ as referred to by Mr Mackenzie was sent to Mr Bentley on 4 August 2017, together with the appeals against all the Notices issued on 7 July 2017.

On 13 October 2017, HMRC issued their view of the matter that the Notices had not been complied with, and fixed penalty notices were issued to the Appellants on 3 November 2017, (which were appealed by Mazars on 30 November 2017). HMRC’s view of the matter in response to the appeal against the Notices issued on 7 July 2017 stated the reasons for certain Documents being sought as follows.

On 14 December 2017, requests for statutory review of HMRC’s view of the matter were lodged in the Appellants’ ongoing appeal against the Sch 36 Notices issued on 7 July 2017.

In November 2017, the files for the other Appellants were sent to the Insurers for approval, to undergo the same process of identifying documents to be extracted before production to HMRC. Mr Mackenzie stated that ‘protracted discussions and correspondence ensued over the following six months with the insurers and their legal advisers’, but their approval was not obtained as regards the files for each trust submitted to them.

A meeting with the Insurers’ legal advisers took place on 30 August 2018, and approval was eventually given on 12 November 2018 to approach HMRC to arrange a meeting. The Appellants’ approval was then sought by Mazars to proceed.

HMRC were first contacted in February 2019 to arrange a telephone conference on 1 March 2019, followed by a meeting on 24 April 2019.

The meeting on 24 April 2019 was held at Mazars’ Liverpool Office and chaired by Mr Ross Mackenzie (‘RM’); other attendees were: Jon Claypole (‘JC’ for Mazars); Officers John Bentley (‘JB’), Carl Whitehead (‘CW’) and two others (for HMRC); Ray Smith ‘present only as observing’ (for Clyde & Co), and Malcolm Frost (legal advisers to Insurers).

The note of meeting at pp598-601 was prepared by Mazars, (but wrongly stated in the index as the ‘Respondents’ note of meeting’; Officer Bentley was cross-examined quite extensively in relation to Mazars’ meeting note, excerpts of which are as follows:

Mazars advised Officers Bentley and Whitehead that some of the documents requested were of their very nature legally privileged and some were already in HMRC’s possession. It was agreed that HMRC would review the Sch 36 Notices issued in July 2017 in this context, and if appropriate, issue revised Notices.

To follow up the meeting of 24 April 2019, Officer Whitehead wrote to Mazars with a summary of the meeting, and enclosed a revised schedule of 30 items for Sch 36 FA 2008 purposes, and made the following observation in relation to LPP:

During the meeting of 24 April 2019, the parties discussed extensively Bowring UT and HMRC asked Mazars to commit in writing their view as regards s 90 TCGA following Bowring. This was furnished to HMRC on 4 July 2019, along with the Note of meeting prepared by Mazars for HMRC’s comment. The implications of Mazars’ view on s 90 TCGA are summarised as follows:

On 2 August 2019, Officer Whitehead responded to Mazars’ view on s 90 TCGA, and set out the counter analysis of Bowring UT and reiterated the need to review the additional information and documents as requested on the revised Notices of 31 May 2019, noting that:

Another round of correspondence ensued on interpreting Bowring UT whereby:

An HMRC internal memorandum to John Curran of 11 November 2019 to seek authority to request documents in excess of 6 years old was prepared by Officer Whitehead, and on which Officer Bentley was cross-examined. The salient aspects of the memorandum are:

A new set of Information Notices were issued on 21 November 2019 to the Appellants. There are 24 items on these Notices, as set out below with Dr Draffan’s as representative.

The summary of events leading to the lodgement of the appeals with the Tribunal is as follows, during which 3 key documents requested were provided to HMRC.

After the lodgement of the appeals with the Tribunal, the Appellants started correspondence with HMRC to assert legal privilege for certain documents.

On 28 February 2022, Judge Redston issued a written decision striking out the applications, and issued directions for the LPP claim to be heard together with other grounds of appeal against the Information Notices.

The background leading up to Mr Wiseman’s appeal mirrors that of the other Appellants until 16 January 2020, when Wiseman commenced proceedings under the LPP Regulations 2009, thereby making an in-time LPP application to remove certain documents from disclosure under the Information Notice served on him. The key dates of his appeal progress are:

As related earlier, on 1 September 2015, Officer Rose Noble provided Mazars the agreed list of all the information in HMRC’s possession that had formerly been provided by Tenon. Under the heading of ‘Insurance Arrangements’, the descriptions of certain documents carry the reference of correspondence relating to the insurance arrangements as part of the implementation of the Scheme. A cohort of such documents were all dated 22 November 2002:

The Appellants produced an Additional Hearing Bundle (‘AHB’) of 53 pages documenting the attempts by Mazars to obtain documents from Turcan Connell in relation to the informal information requests, and the formal Notices issued in July 2017, and then November 2019; some of the documents included are redacted.

The Additional Bundle was produced when the hearing was underway, and consequent on Mr Dixon’s challenge of the lack of evidence to substantiate the Appellants’ Skeleton Argument in Reply at paragraph 20, which states that Mazars had made attempts to obtain documents but had been refused. The following excerpts from AHB stand as evidence of the exchanges between Mazars and the Appellants’ legal advisers.

Trust for Mrs Thomson: exchanges in 2017

On 23 March 2017, Mr Mackenzie emailed Heather Thompson, who would be shortly leaving her employment with Turcan Connell, to enquire on any progress made in ‘locating the documentation for Mrs Thomson in line with that which discussed in relation to Colin Wiseman’. In June 2017, the email was followed up by Mazars to request Turcan Connell to locate ‘the Thomson equivalent of the Wiseman documents’, and was responded to by Tom Duguid, partner at Turcan Connell.

The documentation for ‘the Thomson equivalent of the Wiseman documents’ was attached by email on 15 June 2017 by Mr Duguid, noting:

Trusts for Mr Wiseman and Dr Draffan: exchanges in 2017 regarding

Debbie Riddoch of Mazars wrote to Mr Duguid in December 2017 regarding the information requests in connection with the trusts for Mr Wiseman and Dr Draffan (and a third participant). The timing would appear to be around the period when the first set of Information Notices issued in July 2017 were appealed. In this email, Ms Riddoch noted that:

The Turcan Family Trusts: exchanges on 20 October 2020

Correspondence between Ms Riddoch and Duguid from October 2020 to January 2022 in relation to the beneficiaries of the Turcan Trusts is provided in the additional bundle, and excerpts of the communications material to the substantive grounds of appeal are related below.

These exchanges were not over the detailed Items but in establishing the basis upon which the beneficiaries of the Turcan Trusts can access the requested documents.

The Turcan Family Trusts: exchanges on 7 October 2020 and 19 January 2022

More substantive email exchanges took place between Ms Riddoch and Mr Duguid in relation to the Turcan Family Trusts documents addressing the information requests as cohorts under different headings as narrated below.

Under this heading, Mazars tried to establish (a) the extent of documents that are in existence and in the trustees’ files with Turcan Connell, and (b) any restriction on beneficiaries’ entitlement to have sight of the said documents.

Item 10 is for documentation relating to the engagement of Tenon to provide tax planning advice, and the exchanges are as follows:

These Items are related to the insurance cover obtained as part of the planning for entering the MIIFF Scheme, with Item 11 being ‘calculation of the level of cover’, Item 14 being ‘final offer document’ from insurance providers, and Item 20 being ‘engagement letter for advice on the insurance’ forming part of Tenon’s tax planning advice.

While the correspondence for information gathering for the trusts for Mrs Thomson, Dr Draffan, and Mr Wiseman by Mazars took place in 2017 (before the issue of the Notices under appeal in November 2019), the equivalent correspondence for the Turcan family trusts took place in October 2020 around the time when the appeals were lodged to the Tribunal.

The ordering of the grounds of appeal below follows the order wherein counsel advanced the Appellants’ case, except for transposing Grounds 1 and 2 for the facilitation of their respective consideration. As to the documents for which LPP is asserted, it is set out as the last ground (in the latter part of the Decision) in view of the specificity of each of those documents and the length of that section in itself.

The abbreviations given below are by reference to the heading assigned by counsel for the Appellants for each ground.

In line with the Judge Redston’s Directions, parties have made submissions with reference to the Notice issued to Dr Draffan, which states as follows:

In addressing the parties’ submissions on the grounds of appeal as advanced for the Appellants, I have followed the order of the relevant provisions in the statutory scheme under Schedule 36, for a proper consideration of the statutory powers conferred on HMRC and the remit of the Tribunal on appeal within the statutory framework. The relevant statuary provisions to be addressed in turn are as follows:

Before addressing the substantive issues in turn, it is expedient to set out the requisite pre-conditions underpinning the Information Notices, and the agreement between the parties so far as possible as respects the documents provided to date in compliance with the Notices.

Schedule 36 FA 2008 para 20 sets out that an information notice may not require a person to produce documents originating more than 6 years before the date of the notice, unless issued with the agreement of an authorised officer.

The Old Documents authorisation dated 11 November 2019 by Officer John Curran gave the agreement for Notices to be issued for the request of documents in excess of 6 years old. I am satisfied that the pre-condition under paragraph 20 of Schedule 36 is met.

Counsel for the Appellants in their skeleton argument raised the issue that the Respondents have not expressly addressed which of the Conditions under para 21 Sch 36 for the Notices to be issued, and submitted that ‘this laxity demonstrates the Respondents’ general approach in this matter, that of seeking information under Schedule 36 without adequate regard to the requirements of Schedule 36’.

Paragraph 21 of Sch 36 requires that where a taxpayer has submitted a tax return an information may not be issued unless one of the four conditions are met. In these appeals, the condition HRMC rely on is Condition A, which requires an open enquiry to be in place. This is evidenced by:

On the evidence produced and relied on by HMRC, I am satisfied that Condition A pursuant to para 21 of Sch 36 is met for the Notices to be served on all the Appellants.

For the Appellants, it is submitted that there are items of information requests have been fully complied with, namely:

HMRC confirm in closing submissions that the Respondents are content to agree that information requests for Items 5, 9, 21 and 24 have been complied with, but contend against items 12 and 13 as having been fully complied with for the following reasons.

On the basis of the parties’ consensus as to the extent of compliance with respect to Items 5, 9, 21 and 24, these Items no longer form part of the appeal.

Pursuant to the post-hearing Directions, parties have set out their respective lists of documents as having been provided and received, including those documents that had been formerly provided to HMRC by Tenon before Mazars took over the representation

In the closing submissions, HMRC have stated their acceptance that Items 6, 7, 8 pertaining to the clauses contained in the trustee deeds and deeds of indemnity entered into in relation to these clauses in the trust deeds have been fully provided. In addition, Item 22 for ‘all Deeds of Indemnity for each of the trusts’ is also accepted to have been complied with.

Consequently, the Items 6, 7, 8 and 22 are not long under appeal.

Ms Nathan has made submissions on the burden issue as regards the ‘reasonably required’ test, and I do not read into the order of the parties’ opening and closing submissions whereby counsel for the Appellants preceded the Respondents, as indicative of the issue of burden in establishing whether or not an item on an information notice is reasonably required.

Ms Nathan submits that on an appeal against a Schedule 36 notice the burden lies on HMRC to show that all conditions for its imposition are satisfied, including that an item of request is within the person’s possession and power (ASA1§37, ASA2§2), citing Cliftonville at [39]; Jenner at [14] – [16]; and OneCall at [6]. The Respondents have not made express submissions on the issue of burden in relation to the reasonably required criterion, but have proceeded by assuming the burden.

In Joshy Mathew (Footnote: ¹)Judge Redston has set out an engaging discussion on the issue of burden in relation to the ‘reasonably required’ test with a review of case law. Referring to the High Court decision at [14] of Derrin (HC) (Footnote: ²)in which Similer J (as she then was) confirmed that the dictum in House of Lords’ judgment in Coombs on the predecessor s 20 TMA scheme ‘applies with equal force to Sch 36 notices’, and a presumption of regularity that the statutory authority has acted lawfully and in accordance in its duty, Judge Redston observed at [71] of Mathew that if this presumption applies, then the burden is on the other party (i.e. not the issuing officer) to rebut the presumption.

However, the notice under appeal in Mathew differed in two significant ways from the subject matter in Derrin and Coombs. In Derrin and Coombs the courts were considering applications for judicial review whereas our task is whether or not to allow an appeal against the notices; and secondly, the notices in both Derrin and Coombs were approved by the tribunal before being issued (see [73] of Mathew).

In relation to an appeal against an information notice issued without tribunal’s prior approval (as in Mathew and the present Appellants), Judge Redston posed the question at [76] of Mathew: ‘Does this mean that our hearing of Mr Mathew’s appeal is similar in some ways to the ex parte proceedings?’ In Mathew, Judge Redston went on to answer the question at [78] by reference to Coombs where Lord Lowry said: “Parliament designated the inspector as the decision-maker and also designated the commissioner as the monitor of the decision. A presumption of regularity applied to both’, and that ‘the presumption that the inspector acted intra vires when giving the notice can only be displaced by evidence which cannot be reconciled with the inspector’s having had the required reasonable opinion’.

At [82] of Mathew Judge Redston concluded that ‘the weight of authority’ is that the burden of proof in relation to the ‘reasonably required’ test in Sch 36 Notices rests on the appellant, and not on HMRC, and that it is consistent with the objective of Sch 36 taken as whole, which is ‘to ensure that the information which will ensure that correct amount of tax can be determined’ (Tager (Footnote: ³)at [16]), as well as the position in substantive tax appeals, citing Goff LJ in Nicholson v Morris (Footnote: ⁴)approving the reason given by Walton J that:

In PML Accounting (Footnote: ⁵)the Court of Appeal in a judicial review claim stated as follows:

PML Accounting post-dates Mathew, and would appear to affirm the conclusion reached in Mathew after review of case law that the burden rests on the appellant on an appeal under paragraph 29(1) of Sch 36 to establish that the information and documents sought are not reasonably required.

However, the differences between Derrin and Coombs on the one hand, and Mr Mathew’s position on the other, the tribunal in Mathew nevertheless acknowledged that ‘it remains arguable that the burden is on HMRC’ (at [85]). Given the very limited submissions, the tribunal in Mathew approached each Item of the Notices under appeal ‘on the working assumption that HMRC had the burden of showing that it was reasonable to require the information or documents’ (at [86] of Mathew).

As observed by Judge Cannon in Holmes (Footnote: ⁶) at [20], that although there have been a number of first-instance decisions (Footnote: ⁷) since Mathew which consider the burden of proof as respects the ‘reasonably required’ criterion, ‘the absence of authoritative consideration of the issue is no doubt due to the fact there is no appeal from a decision of the First-tier Tribunal in relation to information notices’. The only exception may be the Court of Appeal’s decision in PML Accounting as noted above, which was made in respect of a para 1(1) Sch 36 Notice and not a third-party notice, although PML Accounting concerned a judicial review, and was not directly concerned with an appeal against a para 1(1) notice as such.

In Cliftonville (Footnote: ⁸)counsel for the taxpayer asked the Tribunal to take a different view from Mathew, for the reason that the authorities relied upon by Judge Redston related to the judicial review of the third party notices that had been approved by the tribunal before their issue, and that it is not appropriate to apply the presumption of regularity to the objective condition for the issue of a notice under Sch 36 para 1(1), and that the burden of proof should be determined in accordance with the general rules of evidence.

It is a material difference that Derrin and Coombs are authorities considering judicial review claims in the context of third-party information requests issued with the prior approval of the tribunal or commissioners. I do not consider that the analysis of burden of proof in Mathew based on Derrin and Coombs can be directly transposed to the issue of burden in an appeal of an information notice issued under para 1(1) Sch 36, which does not require tribunal’s approval.

In the absence of any express statutory guidance on the burden of proof in relation to the ‘reasonably required’ test applicable to a notice under para1(1) Sch 36, the working assumption that HMRC bear the burden on this issue is in line with a tenet of civil litigation that the burden rests on the party who asserts the position (Footnote: ⁹), as discussed in Cliftonville. I have adopted the same approach, noting that HMRC in the present case have accepted that the burden lies with them to prove the information and documents sought to be reasonably required to check the Appellants’ tax position. Thereafter, I consider that the onus shifts to the Appellants, to demonstrate that the information and documents sought are not reasonably required.

If there is any parallel to be drawn between an ex-parte hearing and an appeal hearing against a notice issued under para 1(1) Sch 36, it is that the tribunal hearing an appeal against an information notice issued to a taxpayer is exercising similar oversight in relation to the ‘reasonably required’ test as in an ex parte hearing to approve a third-party information notice pursuant to the statutory requirement under para 3(3)(b) of Sch 36, in terms that the tribunal must be ‘satisfied that, in the circumstances, the officer giving the notice is justified in doing so’. To that end, while the issue of burden differs in a challenge against a third-party notice from an appeal against a para 1(1) notice, the consideration of the ‘reasonably required’ is substantively the same for the authorities on the judicial review claim against a third-party notice to apply to the reasonably required criterion for the purposes of para 1(1) Sch 36.

In this regard, I agree with Judge Bowler’s observation in OneCall (Footnote: ¹⁰)at [65] that the principles as set out by the courts above in cases dealing with the application of the limitation to information or documents ‘reasonably required’ for the purposes of checking the tax position of the taxpayer at para 2 Sch 36 ‘which empowers HMRC to issue third party notices uses the same “reasonably required for checking” phraseology as paragraph 1 governing taxpayer notices’ are ‘highly persuasive if not binding on this tribunal’.

In R (Derrin Brothers Properties Ltd) v HMRC [2016] EWCA Civ 15 (‘Derrin CoA’), Derrin Brothers sought judicial review of the FTT decisions in without notice hearings which approved the issue of notices by HMRC to HSBC Bank plc and a UK firm of accountants, with a ground of claim being breach of the requirements of Sch 36 in approving the third-party notices. Sir Terence Etherton described the purpose of the statutory scheme as follows:

In R(Kotton) v HMRC [2019] EWHC 1327 (Admin) (‘Kotton’) the claimant of judicial review (a Swedish national) sought to challenge the FTT’s approval of HMRC’s issuance of a third-party information notice served on American Express Services Europe Ltd (‘AMEX’) to provide information and documents for checking the claimant’s tax position by way of assistance to the Swedish Tax Authority. Simler J (as she was then) set out the salient aspects of the test for whether documents are reasonably required.

In Steven Price v HMRC [2011] UKFTT 624 (TC) (‘Price’), the taxpayer applied to the FTT for a closure notice to be issued by HMRC under s 28A TMA to close the enquiry into a loss relief claim of £1.5m following the implementation of a tax planning scheme. The taxpayer’s case is that HMRC had a broad understanding of the scheme and could form a view on the tax loss claim, and the detailed scheme documents sought could be provided to HMRC under disclosure once an appeal was lodged against the closure notice.

On the working assumption that HMRC bear the burden to establish that the information requests on the Notices are ‘reasonably required by the officer for the purpose of checking the taxpayer’s position’, the Respondents have called the evidence of Officer Bentley.

It is submitted that the Information Notices issued met the criteria to be valid as they were issued by Mr Carl Whitehead, an officer of HMRC, in writing and requested that the Appellants provide the Respondents with information and documents, which Mr Whitehead believed to be reasonably required for the purpose of checking the Appellants’ tax position. Mr John Bentley, an officer of HMRC, who assisted with the drafting of the Notices also considers the information and documents requested to be reasonably required.

Mr Dixon sets out the tax position being checked by the Information Notices as follows:

The Respondents refer to ‘the purpose of the statutory scheme’, which is ‘to assist HMRC at the investigatory stage to obtain documents and information’ without providing an opportunity for those served with a notice ‘to delay or frustrate the investigation by lengthy or complex adversarial proceedings or otherwise’: Derrin CoA at [68]; and that ‘the test for whether information or documents are reasonably required does not require an investigation of whether the tax investigation itself is reasonably required’: (Kotton at [62]).

For the Respondents to understand the Appellants’ position, it is necessary to check the documentation produced to implement MIIFF arrangements, and this is in accordance with Bowring UT, Barling J stated at [89]: ‘the issue raised here requires all relevant factors to be considered, and each case will depend on its own facts. Relevant factors will no doubt include whether what is done is pursuant to a plan or understanding or agreement’.

The Respondents contend that they are entitled ‘to know the full facts related to a person’s tax position so that they can make an informed decision whether and what to assess’: Price at [10]. In the present case, the ‘full facts’ are those relating to the Appellants’ implementation of the scheme. Mr Bentley summarises the relevant questions he has distilled from [89] and [90] in Bowring UT ‘into the relevant tests for any scheme participant that has engaged in transactions pursuant to MIIFF planning’ as follows:

Officer Bentley’s witness statement sets out in some detail the reasoning behind each Item of requests, and in relation to each of the Items in dispute as whether they are reasonably required, Mr Dixon’s submissions are as follows.

Ms Nathan and Mr Carey submit the following in the Skeleton Argument in chief:

In the Skeleton Argument in Reply (ASA2), and Closing Submissions in Reply (ACS), and in rebuttal to the Respondents’ submissions, counsel for the Appellants take issue with:

In addition to the above, it is submitted that (a) the Respondents have not shown that there is a legitimate purpose in issuing the Notices; (b) there is ‘no real evidence or suggestion that the tax has been understated by the Appellants’; and (c) what HMRC do have is ‘sufficient information to see that the case is materially similar to Bowring’. The submission refers to Judge Hyde in Marathu (Footnote: ¹¹)at [40]:

In a similar vein, Ms Nathan and Mr Carey submit that it is ‘immaterial that the Respondents may want more information’, that ‘the Respondents’ desire for information is not a legally relevant consideration’. It is reiterated that given ‘the context in which the information has been sought, in order to determine whether the facts of the Appellants fall squarely on all fours with the facts of Bowring’, the Respondents ‘have not explained why the further information they seek is not [sic] reasonably required’.

The Appellants contend that far from being ‘reasonably required’ for the purpose of checking whether the arrangements entered into by the Appellants fall squarely in line with Bowring, the challenged Sch 36 requests are ‘little more than a fishing expedition’ where despite having received ‘significant amounts of information from 2005 onwards’, HMRC continue to seek further documents ‘in order to see if, like Mr Micawber, something might turn up. This is not a permissible way to proceed’ (citing Derrin HC at [20]; Jenner (Footnote: ¹²)at [22]-[25]).

The Respondents’ internal memo for Old Documents Authorisation, and the Note of meeting of 24 April 2019 are the basis for the Appellants’ submission that ‘it appears that HMRC are looking for evidence that may allow them to bring a case to counter Bowring rather than simply seeking to under the arrangements’.

Further, it is submitted that ‘it is implicit in HMRC’s approach they consider that there are documents that show that the trustees of the transferee trust behaved in a different way to the trustees of the transferee trust in Bowring’; that ‘it is unclear why HMRC assume that this should be the case or that such documents exist’; and that ‘HMRC have provided no evidence to justify such assumptions’.

It is argued that HMRC have issued ‘widely drawn information requests in order to elicit as much documentation such that they can see what, if anything, allows them to argue that the Appellants’ facts are materially different to the facts in Bowring, and is ‘a clear “fishing” exercise’.

The Items contended by the Appellants as ‘not reasonably required’ in those specific terms are the following:

In relation to Items 11, 14 and 15, it is submitted that several documents relating to the calculation of insurance cover have been provided to HMRC by Tenon between March 2005 and November 2006; that it is clear from those documents that there is nothing to support HMRC’s submission that ‘The documents created to calculate the level of insurance will help to show whether the transfer of the assets from the 2002 Trust to the Appellants were preordained’ or ‘potentially evidence whether these were preordained’. It is argued that HMRC provide ‘no concrete support for their view’ that ‘insurance calculations can shed any light on preordination of steps’.

The Appellants submit that Item 20 should be regarded as satisfied by Appendix 2(a) attached to Draffan’s witness statement, which is the Listing of documents provided by HMRC for Mazars on 1 September 2015, being the list of documents provided by Tenon to HMRC on behalf of all participants under the heading of ‘Insurance Arrangements’. HMRC do not accept that the Listing of documents provided to them by Tenon means that Item 20 has been satisfied.

The Respondents rely on Bowring UT where Barling J’s observation at [89] of that the issue requires ‘all relevant factors to be considered’, and ‘each case will depend on its own facts’. The Appellants also rely on Bowring UT and contend that the Appellants’ arrangements ‘are materially similar to the facts in Bowring (“on all fours”)’ – they say, which led Barling J to hold that the arrangements in Bowring succeeded.

The Appellants submit that the reasonably required criterion ‘cannot be undertaken in a vacuum’ and that the tribunal ‘must consider whether the documents are reasonable required to check the Appellants’ tax position in the context of the CGT liability in respect of the capital payments received from the transferee trust, ‘the analysis of which necessarily needs to take into account the UT’s decision in Bowring.

I note that the Appellants have urged on the tribunal to consider (indeed ‘must consider’ (Footnote: ¹³)) the ‘reasonably required’ criterion with reference to Bowring UT. In this respect, I agree with Ms Nathan that a proper consideration of the ‘reasonably required’ criterion cannot be undertaken ‘in a vacuum’, and requires an understanding of the MIIFF arrangements in the context of the Bowring decision.

As stated earlier, the judicial decisions on MIIFF which are material to these appeals are Herman (2007, by Sir Stephen Oliver as Special Commissioner); Bowring FTT (2013, by Judge Mosedale); and Bowring UT (2015, by Baling J).

The issue in Herman was whether the ‘trust gains’ accumulated in an offshore transferor settlement were to be treated as chargeable on Mr and Mrs Herman as beneficiaries of capital payments made by an onshore transferee settlement, pursuant to s 87 of the Taxation of Chargeable Gains Act 1992 (‘TCGA’), which relevantly provides as follows:

Where trust gains fell to be taxable under s 87 as attributed gains of the beneficiary on the receipt of a capital payment, the tax payable was subject to the addition of a ‘supplement’ under s 91, making the effective rate of tax for s 87 TCGA purposes at about 58% in the case of Herman,and at 64% in the case of Bowring.

Subsection 87(2) of TCGA refers to section 90, which was the focus of the operation of MIIFF, and at the time when MIIFF was being promoted, section 90 provided as follows:

Section 90 of TCGA is designed to carry over the realised gains of the transferor settlement to the transferee settlement. However, s 90 did not apply to gains realised by the non-resident trustees after the advancement, and this gave rise to arrangements known as the ‘flip flop’ schemes. Mark I Flip Flop, being the predecessor of MIIFF, operated in the manner as illustrated by the following example at [10] in Herman:

To counter Mark I schemes, the Finance Act 2000 (‘FA 2000’) enacted anti-avoidance legislation to the TCGA (as Schedules 4B and 4C), which applied to transfers between settlements ‘linked to trustee borrowings’. At the same time, a new subsection 90(5) was inserted to s 90 TCGA to bring in the operation of schedule 4B (as above) within section 90. The new subsection 90(5), while effective in countering Mark I schemes, inadvertently paved the way for Mark II schemes, which were designed to effect the disapplication of s 90 through trustee borrowings by triggering the new subsection 90(5) through settling the borrowed funds into a new trust.

Mark II Flip-Flop schemes worked essentially by triggering the disapplication mechanism introduced by FA 2000 as a targeted anti-avoidance rule against Mark I Flip Flop schemes, by exploiting the flaw in the new subsection 90(5).

The Treasury Notes to the Finance Act 2003 (‘FA 2003’) which amended the flaw in the anti-avoidance legislation introduced by FA 2000, described the Mark II scheme as follows:

Whereas Mark I schemes eluded the application of s 90 in relation to post-advancement gains to be realised by the non-resident transferor trust, Mark II schemes eluded the application of s 90 in relation to gains already realised in the transferor trust before the settlement of borrowed funds into a transferee trust. By triggering the new subsection 90(5) through linking the two settlements with trustee borrowings, the application of s 90 was switched off. Mark II schemes worked by locking in the trust gains of the transferor trust, so that the stockpiled gains remained stranded in the transferor trust. As observed in Bowring FTT at [9]:

To counter MIIFF, amendments to TCGA (such as to subsection 90(5)) were made by FA 2003 and had retrospective effect as regards transfers between settlements made after 21 March 2000, but only in so far as the transferred property remained within the transferee’s settlement as at 9 April 2003. If the funds in the transferee settlement had already been distributed to beneficiaries before the date of 9 April 2003, then the retrospective effect of the FA 2003 amendments did not apply.

It is common ground, as stated in Herman at [12] that MIIFF ‘was effective in preventing the realised stockpiled gains of the non-resident [transferor] settlement being carried into the [transferee] settlement’. If assets in a transferee settlement following implementing MIIFF had already been distributed to beneficiaries by 9 April 2003, then the only way to attribute trust gains to a beneficiary in receipt of a capital payment under a MIIFF scheme is to establish that subsection 97(5) TCGA applies. Section 97 relevantly provides as follows:

In Herman, Sir Stephen concluded that s 97(5) TCGA applied to the capital payments received by Mr and Mrs Herman, and gave the relevant ‘signposts’ for s 97(5) at [21]:

In Bowring FTT, the tribunal followed the signposts in Herman and likewise concluded that s 97(5) applied to the capital payments in issue. The first-instance decision was overturned on appeal to the Upper Tribunal. Barling J observed in Bowring UT:

The Mark II Flip Flop scheme was designed to take advantage of a flaw in the anti-avoidance legislation introduced to tackle Mark I Flip Flop (‘MIFF’). Beneficiaries resident in the UK receiving capital distributions from a trust are normally chargeable to the extent of gains accumulated in the trust. The Scheme sought to separate the trust gain from the capital payments by establishing additional trusts with funds secured on the trust assets as explained at [13] by Barling J in Bowring:

In terms of the statutory construction of s 90 TCGA, Barling J expressed his agreement with the submissions of Mr Prosser, counsel for the taxpayers, which he credited at [91] as being ‘very strongly supported by the legislation in the respects identified above, and in particular by the purpose and modus operandi of s 90’. Mr Prosser’s submissions are set out at [75]-[77] of Bowring UT:

It was the flaw in the drafting of (the then new) subsection 90(5)(a) that gave rise to the ‘unintended effect’ of allowing the trust gains to be stranded in the transferor settlement by switching off the operation of section 90, avoiding the capital distributions from being brought to charge under section 87 TCGA. Barling J remarked that HMRC sought to ‘sidestep’ this limb of Mr Prosser’s arguments by submitting that ‘on the fact of the present case, s.90 would not have applied to transfer the gains to the transferee settlement, evenin the absence of the flawed drafting of ss.90(5)(a)’ (italics original, at [78]). The argument run for HMRC by Mr Vallat is after WT Ramsay Ltd v IRC [1982] AC 300 and related authorities is set out at [78]-[81] of BowringUT, and summarised as follows:

The FTT in Bowring held that the capital payments, although made directly by the trust, could also be interpreted as being made indirectly by the other, thereby the trust gains in the original trust could be linked to the payments and chargeable to CGT by virtue of the different charging provision under subsection 97(5) TCGA. Barling J at the Upper Tribunal of Bowring held that the FTT had erred in law in respect of the ‘made indirectly’ criterion under subsection 97(5) TCGA. In holding that s 97(5) TCGA did not apply, Barling J had special regard to the following facts from the FTT’s findings, which are summarised at [90] of Bowring UT:

The joined Appellants were among the followers who are awaiting decisions in test cases on MIIFF. Following initial decisions in HMRC’s favour, notably Herman (2007) and Bowring FTT (2013) negotiations were re-opened with Baker Tilly as the agents taking over the matter from Tenon LLP, the original proposers of the Scheme.

In 2014, Mazars took over the representation for the group of joined Appellants in the present appeals. At that time, the decision of Bowring FTT had been appealed to the Upper Tribunal and became the lead case. In 2015, the Upper Tribunal in Bowring reversed Bowring FTT and allowed the taxpayers’ appeal.

In the judicial decisions connected with MIIFF, the issues having been determined are:

The only judicial determination from Bowring UT that is of relevance to the Appellants is that the MIIFF scheme has been held to be effective in switching off section 90 TCGA, but Bowring UT leaves it entirely open as to whether a capital payment made to a participant of MIIFF remains chargeable under section 97(5) TCGA.

It is therefore not a foregone conclusion that the capital payments made to the Appellants are not subject to a charge under section 97(5) TCGA, even if section 90 TCGA was switched off. The factual matrix at Bowring [90] as summarised above point to the multi-factorial considerations that a tribunal is required to undertake in determining whether a capital payment made by a transferee trust of MIIFF remains chargeable to CGT under section 97(5) TCGA.

Having considered the implications of the judicial decision in Bowring UT, I now turn to consider whether HMRC have met the burden in relation to the disputed information requests as being reasonably required for checking the Appellants’ tax position as concerns the capital payments received from the transferee trusts on implementing MIIFF. I have in mind the guidance from Kotton that the question in front of me is ‘an expressly limited one’; that it is not for me to investigate ‘the merits of the underlying tax investigation’, or indeed whether the investigation is justified or reasonably required.

My consideration should be focussed on whether ‘there is a rational connection between the information and documents sought and the underlying investigation’, while also having regard to the pronouncement in Derrin CoA that ‘at the investigatory stage it will be difficult to be definitive as to the precise way in which particular documents will establish tax liability’, and bearing in mind that the statutory scheme of Schedule 36 in conjunction with the issuance of a Closure Notice is that HMRC are entitled to full disclosure of relevant facts relating to the tax position in issue before making a determination under s 28A TMA to close the enquiry.

I have regard to Officer Bentley’s evidence and its related submissions as follows:

I accept the evidence from Mr Bentley, oral and written, as to the reasoning that has gone into considering each of the disputed Items and why they remain reasonably required for the identified tax issue in these enquiries, namely checking the Appellants’ capital gains tax position as recipients of capital payments from the 2002 transferee trusts pursuant to the MIIFF arrangements. I find the ‘rational connection’ between the Items of requests being reasonably required and the identified tax issue to be cogent, consistent, and considered in each instance.

I am satisfied that the Respondents have met the burden of proof in relation to Notices under appeal. I have regard to the fact that the nutshell conclusion relevant to my consideration is at [89] of Bowring, that the determination of the substantive issue concerning the Appellants’ tax position is not susceptible to ‘some more or less formulaic “test”’. There is no check-box approach that can be followed by HMRC to reach a conclusion to close the enquiry, and that the information requests are necessarily multi-factorial to address the relevant questions highlighted in Officer Bentley’s evidence.

The Appellants in the present appeals have all received capital payments from trustees of a 2002 trust under the MIIFF arrangements but with the additional feature of insurance cover that was part and parcel of the overall arrangements. The documentation surrounding the insurance indemnity (i.e. Items 11, 14, 15 and 20) is an indispensable part of the arrangements as implemented for the Appellants, and is therefore reasonably required for checking the Appellants’ tax position in relation to any potential exposure under section 97(5) TCGA.

As to Item 10 as respects the Engagement Letter for tax planning advice from Tenon, it is the documentation that evidences the inception of the MIIFF arrangements, and forms part of the continuum of documentation that constitutes ‘all relevant facts to be considered’, and is reasonably required for the purpose of checking the Appellants’ tax position.

For the avoidance of doubt, I have addressed specifically only those Items being contended by the Appellants as ‘not reasonably required’ under this heading on the basis that the Appellants have accepted that the remaining Items are ‘reasonably required’, even if contended on grounds of paragraph 18 or 23 restrictions from production.

For the reasons stated, and on being satisfied that the Respondents have met the burden that the disputed Items on the Information Notice are reasonably required, the Appellants’ ground of appeal that the Information Notices and any Items therein are not reasonably required is hereby dismissed in full, having considered the Appellants’ contentions very carefully and in detail, and I set out the reasons why the contentions are to be dismissed in their final analysis.

As highlighted above, Ms Nathan’s rebuttal (at ACS §16) of HMRC’s closing submission (at §25) contains the chief tenor of the contention against the information sought in the Notices:

The Appellants’ submission in this respect has the appearance of a syllogism, and I consider the premise at (a) and the conclusion at (b) in turn.

The premise as formulated at (a) is advanced as the ‘aim’ or the purpose of the Notices, and reading the specially formulated premise in conjunction with other submissions, namely:

The statutory purpose of the Information Notices by reference to the ‘tax position’ being checked is clearly set out in the Respondents’ Skeleton Argument at §46. I accept HMRC’s plain statement to be the correct identification of the tax position being checked for the issuance of the Notices in November 2019 that is in line with the statutory provisions under Sch 36.

The alternative formulation by counsel for the Appellants would appear to seek to delineate the permissible scope of the Notice by reference to what counsel consider to be ‘relevant’ in Bowring UT. I reject the proposition that the ‘aim’ of an information notice is to be reformulated in terms as set out at ACS§16, and for the ‘reasonably required’ test to be applied against this specific formulation according to Ms Nathan’s submissions. The primacy of the statutory wording weighs against any liberty to be taken in permitting such an individualised formulation of the statutory test.

The statutory test for ‘reasonably required’ is set out in terms as provided under para 1(1) of Schedule 36, and that is the correct test to be applied in determining the reasonably required criterion. HMRC’s submission at RSA §46 has correctly set out the tax position to which the statutory test is to be applied. There is no justification to depart from the statutory formulation of the applicable test, and the principal danger in any attempt to re-cast the statutory test in wording supposedly tailored to each and disparate case is the deviation from the correct test, not to mention that it will be setting an undesirable and impermissible precedent.

I accept that the context of the information requests has Bowring UT firmly in the background, and I have applied the statutory test of ‘reasonably required’ against the tax position to be checked in the context of the Bowring judgement by Barling J. I reject the submission that the ‘reasonably required’ criterion is to be determined by reference to ‘whether the facts of the Appellants fall squarely on all fours with the facts of Bowring’ – to do so will require an evaluation of the substance of the contents in the documents provided, which is plainly not within the remit of the tribunal hearing an appeal against an information notice.

In determining on whether the reasonably required criterion is met, my focus is on ‘whether there is a rational connection between the information and documents sought and the underlying investigation’ (Kotton at [62]) to check the Appellants’ CGT position in relation to the capital payments received in participating in MIIFF arrangements. To that end, HMRC have met the burden, and it is not for me to determine ‘whether the facts of the Appellants fall squarely on all fours with the facts of Bowring’ – that is for HMRC to determine in due course before the issuance of closure notices for the Appellants.

I dismiss the premise as formulated for the Appellants to be ‘the true position’ for the reasonably required test. The references to the correspondence between Mazars and HMRC prior to the issue of the information notices do not detract from the premise as formulated by counsel for the Appellants being out of line with the statutory test under para 1(1) Sch 36 which is incumbent upon me to apply.

Given the submission for the Appellants in this regard is cast as a syllogism, by dismissing the premise, it follows that the conclusion does not stand either. Indeed, the Appellants’ conclusion that HMRC have ignored ‘the true position evidenced by the correspondence which is to identify whether the arrangements entered into by the Appellants falls “on all fours” with the position in Bowring’ is not a finding of fact that I am supposed to, or required to, make to determine the ‘reasonably required’ criterion as having been met.

Even if there were a ‘true position’ to be evidenced by the correspondence, that is in the background before the issue of the Notices, and does not affect the correct formulation of the statutory test for the information requests as set out at RSA§46. In any event, from the submissions for the Respondents, it would appear that the documents provided to HMRC so far have suggested to HMRC that there are material differences between the Appellants’ capital payments position to that in Bowring, having regard to the following facts as highlighted above.

The Appellants rely on Derrin HC where Simler J remarked at [20]:

Simler J’s remark in Kotton at [60] should be juxtaposed against, and read in conjunction with her remark in Derrin HC at [20]:

I agree with the Respondents’ submission in this respect, that ‘what constitutes “fishing” must be considered in the light of the reasonably required test’. I have special regard that what the Court of Appeal said in Derrin CoA at [68] in relation to complex arrangements (as in the MIIFF) that it is ‘inevitable in many cases, particularly where there are complex arrangements designed to evade tax, that at the investigatory stage it will be difficult to be definitive as to the precise way in which particular documents will establish tax liability.’

I accept the Respondents’ submission that the instances of ‘fishing’ pertain to information requests which ‘do not relate to an identified tax issue and seek documents of so wide a class that they are merely hoping to find a tax issue’. This position is supported by Onecall at [64]: that ‘HMRC can only reasonably require information which relates to identified tax issues’.

In relation to the criticism that the requests are widely drawn, the Respondents submit that Officer Bentley’s requests relate specifically to a tax issue (namely the CGT position of the capital payments from the trust, and more specifically whether the relevant factor set out by Barling J in Bowring have been met. Where possible, Officer Bentley has confined the requests to those relating to specific documents or meetings evidenced to exist. For example:

Further, the Respondents submit that there are instances where the requests have to be more widely drawn, such as Item 19, but they remain ‘in keeping with the statutory provisions of Schedule 36’. Item 19 asks for meeting notes but within a defined period when the planning took place – it is submitted that this ‘is not fishing but tailoring information requests as far as possible to address the tax issue’. The tailoring of the information notice is further evidenced by the withdrawal of the initial information notices issued on 7 July 2017, and the reduction in the number of requests between the informal and formal schedules.

Overall, the Respondents submit that they cannot specify the requests in further detail than what has been done since HMRC do not know which documents exist to be able to specify or itemise the requests further. HMRC also refer to Mr Mackenzie’s oral evidence wherein he stated that Mazars hold documents they believe are not reasonably required. While HMRC have asked Mazars for further specification of these documents, they have not been provided with further details regarding these documents which are in Mazars’ possession but withheld as being not reasonably required.

Ms Nathan referred in her closing submissions to Cliftonville, where the appellant had used a tax avoidance scheme and appealed against certain information requests on ground of being ‘nothing more than a fishing expedition for a tax avoidance motive’ (at [84]). Judge Nicholl rejects the ground that there was a fishing expedition because ‘the requests are limited to correspondence that relates to the implementation of [the tax avoidance scheme]’.

Similarly, I consider that the Respondents are looking at the specific issue as concerns whether the capital payments made by the transferee trusts acting as an ‘intermediary’ for the transferor trusts. The issue is well identified, and there is ‘a rational connection between the information and documents sought’ and the identified issue. The rational connection is not severed when a request is widely drawn out of necessity. Having heard the parties’ evidence, I accept that it is difficult at the early investigatory stage for HMRC to be more definite and precise, and when HMRC do not have the full knowledge of what documents exist when Mazars have not provided details as requested. I reject the Appellants’ contention that the disputed Items are fishing expedition.

Ms Nathan’s cross-examination of Officer Bentley centred on the internal memorandum for Old Documents Authorisation prepared by Officer Whitehead as evidence that the information requests were motivated by an illegitimate purpose, that of bringing the Appellants’ case for litigation to overturn Bowring.

Mr Dixon submits that the starting point is not to look at the purpose of the underlying enquiry (Kotton at [62]) but to consider the individual requests and whether they are reasonably required: ‘the legislation does not make the approval of a notice conditional on the tax investigation itself being reasonably required’.

To the extent that the Appellants submit that HMRC are trying to ‘overturn’ the decision in Bowring, the Respondents say that ‘it fails to hold water’ because:

Officer Bentley was cross-examined extensively on what was authored by Officer Whitehead. I consider the relevance of the Old Documents Authorisation for present purposes is to allow the requests to cover documents beyond the usual time limit of 6 years from the date of issue of the notice. The procedure within HMRC for such an authorisation to be granted is an area of governance of executive powers which the Tribunal has no jurisdiction to consider.

To the extent that there is a reference to litigation in the Old Documents authorisation, I accept the Respondents’ submissions in this respect. I have special regard to the dictum in Kotton that the reasonably required criterion does not bring in the ‘merits of the underlying tax investigation’ (at [60]); and the tribunal is not required to establish the merits of the underlying tax investigation as a pre-condition for determining if the information requests are reasonably required for the purpose of checking the taxpayer’s tax position.

Finally, insofar as the illegitimate purpose is to bring a case to overturn Bowring, it is worth noting that any reliance on Bowring by any participant of MIIFF arrangements is strictly limited to the conclusive determination that the scheme was effective in switching off the application of s 90 TCGA. In that respect, Bowring is no different from Herman and the decision in Bowring does not mean that Herman has been wrongly determined.

The Bowring case does not confer a blanket dispensation on all participants of MIIFF arrangements because it has made it clear that notwithstanding s 90 TCGA being switched off, the capital payments pursuant to MIIFF arrangements may still be subject to a charge of capital gains under s 97(5) TCGA as being made ‘directly or indirectly’ by the transferor trusts to the beneficiaries, and each case has to be determined with regard to its own factual matrix. To that end, the determinative factors that decided Bowring were fact-specific, and the submission that the illegitimate purpose is to ‘overturn’ Bowring does not hold water, as submitted by HMRC.

Ms Nathan submits that on an appeal against a Schedule 36 notice the burden lies on HMRC to show that all conditions for its imposition are satisfied, including that an item of request is within the person’s possession and power (ASA1§37, ASA2§2), citing Cliftonville at [39]; Jenner at [14] – [16]; and OneCall at [6]. (Jenner simply refers back to Mathew and Cliftonville at [39]; OneCall at [6] concerns the burden on the reasonably required criterion.)

In Cliftonville, which was concerned with an appeal against an information notice such as the present cases, the burden of proof in relation to the grounds of appeal being advanced was settled by reference to the general rule in civil litigation that the burden rests with the party who makes a substantive assertion, whether in the affirmative or in the negative, and this general tenet in litigation should apply equally as respects the substantive assertion in an appeal against an information notice. The conclusion reached in Cliftonville is at [39], which states:

Paragraph 18 of Schedule 36 comes under Part 4, and the statutory wording is in the affirmative: ‘An information notice only requires a person to produce a document if it is in the person’s possession or power’. The conclusion reached in Cliftonville is in line with the general rule that if the Appellants rely on para 18 Sch 36 restriction, then the onus is on the Appellants to establish any particular documents under a certain request are not in the Appellants’ possession or power. The conclusion in Cliftonville at [39] is expressly cited in Ms Nathan’s submission, but it is not immediately clear how the conclusion at Cliftonville [39] lends support to the submission that HMRC bear the burden in establishing the para 18 condition.

The Appellants also refer me extensively to Mattu (Footnote: ¹⁶)for case law principles applicable in determining whether a document is in the possession or power of a recipient of an information notice. In Mattu the matter in front of the Upper Tribunal was HMRC’s application for imposing a tax-related penalty under para 50 Sch 36 FA 2008 for an alleged failure to comply with an information notice. In relation to burden, the Upper Tribunal in Mattu held at [100]:

The Appellants’ Closing Submissions in Reply (ACS §18) say that ‘it is absurd to suggest that the burden is not on the Respondents to show a prima facie case that a document is in the power and possession of the Appellants’, and at ACS§19, Ms Nathan submits:

Ms Nathan’s submission on burden is that Mattu is the authority to follow in deciding on burden. I have regard to the fact that Mattu is an authority on application by HMRC to impose a tax-related penalty under para 50 Sch 36 for alleged failure to comply with the information notice, and that the onus in a penalty case always rests with the party seeking to impose it, while the issue here, being an appeal against an information notice is substantively different from the matter in front of the UT in Mattu. However, I accept the validity of Ms Nathan’s submission in that the Respondents bear the burden to show a prima facie case that ‘the documents exist, or could reasonably be said to exist, before directing compliance’ (ACS§20).

I accept Ms Nathan’s submission as respect the prima facie case that HMRC have to establish in accordance with Mattu, but the Upper Tribunal in Mattu also clearly stated that the burden then reverses onto the taxpayer, on approval of the approach adopted in Parissis: ‘although HMRC must raise a prima facie case that the documents are in the respondents’ possession or power then it is for the [taxpayers] respondents to show that they are not’.

The approach in Parissis is in line with Cliftonville at [39], which Ms Nathan has cited in support of her submissions on burden. In relation to para 18 Sch 36, I determine the Items in dispute with HMRC bearing the prima facie burden, then ‘the onus is on the appellant on the grounds of its appeal, including grounds that a restriction in Part 4 of Schedule 36 applies’.

The relevant case law principles are summarised from the key authorities as follows.

To establish para 18 restriction applies to those requests as contended, each of the Appellants provides a witness statement that the documents are not in their possession or power to provide. Dr Draffan, Mr Wiseman, and Mr Clark as executor of Mrs Thomson, together with 8 beneficiaries of the Turcan Family trusts were cross-examined.

Dr Draffan’s witness statement is representative of others, and in relation to his position as a settlor and beneficiary of the relevant trusts. The relevant parts of Draffan’s statement are:

In cross-examination, Dr Draffan confirmed that: (a) he had no ‘first-hand knowledge’ of documents being provided by Mazars; (b) was unable to say whether Mazars had these documents or whether Turcan Connell would provide the requested documents to them. The other Appellants who gave oral evidence were asked a similar set of standard questions, and their replies did not differ from the two material aspects highlighted here of Draffan’s replies.

As to Mr Mackenzie’s evidence, I accept Mr Dixon’s submission that the witness statement does not set out his view of what documents are supplied, whether these are the totality in relation to each request and whether the Appellants have power to obtain more. In cross-examination, Mr Mackenzie stated that:

Mr Mackenzie was asked about why there was no communication for Robert Turcan’s children from Turncan Connell, and his reply was that Robert Turcan was acting as the family adviser to the whole family, and the communications were between Robert Turcan and his siblings and their children; that there would be no written records of communications for Robert Turcan’s children as they would have been verbal.

In relation to ‘possession’, HMRC submit that:

In relation to ‘power’, HMRC submit that:

For each Item disputed on the ground that it is not in the Appellants’ possession or power in reliance on para 18 Sch 36, HMRC have to meet the prima facie burden that ‘the documents exist, or could reasonably be said to exist, before directing compliance’ (per Ms Nathan’s submission). The prima facie evidence is set out in Officer Bentley’s witness statement, and I deal with each disputed Items in turn as follows.

HMRC’s case is that the substance of the request is derived from the meeting referred to in Turcan Connell’s letter of 16 January 2002 on the offer of tax planning services by Tenon, and to include all documentation prepared in connection with the planning and the minutes of the meeting which took place immediately following that letter. Excerpts of the letter of 16 January 2002 from Turcan Connell to John Joyce, Regional Chairman of Tenon are as follows:

The Appellants’ evidence is to confirm that ‘to [their] knowledge no marketing material exists or has ever existed’. Further, many of the documents that fall within Item 1 are also subject to a claim of legal professional privilege under para 23 Sch 36.

I accept that there is a prima facie case that Item 1 requests are valid as correspondence and documentation emanating from the planning discussion between Tennon and Turcan Connell. I also accept that the Appellants do not have in their possession the marketing material, and to their knowledge, that no such material has ever existed, and therefore para 18 restriction applies to the marketing material.

In any event, I do not consider the marketing material to be essential to the identified tax issue in question, since the effectiveness of the MIIFF in switching off s 90 TCGA (which would be what the marketing material of the scheme sought to promote) is not the relevant issue. In my judgment, even if the marketing material did exist, it would not have assisted in addressing the question whether s 97(5) TCGA charge is in point in relation to the capital payments made to the Appellants.

To the extent that most of the correspondence and documentation has been granted privilege as claimed, the Appellants can rely on para 23 restriction, save for the specified documents relating to the 31 July 2002 meeting which I have considered not to be privileged and shall be disclosed (see below).

Further, the parties are aware that the 4 Appellants who are beneficiaries of the Turcan trusts (being children of Robert Cheyne Turcan) have waived their right to privilege. The relevant documents which would otherwise have fallen under Item 1 for these 4 Appellants who have waived their privilege could have been directed for disclosure, even if the equivalent documents are otherwise protected by privilege as granted to the other 10 Appellants.

However, I accept that documentary evidence from the exchanges between Mazars and Tom Duguid that the communications between Robert Turcan and his own children are not on Turcan Connell’s file, and of Mr Mackenzie’s evidence that Mazars do not hold the equivalent set of communications for Robert Turcan’s children as for other beneficiaries for production.

The basis for Items 2 and 3 is an internal email of 29 May 2002 from Heather Thompson of Turcan Connell. The internal email exchange within Turcan Connell was between Heather Thompson (of Turcan Connell) to Alasdair McLaren (Guernsey office of Turcan Connell), Robert Turcan (being the family adviser of the Turcan Trusts as well as a partner of the firm), Douglas Connell, and Graham Scott, the subject heading is absent in Thompson’s email but Robert Turcan’s reply gave the subject heading as ‘Tenon’.

The Appellants’ stated ground against Items 2 and 3 is to state that ‘there is no evidence that the Appellants were aware of the existence of such documents nor that they had possession of such documents’, and that applies to Items 2 and 3, being information referred to in Heather Thompson’s (of Turcan Connell) email dated 29 May 2002, such as the ‘timetable’.

The submissions for the Respondents are:

In relation to Items 2 and 3, I find that HMRC have met the prima facie burden that the information and documents requested exist. In the light of the evidence as respects information gathering so far, I also find that it is within the Appellants’ power to request for the production of such information and documents from Turcan Connell, either in their capacity as settlor cum beneficiary as in the case of Mr Wiseman and Dr Draffan, or as beneficiaries of the 2002 trusts.

However, while the step-by-step plan and timetable evidently existed at one point and would appear to be some kind of working documents for Turcan Connell to liaise and co-ordinate their actions with Tenon, that does not mean that those documents to keep the lawyer and Tenon on track would have been passed on to the Appellants for them to be in possession.

As to whether the Appellants have the power to request Turcan Connell to locate Items 2 and 3, I consider that even if the Appellants were to have the power to make such a request, it would have been privileged documents and be protected from disclosure.

For these reasons, I conclude that even though HMRC have met the prima facie burden that Items 2 and 3 exist (or existed), the Appellants are not in power or possession of the Items and in any event the documents would be privileged. Items 2 and 3 are to be removed.

It is not in dispute that there was a presentation by Tenon on 31 July 2002, and the prima facie case is made out that there exists documentation relating to that presentation, as well as before and after the presentation in preparation of and in following up from the event.

The Appellants’ ground of appeal is in substance the same as Items 2 and 3, which is to say that that there is no evidence that the Appellants were aware of the existence of such documents, nor that they had possession of such documents.

HMRC’s position is that the Appellants had referred to there not being any ‘marketing material’ but the presentation was likely to have taken place as it was referred to in the email of 29 May 2002, and that it is likely that further documents were prepared in connection with the presentation.

My conclusion on Item 4 the same as Items 2 and 3, and the Appellants, and in any event could have relied on para 23 restriction in relation to Item 4.

The Appellants’ position is that these items relate to copies of clauses contained in any of the trust deeds relating to the involvement of the trustees, and Mazars have ‘consistently said that there are no other clauses other than the ones in the trust deed itself’.

The Respondents in closing submissions have accepted that Items 6, 7 and 8 have been compiled with. The appeal against Items 6, 7 and 8 therefore falls away.

HMRC do not accept that Item 12 has been fully complied with as contended for the Appellants. Item 12 is referenced to the documentation mentioned in the ‘indication letters’ dated 22 November 2002 for each of the five transferor trusts. The indication letters are from Ambridge Partners addressed to Mr Astley-Rushton, Executive Director of Global Financial & Executive Risks Practice based in London.

The subject title of the Indication letter is ‘Proposed Tax Opinion Insurance Policy’ followed by the name of each of the transferor trusts. The first page reads as follows:

Ambridge Partners’ Indication Letters are 3 pages long each, and are identical in substance for all the other 4 transferor trusts as the letter to Dr Draffan 1988 Trust, save for the particulars as concerns the names of the ‘Proposed Insured’, and the quantum as respects the limit of liability, which are as follows:

Item 12 is drawn in terms to refer to the substance of the Indication Letters that would have enabled Ambridge to make the Policy offer to each of the transferor trusts. Item 12 also particularises the requirement to provide information or documents in relation to ‘the timing of the payments and the amounts paid’ as respects the ‘capital payments for each beneficiary’ as referred to in the Indication letters. HMRC are of the view that not all relevant documents under Item 12 have been provided.

It is clear from the Indication letters that Ambridge Partners had been provided with a body of relevant information to enable Ambridge to assess the risks and to set the terms and conditions for the Policy on offer, and also the quantum for the ‘Limit of Liability’, and HMRC’s assessment is reached in the context of insurers having to base the premium and their exposure to liability on sufficient information to enable the Policy offer to be made. The timing and the amounts paid as respects the capital payments for each beneficiary are items of information readily ascertainable as having been received or not.

Based on what have been provided to date as in compliance of Item 12, HMRC are of a view that not all documentation referred to in the Indication Letters has been provided. I accept that Item 12 has not been fully complied with, and any outstanding documentation is to be provided pursuant to the Directions that accompany this Decision.

The Appellants have stated that all documents under Item 13 have been provided and any documents not provided under this request are covered by LPP.

HMRC accept that the engagement letters have been provided, but submit that it is difficult to determine whether all the documents requested (and not covered by LPP) have been provided; and that the evidence from the Appellants (as covered below) failed to determine that there were no further documents.

I note the specific response by Mr Duguid to Mazars on 19 January 2022 (supra [86](3)) that he had spent hours looking for these documents and have identified some of them. These may be some of the documents that have been provided by Mazars to HMRC, and to the extent that any further documents may have existed but not provided, I accept that they would be protected by privilege, and the Appellants shall not be required to produce further documents.

HMRC hold a copy of a letter dated 27 November 2002 from Turcan Connell to Justin Astley Rushton of Willis Ltd (the insurance broker) enclosing copies of solicitor’s confirmation letters for “the Scottish Trusts”. HMRC submit that copies of the letters themselves issued to the insurance company on behalf of each beneficiary have not been provided.

HMRC have treated this Item as being appealed under para 18 restriction. However, the Appellants’ ‘Schedule of Categories’ to sum up the ground of appeal against Item 16 as ‘Mr Bentley’s evidence shone a spotlight on the vagueness and speculative nature of such a claim’.

I take it therefore that the Appellants are contending that Item 16 is ‘purely speculative’ and ‘constitute fishing expedition’ as the general heading. I do not consider that Item 16 request to be ‘vague’ or ‘speculative’. There is clear indication from the letter dated 27 November 2002 held by HMRC that the copies of the letters have been enclosed to the broker.

Insofar as the ground of appeal is in reliance on para 18 restriction, I find that the Appellants have the power to request the production of the confirmation letters issued to the insurance company on their behalf from Turcan Connell, notwithstanding the Appellants’ (such as stated in their witness statements) that the letters are no longer in their possession.

The Appellants assert that Item 17 requests are covered by legal privilege. Officer Bentley’s evidence is that the claim to LPP indicates that the documents exist, and HMRC would suggest that the documents are ‘directly relevant’ to the test set out in Bowring.

I conclude that Item 17 requests are subject to para 23 restriction. Even if in the view of HMRC the existing documents falling under Item 17 are instructive in assisting them to complete the enquiry and form a view, such documents are privileged for the reasons as set out below and I vary the Information Notices by removing Item 17.

HMRC rely on the Minute of Trustees Meeting on 7 October 2002 in relation to Turcan 1972 No. 1 Trust of the Directors of Saltire Trustees (Overseas) Limited to pass a resolution to instruct investment advisers to liquidate portfolio to meet Tenon’s fees, and to progress with the restricting. It is noted in the Minute that ‘The Trustees had previously appointed Tenon Tax to advise on the restructuring of the trust.

The Appellants’ contention is that ‘there is no evidence that any such advice was given, or that any of the beneficiaries were privy to any such advice’.

Contrary to the Appellants’ contention, the fact that the overseas trustee company resolved to liquidate the portfolio in part to meet Tenon’s fees, it is evidence that advice was received from Tenon Tax. HMRC have met the prima facie case that such documentation exists to evidence the tax advice given by Tenon.

HMRC’s position is that while the Appellants suggest that Mazars have been unsuccessful in their attempt to obtain, it is unclear what those attempts have been and whether the beneficiary has made the request, especially where in the case of Dr Draffan and Mr Wiseman who were settlors and beneficiaries of their respective trusts.

To the extent that the Appellants are not in possession of such advice documentation, request can be made for Turcan Connell to assist in its production. Advice from Tenon is not covered by privilege; nor is it being contended that Item 18 is subject to para 23 restriction.

The prima facie case for HMRC is made on the basis that the minutes in HMRC’s possession are formal minutes of trustee meetings for each of the participating trusts covering the mechanics of the tax avoidance scheme; that the minutes provided to date cover the mechanics and little else.

HMRC also have the document on their list (H18) which refers to an engagement letter from Sedgwick Detert Moran & Arnold concerning advice and assistance in relation to the insurance policy to be arranged as part of the tax avoidance scheme. Officer Bentley’s evidence is that having taken from Moran & Arnold, there are no minutes of meeting to discuss this further; that it is not unreasonable to expect trustees to discuss the merits of such advice and to minute any decisions taken, and in particular the reasons for those decisions. These are absent in the documents provided so far.

The Appellants contend that 3 trustee minutes in the supplementary bundle, as well as the minutes for 9 and 30 October 2002 meetings have been provided, but HMRC have assumed that there were further documents but unable to cite any support that such documents exist.

HMRC submit that while some formal meeting notes have been provided, there is evidence that further meeting notes are stated to exist [AHB 20], which have not been provided by Wiseman, and where a request by Turcan Connell to find meeting notes for Dr Draffan was said to be outstanding. HMRC accept that that they have received meeting notes for Mr Wiseman of 9/10/02 and 30/10/02. The Tribunal has not heard from any Appellant with first-hand knowledge that all meeting notes have been provided, and the request should not be considered as having been complied with.

I conclude that HMRC have met the prima facie burden that further documents exist beyond those that have been specified by the Appellants in contention as meeting the requirement. I accept Officer Bentley’s evidence that the named minutes as produced ‘cover the mechanics and little else’. The trustees involved were all professional trustees and would have discharged their fiduciary duties to a professional standard.

In the background was the formal engagement of a firm to advise the trustees of the insurance policy to be arranged in implementing MIIFF scheme. It is reasonable to infer that the trustees’ deliberations and final decisions would have been well documented as an indispensable part of their record keeping in accordance with their statutory obligations as trustees in making those decisions on behalf of the beneficiaries. It was not a casual decision being considered that can be left unrecorded. In particular, as Officer Bentley’s evidence highlights, the reasons for the trustees’ decisions would also be recorded in minutes.

On the balance of probabilities, while the Appellants have provided some of the minutes, it is likely that there are more minutes to evidence the substantive decisions having been taken by the trustees. I accept that the Appellants do not have in their possession these minutes, but it is in their power to request for these minutes to be produced by applying to the professional trustees who would have regard to their duty in obliging with such request.

Item 20 is specific, and by reference to the engagement letter of Sedgwick Detert Moran & Arnold (mentioned in H18) to provide insurance advice on the policy to be taken out, and as signed by the trustees of each trust.

The Appellants’ contention is that ‘the existence of such documents has not been proven’, and that ‘it is unclear what light they can shed on the factors found to be relevant’ in Bowring.

Item 20 has been addressed above under the ‘reasonably required’ criterion. I am satisfied that HMRC have met the prima facie burden that the engagement letters existed, and the trustees would have signed the engagement letters to contract with Sedgwick Detert Moran & Arnold to provide them with insurance policy advice, and would have retained a copy of the engagement letter signed as part of their record keeping. It is also within the power of the Appellants as beneficiaries to request the trustees to provide a copy of the signed engagement letter with the insurance adviser, and I direct Item 20 for production.

The Appellants’ position is that copies of all Deeds of Indemnity for each of the trusts have been provided, and in the light of the evidence this request must be regarded as satisfied given that there is no evidence of any other deeds of indemnity or in power and possession of the Appellants. The Respondents in closing submissions have accepted that Item 22 has been complied with. The appeal against Item 22 falls away.

Officer Bentley’s evidence is that it is not unreasonable to expect trustees to take advice in advance of making appointments and to discuss the merits of such advice. Consequently, HMRC would expect any decisions, and in particular the reasons for those decisions, be recorded in the form of minutes.

In submission, Mr Dixon states that HMRC consider that further meeting notes are likely to exist to evidence the trustees’ decisions to distribute large sums to the beneficiaries, and that it is reasonable to consider that there was some discussion between the transferee trustees or notes recording the reasons why they considered distributing the full funds was appropriate.

For the Appellants, it is submitted that these documents have been provided, but that HMRC appear to consider that the trustees must have taken advice in advance of making appointments to the beneficiaries. HMRC’s evidence disclosed ‘the purely speculative nature of this view’; this request is ‘unfounded and no more than fishing expedition’.

From what is obtainable, HMRC are aware that the transferee 2002 trusts appointed all the funds to the beneficiaries. Insofar that the 2002 trustees were professional trustees, it is reasonable to expect that there would be minutes recording the decisions to appoint all the funds to the beneficiaries.

The Appellants have submitted that the expectation that the trustees would have taken advice before making the capital appointments is purely speculative and unfounded. I consider that this information request is to offer an opportunity for the Appellants to evidence the independence of the transferee trustees in making those decisions to appoint all the funds to the beneficiaries, so soon after the inception of the 2002 trusts. If there is evidence that such advice was taken before the appointment, it may go towards establishing the transferee trustees’ independence, and that the transferee trusts were not mere ‘intermediaries’ acting as a conduit. I accept that there might not have been any advice taken by the transferee trustees for any documents under Item 23 to be produced, as suggested by what HMRC have highlighted in a meeting note which remarked on ‘a clause which states at every stage of the planning the old trustees would have to be consulted’ (supra [169](6)). If no such documents are available for production, it is then for HMRC to draw their own inference, adverse or otherwise, from the absence of such documents to evidence any advice having been taken prior to the appointment of all of the trust funds by the transferee trustees.

I conclude therefore that for Item 23, the Appellants are at liberty to produce any further documents as they wish, but shall not be directed to produce any further documents as required.

Pursuant to direction 24 of Judge Redston’s Directions, the Appellants lodged a folder on 23 December 2022 of twelve lists of documents (the Original Bundle of 138 pages), in respect of which LPP was said to have been ‘originally asserted on 25 April 2022’, which I infer the April 2022 date as by reference to the date of the ‘LPP List’ served on the Tribunal and the Respondents pursuant to direction 10, (in lieu of 28 March 2022 per direction 10).

The application is made pursuant to rule 5(2), 5(3)(d) and 6 of the Tribunal Procedure (First-tier Tribunal) Rules 2009 for the Tribunal to exercise its case management powers to admit the Additional Bundle of 195 pages; that Appellants apologise for the ‘late identification’ of the documents during the preparations for the hearing, and that number of additional documents ‘is relatively modest’, totally sixty (60) documents, many of which are materially similar to each other; that the Appellants have ‘promptly sought to bring them to the attention of the tribunal’. It is submitted that any prejudice to the Respondents is ‘limited’ since HMRC ‘are not privy to the documents in respect of which legal advice privilege is being claimed’.

The Additional Bundle of 60 documents is tabulated in an Annex attached to the Application, and the further documents relate only to the following trusts and the beneficiaries of those trusts, namely: (i) Mrs L Turcan 1968 Trust; (ii) The Turcan 2002 (No. 1) Family Trust; (iii) Mrs L Turcan 1972 (No. 1) Trust; and (iv) The Turcan 2002 (No. 2) Family Trust.

The application has the dual purposes of amending the preceding application of 13 January 2023 by removing several documents from the Annex attached thereto, and to adduce two further documents for which privilege is asserted.

Mr Ross Mackenzie of Mazars filed an additional witness statement dated 19 January 2023 in respect of this application, wherein he referred to Item 1 of the Information Notices issued on 21 November 2019 with the request as follows:

Mr Mackenzie’s second statement refers to his earlier statement dated 5 December 2022, in which he stated that:

Mr Mackenzie’s statement continues at paragraphs 10 and 11 by stating how he had mistaken Document B1 to be the same documents for which LPP is now asserted:

According to Mr Mackenzie, ‘this error became apparent’ when compiling the hearing bundle, and that document B1 in HMRC’s List refers to ‘a letter from Douglas Connell of Turcan Connell to John Joyce of Tenon’ and is ‘a different document to the one we thought was in HMRC’s possession’. The same error has also led to the letter of 16 January 2002 being omitted from Mr Wiseman’s List of Documents for the LPP application (before Judge Bailey).

For the purposes of the LPP claim, the application seeks to correct the error by inclusion of the 16 January 2022 letters sent to Dr Draffan and Mr Wiseman which are in Mazars’ possession (and not in HMRC’s possession).

Mr Mackenzie’s statement continues by referring to several documents that have been included in the application of 13 January 2023 to be adduced as part of the Additional Bundle of which he became aware that they are already in HMRC’s possession. The application seeks to amend the earlier application of 13 January 2023 by removing those documents, the Appellants no longer seek to assert LAP in relation to those documents.

The application of 13 January 2023 to adduce the Additional Bundle is granted, for reasons not only as given by the Appellants, but also in view of the substantive matter being concerned with a fundamental part of the rule of law as respects the Appellants’ right to assert privilege, it is right and proper, and in the accordance with the overriding objecting of dealing with cases fairly and justly, to admit the Additional Bundle for consideration.

The application of 19 January 2023 is also granted. I understand only too well the file management challenges in these proceedings. HMRC were provided with a list of documents by Tenon, prior to the engagement of Mazars by the Appellants in dealing with the Information Notices. HMRC furnished Mazars with the listing of the documents provided by Tenon, but without providing the actual copies of the documents now in HMRC’s possession. Although Mazars had been working with the Information Notices for a period of time, the sheer volume of documents involved for multiple Appellants had given rise to some confusion as regards the status of the said documents. It is in the interest of justice to allow these errors to be rectified.

In R v Derby Magistrates’ (Footnote: ¹⁸), the dicta from the House of Lords on the protection of privileged documents and communications are: (a) the need for complete and unfettered confidence in seeking legal advice; (b) privilege is ‘a fundamental condition’ for the administration of justice, and (c) privilege as reflecting ‘the paramountcy’ of public interest.

In Addlesee (Footnote: ¹⁹), it is observed that legal professional privilege is an encompassing term for both (a) legal advice privilege and (b) litigation privilege. With reference to Lord Hoffmann’s speech in Morgan Grenfell,Lewison LJ remarked that Morgan Grenfell has established LAP as a fundamental human right, while Addlesee observed that LAP is ‘not merely a private right’, and is ‘not like a private right to confidentiality’ (at [32]).

To preserve the integrity of the principle for LPP, there is no scope for judicial discretion in weighing one interest against another in a balancing exercise, and this is the clear conclusion reached by Lord Nicholls in Derby Magistrates’.

The proper extent of legal advice privilege has been subjected to some recent and extensive judicial considerations. The areas of debate as arising from two sources are succinctly set out at [20] in Property Alliance v RBS (Footnote: ²⁰). First, the fact that over solicitors have, in addition to offering legal advice, tended to offer their clients a range of what might loosely be described as “business services”. Secondly, that not all communications between a solicitor and his client will necessarily be for the purpose of giving or obtaining legal advice. It is helpful to set out the criteria for determining when a document or communication is privileged.

The criterion of confidentiality

It is perhaps axiomatic that privilege cannot be claimed unless the evidence in question is confidential: see Wheeler v Le Marchant (1881) (Footnote: ²¹). In Balabel (Footnote: ²²), Taylor LJ said at p330-D:

Whose privilege?

In Addlesee the issue was whether LAP ceased to exist if there was no legal person capable of asserting it, the Court of Appeal’s conclusion at [29] is instructive.

A ‘relevant legal context’

In Three Rivers(No. 6) the Supreme Court stated in relation to a ‘relevant legal context’:

Lawyer-client communications and evidence thereof

In Prudential Lord Neuberger at [29]: ‘it is universally believed that LAP only applies to communications in connection with advice given by members of the legal profession’. A more nuanced definition as to the remit of lawyer-client communications is given in Three Rivers (No. 5) (Footnote: ²³)whereinthe Court of Appeal concluded, after extensive review of the 19^th century authorities, that: (a) LAP attaches only to documents ‘passing between the client and his legal advisers and evidence of the contents of such communications’ (at [21]); (b) unlike litigation privilege (Footnote: ²⁴) which can be extended to lawyers’ communications with third parties if requirements for litigation privilege is made out (Footnote: ²⁵), LAP will not attach to communications between the lawyers and third parties; (c) LAP is extended to a lawyer’s own drafts of documents and memoranda, even if not transmitted to the client.

In USP Strategies (Footnote: ²⁶),where the issue was whether privilege extends to the documents that ‘evidence’ the privilege communications, Mr Justice Mann referred to Longmore LJ in Three Rivers (No. 5) and observed:

Documents betraying the trend of the advice

Mann J concluded at [21] of USP Strategies that the proper analysis, consistent with Three Rivers (no. 6) ‘is to continue to afford privilege to material which evidences or reveals the substance of legal advice (subject, of course, to wavier)’. The rationale for this approach by Mann J is set out at [19]:

Lyell v Kennedy (Footnote: ²⁷), a nineteenth-century authority concerning professional privilege in a dispute over an intestate estate. The Chancery court declined to order the production of certain documents by the defendant, and Cotton LJ reasoned that:

Bowen LJ in Lyell v Kennedy referred to the application for production of documents as asking for ‘the key to the labour which the solicitor had bestowed in obtaining them’ (p31). In Ventouris v Mountain (Footnote: ²⁸) Bingham LJ stated the ratio of Lyell v Kennedy as follows:

In Edwardian Group (Footnote: ²⁹)Morgan J confirmed that the professional privilege in question in Lyell was legal advice privilege (i.e. not litigation privilege), and as I understand, that is because the documents applied for production were preliminary to litigation and had been collected for the purpose of preparing a defence in litigation and for the purpose of instructing counsel in that litigation. The approach in Lyell to a claim to legal advice privilege is summed up by Morgan J after a review of authorities (including Australian cases) at [37]:

Continuum of communication

The key authorities as regards this criterion are the following.

Dominant purpose of giving/receiving advice

Before the decision of the House of Lords in Waugh v British Railways (Footnote: ³⁰), there was uncertainty as to the test to be applied in considering whether a document is privileged if the evidence shows that the purpose of using it is to obtain legal advice or assisting in the conduct of litigation was only one of the purposes for its production. The Waugh decision has established the ‘dominant purpose’ test by endorsing the test propounded by Barwick C.J. in Grants v Downs (at p677):

The issue arose in Guinness Peat Properties v Fitzroy Robinson (Footnote: ³¹) as concerns‘whose purpose’ is relevant to the ‘dominant purpose’ test,in a situation where the purpose of the author of a letter with attachments differed from the purpose of the procurer of the same. Fitzroy Robinson was a firm of architects, and Mr McLeish (for the firm) wrote to their professional indemnity brokers to give insurers notice of a claim against them. The letter attached documents which made admissions, and stated that the letter was for the purpose of complying with the policy, (which was not a privileged purpose). The partnership now claimed privilege. The Court of Appeal reversed the judgment from below, and Slade LJ in giving the lead judgment, reasoned as follows:

In Jet2 (Footnote: ³²)Hickinbottom LJ at the Court of Appeal discussed the ‘dominant purpose’ test as respects the two limbs of privilege at [95]:

Hickinbottom LJ continued by concluding how the dominant purpose test is to apply to LAP at [96]:

In relation to multi-addressee communications, the court’s guidance in Jet2 is at [98] for establishing the ‘dominant purpose’ is to apply a two-stage test to ‘internal exchanges’:

Further guidance from Hickinbottom LJ in Jet2 on the dominant purpose test applicable to multi-addressee communications is at [100], of which the following are pertinent to the present determination.

Hickinbottom LJ summarised the position as indicated by the authorities in Jet2 at [69], noting that he had left aside for the time being the issue of whether the relevant purpose has to be ‘dominant purpose’, which was addressed in detail in the affirmative at [70] et al.

The submissions for the Appellants’ LPP are summarised as follows.

The First-tier Tribunal (Judge Bailey) had formerly considered the availability of LAP in respect of documents relating to Mr Wiseman, whose application to have joined to these proceedings was granted on 5 December 2022. The Appellants contend that the First-tier Tribunal considered materially similar documents to those before this Tribunal and that Tribunal’s decision, dated 24 Augst 2020 is of material assistance to this Tribunal in determining the availability of LAP in respect of the documents before it.

The documents before the Tribunal relate to different Appellants who participated in the same tax arrangement. Accordingly, the communications between Turcan Connell and each of the Appellants are materially similar. In accordance with the Directions of 28 February 2022, the approach taken in the submissions is to address Dr Draffan’s set of arrangements in some detail, on the basis that such submissions are equally applicable to materially similar communications between Turcan Connell and the other Appellants. Where a particular document is not materially similar to those between Turcan Connell and Dr Draffan, that document is separately addressed.

Where documents are the same as those in Wiseman v HMRC [2022] UKFTT 0075 (TC), and to which it was decided privilege applies, the information notice does not require the Appellants to provide the information or document. However, for the most part, the documents for which privilege is asserted are not the same as in Wiseman. HMRC are unable to determine whether the information or documents are protected by privilege, as the descriptions of those documents for which privilege is asserted are ‘too vague to allow the Respondents to effectively decide whether privilege applies’. HMRC submit:

The onus is on the Appellants to establish that privilege attaches to each communication for which privilege is asserted. Apart from establishing the communication is in confidence between a client and a lawyer acting in a professional capacity, it is necessary that there is a relevant context for the provision of legal advice relating to ‘the rights, liabilities, obligations or remedies of the client either under private or under public law’ for LAP to be attached. The dictum in Balabel that ‘legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context’ is apt for present purposes.

For privilege to be attached, each document or communication is to be considered on its own terms, but viewed in the wider context of the continuum of communications which precede and follow it, and whether the communication evidences or betrays the trend of advice being given. Where a communication has more than one purpose, it is then necessary to consider whether the dominant purpose is the seeking and giving of legal advice, or whether the document contains evidence of the legal advice being given. The dominant purpose is to be ascertained from the perspective of the author of the document or the person under whose direction the document was created.

If the dominant purpose of the communication is non-legal, then the document will not be privileged and is disclosable with redaction.

There are 10 documents for which privilege is asserted for Dr Draffan, and a further document that is admitted by the application dated 19 January 2023. In total, there are the 11 documents specifically identified for Dr Draffan and serve as the representative of the equivalent documents for the other 16 Appellants.

I have adopted the description of each document as provided in the submissions to preserve the integrity of the claim, since the descriptions have been provided for the Appellants in compliance with direction 10 of Judge Redston’s Directions, as well as the designations of ‘TC’ for Turcan Connell, who were engaged to act as solicitor to the taxpayer, and ‘Participator’ in Dr Draffan’s capacity as a participator in the Mark II Flip Flop scheme.

I am satisfied that each of the five letters records communication to Dr Draffan from Turcan Connell giving advice as regards the rights, liabilities, obligations, and remedies in the context of the benefits and savings arising from the Scheme; of what would be prudently and sensibly be done in obtaining Scottish counsel’s input; that the cohort of letters forms a continuum of communications to keep the Appellant informed so that advice may be sought and provided. I conclude that each letter is privileged from disclosure.

Document 6 records the meeting which took place 31 July 2002, with by 12 attendees: from Tenon (4 attending), clients of Turcan Connell’s (3 in total), and advisers from Turcan Connell (5 in total). Mr Wiseman was one of the three clients who attended, and Dr Draffan was not one of the attendees.

The Appellant’s description of Document 6 is ambiguous, and can be readily construed to be referring to a meeting that had taken place between Dr Draffan and Turcan Connell. For the avoidance of doubt, Document 6 is not a record of a meeting that had taken place between Dr Draffan and Turcan Connell. Further, Document 6 would appear to be a multi-addressee communication, since Dr Draffan, while not being present at the meeting, presumably had been circulated the Notes of the Meeting of 31 July 2002.

Document 7 is specific to Dr Draffan’s 1988 Trust, and sets out the estimated stockpiled gain in the trust, and the costs and benefits in participating in the Scheme. Documents 6 and 7 have in common in their title headings the references to ‘Tenon’ and ‘Meeting 31^st July 2002’.

Turning to the question as to whether privilege is attached to Documents 6 and 7, I have regard to the guidance in Jet2 at [98] and [100], and especially at [100](vii) where it is stated that ‘the mere presence of a lawyer, perhaps only on the off-chance that his or her legal input might be required, is insufficient to render the whole meeting the subject of LAP so that none of its contents (including any notes, minutes or record of the meeting) are disclosable’.

The Appellants’ submissions have expressly referred to Colin Wiseman v HMRC [2022] UKFTT 0075 (TC) as of assistance in the present determination. which would appear to be the equivalent documents being considered by Judge Bailey in Wiseman, under the heading:

I agree with Judge Bailey that the dominant purpose of the communications at the Meeting of 31 July 2002 was for Tenon to present information to Turcan Connell and its clients, and not the provision of legal advice, and are not privileged from disclosure.

In respect of whether any direction should be made in terms of redaction, Judge Bailey’s conclusion is at [42] and [43] of Wiseman.

For the same reasons and analysis as given by Judge Bailey in Wiseman, I conclude that the two Documents 6 and 7 are not privileged and shall be directed for disclosure.

The same conclusion applies to the equivalent documents to Draffan 6 and 7 in the cases of the other 15 Appellants. I understand that Mr Wiseman had withdrawn his appeal to the Upper Tribunal of Judge Bailey’s refusal decision and Wiseman Documents 6 and 7 would have become disclosable following the withdrawal of his appeal.

I am satisfied that these are communications are in the continuum of communications of the privileged communications under Draffan/ 1 to 5, and are between Turcan Connell and Draffan as their client, in the context of Turcan Connell providing advice concerning rights and liabilities under private and public law, and on ‘what should prudently and sensibly be done in the relevant legal context’, and are therefore privileged from disclosure.

The letter of 16 January 2002 was the inception of the relevant legal context and preceded the other communications in the listing of the Draffan’s LPP documents that form the continuum of communications. The letter of 16 Janaury 2022 by application for Draffan is in substance identical to that addressed to Mr Wiseman, and both are privileged from disclosure.

The conclusion on the representative list of LPP documents for Dr Draffan as listed above applies equally to the equivalent documents for the other Appellants which are not included in the LPP Bundle. Further documents included for the other Appellants and exhibited in the LPP Bundle have been examined and I am satisfied that they are all privileged from disclosure. HMRC have a list of these documents and in summary I note as follows:

The Additional LPP Bundle of 195 pages was lodged by application of 13 January 2023, with some documents later removed by application of 19 January 2023 on the fact that they are already in HMRC’s possession. I am satisfied the remaining documents in the Bundle are all privileged material, some of which would appear to be internal working documents generated by Turcan Connell in relation to the Turcan family trusts, and include email communications with the Appellants as beneficiaries. I am satisfied that the documents all privileged.

The Items of information requests are confirmed or varied as set out below.

For the reasons stated, the appeals are allowed in part as summarised below:

In relation to the Additional LPP Bundle which contains the documents for which privilege is asserted for the Turcan Family trusts, I am satisfied that all of the documents contained in the Additional LPP Bundle are privileged. The fact that the documents in the Additional LPP Bundle concern the Turcan Family trusts and therefore also the 4 Appellants who have waived privilege does not alter the status of those documents which are found to be privileged. I have regard to the legal principle that privilege is ‘absolute’ and ‘once privileged, always privileged’.

From Mr Mackenzie’s evidence, I conclude that documents contended to be ‘not reasonably required’ are already in Mazars’ possession and can be provided within a two-week period, while allowing a longer duration for Item 20 to be gathered for production.

The Tribunal hereby directs:

This document contains full findings of fact and reasons for the decision. There is no right of appeal in respect of this decision pursuant to paragraph 32(5) of Schedule 36 to the Finance Act 2008.