Case Number: TC09468
Glasgow Tribunal Centre
Appeal reference: TC/2024/02980
INFORMATION NOTICE – failure to register for self-assessment – failure to file tax returns – whether information reasonably required to check tax position – yes – appeal dismissed
Judgment date: 27 March 2025
Before
TRIBUNAL JUDGE ANNE FAIRPO
TRIBUNAL MEMBER IAN SHEARER
Between
JIAN LIN
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Mr Feng, adviser
For the Respondents: Ms Ritchie, litigator of HM Revenue and Customs’ Solicitor’s Office
DECISION
Introduction
This is an appeal against an Information Notice issued on 19 March 2024 issued by HMRC under Schedule 36 to the Finance Act 2008 (FA 2008). The Notice required the Appellant (Mr Lin) to provide information and documents relating to his self-assessment position for the tax years ended 5 April 2019, 5 April 2020, 5 April 2021, and 5 April 2022.
It appeared from the papers that the appellant may have also intended to appeal against a penalty imposed in respect of the Information Notice. The decision attached to the Notice of Appeal included a reference to a potential penalty but no actual penalty decision was attached. HMRC confirmed in the hearing that they were withdrawing from the penalty matter. Accordingly, we have not considered the penalty aspect of the appeal further as neither party made any submissions in respect of it.
At the end of the hearing we gave a brief extempore decision which stated that the appeal against the Information Notice would be dismissed and the Information Notice confirmed. The following decision sets out further detail for that decision but also concludes that part of the appeal should be struck out for lack of jurisdiction. However, had it not so been struck out, that part of the appeal would also have been dismissed and the Information Notice relating to that part of the appeal would have been confirmed.
Background
During the tax years in question Mr Lin operated a takeaway restaurant. HMRC opened a compliance check in respect of the business on 22 February 2023 and visited the premises on 22 March 2023. During this visit Mr Lin stated that he operated as a sole trader and had started the business approximately 4-5 years earlier. He confirmed that he had not registered for either VAT or self-assessment purposes.
Following the visit, on 6 April 2023, Mr Lin registered for self-assessment. He did not file, and has not since filed, self-assessment tax returns for the relevant tax years.
The information obtained by HMRC prior to the issue of the Information Notice on 19 March 2024 consisted of:
meal slips and JustEat receipts from the day of the visit on 22 March 2023;
a spreadsheet which set out receipts from JustEat during the relevant periods;
weekly takings information for those periods (which included only weekly totals for JustEat and cash sales);
bank statements for a Bank of Scotland bank account for the relevant periods.
Requests for further information were not complied with. Mr Lin refused to allow HMRC to revisit the premises to check the till, which had not been properly operated and had no readings kept at the time of the visit. Mr Lin’s agent, Mr Feng, had asked for more time to reply, then later stated that Mr Lin had ceased trading shortly after the HMRC visit.
Following further correspondence, a compliance check in respect of self-assessment was opened on 16 February 2024, asking for the information to be provided. Mr Feng replied to say that bank statements had already been provided.
On 19 March 2024 the Information Notice was issued.
Information Notice
The Information Notice was issued following the opening of a self-assessment enquiry into Mr Lin’s tax position. The Notice asked for the following documents to be provided by 18 April 2024:
Details of any and all income received on a self-employed basis in the 2018/19, 2019/20, 2020/21 and 2021/22 tax years. If income was received from multiple sources, provide a breakdown of each.
Details of any expenditure related to work carried out on a self-employed basis in the 2018/19, 2019/20, 2020/21 and 2021/22 tax years.
Details of any bank accounts held in the appellant’s name between 6 April 2018 and 5 April 2022 and bank statements for each of these accounts covering this same period.
A timeline of employment history, including the names of any employers and the dates worked for each employer.
The appellant’s agent replied to say that HMRC already had the appellant’s bank statements and that all statutory records had been supplied to HMRC. A review was requested and an appeal was lodged with the Tribunal at approximately the same time.
A ‘view of the matter’ letter was issued on 21 May 2024, explaining why the documents were required.
Submissions and evidence
For Mr Lin (who was not present at the hearing), Mr Feng contended that the compliance check had been in respect of the takeaway operating from 17 Nelson Street, and that all relevant documents had been provided for that business. These documents were clearly sufficient as HMRC had been able to issue a VAT assessment on the basis of those records. HMRC also clearly had Mr Lin’s PAYE records.
Mr Feng contended that this was a fishing expedition, as HMRC were trying to find out whether or not Mr Lin had any other self-employment premises because they had been unable to find anything.
He stated that the information would come to light anyway because the tax returns would need to include all income such as dividends and rental income as well as employment and self-employment income. He contended that tax law allowed returns to be filed on the basis of a reasonable estimate but that the information requested by this Notice required precise details and that, even if the Notice was complied with, it might be necessary to return to the Tribunal to close the enquiry.
HMRC contended that the requested details of income and expenditure amounted to statutory records, which were requests that this Tribunal had no jurisdiction over. In respect of the other items, and in the alternative in respect of the details of income and expenditure, the information was reasonably required to be able to check Mr Lin’s tax position. HMRC could not simply guess when making an assessment, in the absence of information.
Giving evidence, Officer White stated that, at the time that the compliance check had begun in respect of the takeaway, it was not known what entity operated the business. Once it had been established that it was operated by Mr Lin as a sole trader the compliance check became in addition a check into Mr Lin’s self-assessment tax position as the business of a sole trader could not be separated from the individual’s wider tax position. The check would have to take into account all taxable income received and it could not be assumed that income was only received from the takeaway.
Officer White also stated that the bank statements provided were not sufficient to provide a full picture of Mr Lin’s tax position. It was known that Mr Lin had PAYE employment income which did not appear on these statements, and the bank statements did not include normal living expenditure, which suggested that Mr Lin had other bank accounts. An Equifax check had also shown that Mr Lin had accounts during the relevant periods with other banks.
The employment history had been requested because it overlapped with the takeaway business and it seemed unusual. Officer White wanted to ensure that Mr Lin’s understanding of his employment status was accurate.
The VAT assessment had been raised because of the statutory time limits which apply to the raising of VAT assessments. Officer White either had to raise an assessment based on the limited information available or not raise an assessment at all. He had concluded that it was better to raise an assessment which could be revisited if new information was provided.
Whether the Information Notice requests information outside the scope of the compliance check
Mr Feng made reference to the case of Avonside Flooring ([2021] UKFTT 158 (TC)). The decision in Avonside Flooring concluded (as relevant) that it was not open to HMRC to request information on wider matters than those set out in the related check, which was as regards a Schedule 24 penalty.
Although he did not continue with his reference to Avonside Flooring, Mr Feng had also contended that the compliance check had been limited to the takeaway business and so the Information Notice was asking for information outside the scope of the compliance check.
We consider that these submissions were somewhat misconceived; HMRC had opened a self-assessment enquiry into Mr Lin’s self-assessment tax position. It was not an aspect enquiry into the business alone.
Given that Mr Lin had not filed any tax returns, it is hardly surprising that the check was not so limited. In the hearing Mr Feng even stated that an individual’s tax return would need to include details of all of his income, not just income from one self-employment business. We do not consider that the items requested were outside the scope of the self-assessment compliance check which was being carried out in respect of Mr Lin.
Relevant law
Schedule 36 Finance Act 2008
Paragraph 1(1) provides that HMRC may by notice in writing require a taxpayer to provide information, or to produce a document, if the information or document is reasonably required by HMRC for the purpose of checking the taxpayerʼs tax position.
Paragraph 58 provides that ‘checking’ includes carrying out an investigation or enquiry of any kind.
Paragraph 64 states that ‘tax position’ in relation to any person means the personʼs position as regards any tax.
Paragraph 29 provides that a taxpayer can appeal against an Information Notice or any requirement in an Information Notice unless the requirement is to provide information or produce documents which form part of the taxpayer’s statutory records.
Paragraph 32(3) provide that on an appeal this Tribunal may
confirm the notice or a requirement in the notice,
vary the notice or such a requirement, or
set aside the notice or such a requirement.
Paragraph 32(4) provides that where the Tribunal confirms or varies the notice or a requirement, the person to whom the information notice was given must comply with the notice or requirement
within such period as is specified by the tribunal, or
if the tribunal does not specify a period, within such period as is reasonably specified in writing by HMRC following the tribunalʼs decision.
Paragraph 32(5) provides that a decision of this Tribunal on an appeal against an information notice is final.
Whether any of the documents requested are statutory records
HMRC contended that the details of income (item 1) and the details of expenditure (item 2) were statutory records. As such, they contended that this Tribunal had no jurisdiction to hear an appeal against the request for those items and that the appeal against items 1 and 2 in the Information Notice should therefore be struck out.
Statutory records are defined in paragraph 62 of Schedule 36 Finance Act 2008 as “information or a document forms part of a person's statutory records if it is information or a document which the person is required to keep and preserve under or by virtue of the Taxes Acts, or any other enactment relating to a tax”, subject to certain timing aspects.
s12B Taxes Management Act (TMA) 1970 requires a taxpayer to “keep all such records as may be requisite for the purpose of enabling him to make and deliver a correct and complete return for the year or period”
HMRC submitted that there is no set list of documents which must be kept for self-assessment purposes but rather than any records which are required to make and deliver a correct and complete return will be statutory records. They contended that the details of self-assessment income earned and deductible expenditure incurred were therefore statutory records.
No submissions were made on behalf of Mr Lin in respect of these contentions.
In our view s12B TMA 1970 requires a taxpayer to keep all records which are necessary to establish that a return is accurate. That will include all documents and information necessary to establish the income and deductible expenditure of the taxpayer in the relevant tax period. The requirement that the return must be correct and complete implies a requirement that the documents and information to be kept must evidence that the return is correct and complete.
What is needed may depend to some extent on the nature of a taxpayer’s business but where there is a duty to keep the information then the information is a statutory record. Where there is a request for information, it is the information which must be provided. In the present Information Notice details of information are requested and the way in which the information is provided is left to the taxpayer. This does not affect the issue as to whether what is required forms part of Mr Lin’s statutory records.
We find that items 1 and 2 are, therefore, statutory records.
Under paragraph 29 of Schedule 36 of Finance Act 2008, a taxpayer cannot appeal against a request to provide information or produce documents which form part of the taxpayer’s statutory records.
In the absence of a right of appeal, this Tribunal has no jurisdiction and so the appeal against the request for items 1 and 2 in the Information Notice is struck out.
Whether the information is reasonably required to check Mr Lin’s tax position
In summary, HMRC contended that:
the details of income were required because the check was into Mr Lin’s self-assessment tax position and so required details of all of his income;
the details of expenditure relating to self-employment activities was required in order to determine the taxable profits from those activities;
bank account details and statements were required in order to assess the full income and expenditure for the periods. As noted in Patel [2017] UKFTT 323 (TC), this is basic financial information which shows details relevant to an income tax position and is precisely the kind of information required to check the income tax position of Mr Lin;
the employment history is required to ensure that Mr Lin’s understanding of his employment position is the same as that of HMRC, particularly given the overlap between employment and self-employment in the relevant periods.
HMRC submitted that the information was therefore reasonably required (to the extent that it was not statutory records).
Mr Feng contended, in summary, that this was a fishing expedition and that HMRC had not been able to find any other self-employment held by Mr Lin and so were looking for material in which they might find something useful.
We have already concluded, above, that the appeal against items 1 and 2 should be struck out for lack of jurisdiction.
We agree with HMRC in respect of items 3 and 4. This is not a fishing expedition: Mr Lin has operated a business for number of years without registering for self-assessment and has not filed tax returns. We consider that it is entirely reasonable for HMRC to require the information set out in items 3 and 4 of the Information Notice to check his tax position.
For the avoidance of doubt, if we had not struck out the appeal against items 1 and 2 in the Information Notice, we would also have concluded that it was reasonable for HMRC to require the information set out in those items.
We also note that paragraph 1(1) of Schedule 36 Finance Act 2008 does not require that HMRC suspect any under-declaration before issuing an Information Notice. The constraints on issuing Notices which require that HMRC have reason to suspect under-declaration relate (in paragraph 27) to periods for which a tax return has been submitted. As noted, no tax returns have been submitted by Mr Lim for these periods.
We agree with the decision in Patel that the information requested is basic financial information which is reasonably required to check Mr Lin’s tax position in circumstances where he has not filed tax returns. The partial information provided to date is not sufficient. The employment history is, similarly, required to ensure that both Mr Lin’s employment and self-employment activities are properly assessed.
Conclusion
The appeal against items 1 and 2 of the Information Notice is struck out for lack of jurisdiction.
The appeal against items 3 and 4 of the Information Notice is dismissed and the requirements of the Information Notice in respect of those items are confirmed.
We direct that the appellant must comply with the requirements of the Information Notice in respect of items 3 and 4 within 30 days of the release of this decision.
This document contains full findings of fact and reasons for the decision.
This decision is final pursuant to paragraph 32(5) Schedule 36 Finance Act 2008.
Release date: 27th MARCH 2025