Gareth Evans v The Commissioners for HMRC
[2023] UKFTT 869 (TC)
Edward Lam Shang Leen v The Commissioners for HMRC
5 May 2023
[2023] UKFTT 407 (TC)
First-tier Tribunal
HMRC thought Dr. Lam didn't declare all his income. His bank account showed much more money from consulting than his company's records showed. The judge agreed HMRC needed more information from his company to check if he was correct, so they won.
Key Facts
- •Dr. Edward Lam Shang Leen (appellant) appealed an Information Notice (Notice) from HMRC concerning his 2017-18 self-assessment tax return.
- •HMRC opened an enquiry into the appellant's tax return, noting discrepancies between reported income and bank statements.
- •The appellant claimed all consultancy fees were declared through his company, GRI Research Laboratories Ltd.
- •Significant discrepancies existed between GRI's reported turnover in its accounts and corporation tax returns.
- •HMRC sought information relating to GRI's accounts to check the appellant's tax position.
- •The appellant argued HMRC's request was an enquiry into GRI, not his personal tax return.
Legal Principles
HMRC can obtain information if 'reasonably required' for checking a taxpayer's tax position (Schedule 36, Finance Act 2008).
Schedule 36, Finance Act 2008, paragraph 1
The burden of proof lies with HMRC to show the information is 'reasonably required'.
Perring v HMRC [2021] UKFTT 110, Joshy Matthew v HMRC [2015] UKFTT 0139 (TC), PML Accounting Ltd, R(oao) v HMRC [2018] EWCA Civ 2231
A taxpayer notice can be issued if an officer has reason to suspect under-declaration (Schedule 36, Finance Act 2008, paragraph 21).
Schedule 36, Finance Act 2008, paragraph 21(6)
The court must determine if a rational connection exists between the information sought and the investigation.
Kotton v FTT & HMRC [2019] EWHC 1327 (Admin)
Outcomes
Appeal dismissed.
HMRC met the burden of proving the requested information was reasonably required to check the appellant's tax position. Significant discrepancies existed between the appellant's declared income and bank statements, and the information sought was relevant to resolving these discrepancies.
Information Notice confirmed (with minor amendments).
The discrepancies between the appellant's bank deposits and GRI's reported income, coupled with inconsistencies in GRI's own tax filings, justified HMRC's request for further information.