The Commissioners for HMRC v Third Party
[2023] UKFTT 71 (TC)
Sarah Jane Turcan & Ors v The Commissioner For HMRC
20 September 2024
[2024] UKFTT 869 (TC)
First-tier Tribunal
17 people got money from a complicated tax scheme. The tax man wanted documents to check if they owed more tax. A judge said some documents were needed, but others were private or the people didn't have them.
Key Facts
- •Joint appeal by 17 appellants who received capital payments from trusts involved in the Mark II Flip-Flop Scheme (MIIFF) in 2002-03.
- •HMRC issued Information Notices under Schedule 36, Finance Act 2008, in November 2019, requesting various documents.
- •Appellants appealed on grounds that documents were not reasonably required, not in their power or possession, or subject to legal professional privilege (LPP).
- •The scheme aimed to avoid capital gains tax (CGT) by using trustee borrowings to disapply section 90 of TCGA 1992.
- •The Upper Tribunal in *Bowring v HMRC* established the effectiveness of MIIFF in disapplying section 90, but left open whether payments could be charged under section 97(5) TCGA.
- •Significant procedural issues arose regarding document production and the assertion of LPP.
Legal Principles
Information Notices are only valid if the information or document is reasonably required for checking the taxpayer's tax position.
Schedule 36, Finance Act 2008, paragraph 1(1)
An Information Notice only requires production of documents in the person's possession or power.
Schedule 36, Finance Act 2008, paragraph 18
An Information Notice does not require production of privileged information or documents.
Schedule 36, Finance Act 2008, paragraph 23
The burden of proof for 'reasonably required' in appeals against Schedule 36 notices rests on the appellant.
*Joshy Mathew v HMRC*, *PML Accounting v HMRC*, *Cliftonville Consultancy Ltd v HMRC*
For legal advice privilege (LAP), the dominant purpose of the communication must be to obtain or give legal advice.
*Jet2 v Civil Aviation Authority*
Outcomes
Appeal allowed in part.
Some information requests were reasonably required to determine the appellants' CGT liability under section 97(5) TCGA, considering the *Bowring* decision and the specific facts of the MIIFF arrangements (including insurance). Others were disallowed due to being outside the appellants' power or possession, or due to LPP.
Specific items confirmed, varied or removed.
Based on the evidence and legal principles, the tribunal made specific determinations regarding each item in the Information Notices.
Several documents were deemed privileged under paragraph 23 of Schedule 36.
The tribunal considered various legal principles related to legal advice privilege (LAP), including confidentiality, the continuum of communication, and dominant purpose, in assessing the privilege claims.