In The Barty Party Company Limited v HMRC TC06116, the First Tier Tribunal (FTT) held that an information notice was not valid as HMRC did not justify the period covered thereby.

Under Schedule 36 FA 2008, HMRC can require a taxpayer to provide information or produce a document provided that it is “reasonably required” by the officer for the purpose of checking the taxpayer’s position. The Schedule does not permit HMRC to require the creation of a document, only provision of existing documents.

On 10 November 2016, HMRC issued an information notice under Schedule 36 (the Notice) to The Barty Party Company Limited (BPC), who appealed on 14 February 2017.

The Notice was issued in relation to the VAT position and requested:

Please provide the statutory records for 01/02/2012 to 30/04/2016 as follows:

  • The VAT account and any related working papers
  • Sales and purchase daybooks
  • Cash books
  • Petty Cash books
  • Sales and purchase invoices, this includes Purchase invoices that were missing from your records in the VAT period ended 30/04/16 in relation to Butcombe and Otter Brewery.
  • Bank and Building Society statements for period 01/01/2013 – 30/04/2016 for all accounts through which business funds are transacted, where so ever in the world these are held.

Other documents or information that we need

  • [In this context document means...........]
  • Annual accounts for the year ended 30/04/2014 and 30/04/2015 including the profit and loss account and balance sheet.
  • A drinks price list (including wine) relevant to the VAT period ended 30/04/16.

BPC appealed on the bases that:

  • The information requested was not reasonably required by HMRC
  • The requested drinks price list did not exist

The FTT held:

  • While Schedule 36 permits HMRC to request information for up to six years, HMRC can only assess the last four (unless there was a mistake or failure to take reasonable care – not raised in the instant case)
    • HMRC needed to demonstrate a specific reason to request information outside the four year window
    • HMRC simply said “they usually ask for six years information”
  • Further, HMRC had already been subject to a VAT check covering the period 1 February to 30 April 2012
  • Hence, the scope of the Notice went beyond what was reasonably required and thus was not validly issued.

Comments

If HMRC policy is to request information outside the period for which they can raise assessments, it appears such notices should be challenged as a matter of course.

BPC raised a series of areas where they believed HMRC had acted unreasonably during the enquiry; the FTT noted that they did not have jurisdiction to rules on these.

Links

The Barty Party Company Limited v HMRC [2017] UKFTT 0697 (TC)

Sch 36 information notices (subscriber version)


 

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