In Uppercut Films Limited v HMRC [2018] TC06465 and Cliftonville Consultancy Ltd v HMRC [2018] TC06464, the FTT decided letters of engagement and advice letters relating to a tax avoidance scheme were reasonably required by HMRC under a Schedule 36 Notice.

  • Uppercut and Cliftonville used the ‘Aikido’ dividend replacement tax avoidance scheme.
  • This aimed to secure a tax free payment to individuals using HMRC’s settlement rules against them, using a mixture of a subsidiary, a parent company, and a trust.
  • The scheme was disclosed to HMRC under the Disclosure of Tax Avoidance Schemes regime (DOTAS).

HMRC issued some users of the scheme with a Schedule 36 information notice to enable them to check the company’s tax position. Some notices requested only five documents, the ‘limited list’, and some users were issued a request for full documentation and information.

The limited list notice requested the following:

  • Engagement letter
  • Advice letter
  • Nominee deed
  • Letter of direction in respect of dividends
  • Minutes of board meeting to pay dividends.

Uppercut appealed the limited list notice received.

The FTT found for HMRC: all the documents were reasonable required by HMRC to check the corporation tax return:

  • As a corporation tax deduction had been claimed for the fees which were incurred under the terms of the engagement, the engagement letter was reasonably required.
  • The advice letter assists HMRC consider the nature and purpose of the expenditure incurred.
  • HMRC required the other documents to understand the nominee element of the arrangement and to ensure that amounts were actually paid.

Cliftonville appealed the full document notice. The Schedule 36 notice, in addition to the above limited list requested further information such as:

  • Confirmation that the DOTAS number was passed to the shareholders. The FTT found this was not reasonably required by HMRC, as it had not effect on the company tax position.
  • Trustee and beneficiaries details. These were found not to be required. All that was required was confirmation that the company was not a beneficiary of the trust.
  • Working arrangements of the director. This was found not to be reasonably required.
  • Correspondence between the company, subsidiary, trustees, and promoter of the scheme. It was accepted that these were required but did not have to be provided where covered by legal professional privilege.
  • Bank statements. Only bank statements of the company were reasonably required, not those of any beneficiary or recipient of the payment.
  • Employment terms of other employees. These were only reasonably required where the terms were changed due to the implementation of the scheme.

All other information requested from Cliftonville, such as more information about the subsidiary, and the information on the limited list, were found to be reasonable required by HMRC for it to check the company tax position.


Schedule 36 information notices (freeview)

Schedule 36 information notices (subscriber version)

DOTAS: Disclosure of tax avoidance schemes

External links:

Uppercut Films Limited v HMRC [2018] TC06465

Cliftonville Consultancy Ltd v HMRC [2018] TC06464



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