In Richard Monks v HMRC  TC8957, the First Tier Tribunal (FTT) held that a Schedule 36 information notice had been correctly issued by HMRC but the preceding tax return enquiry was out of time.
Mr Monks filed his 2019-20 Self Assessment return on 29 January 2021.
- On 27 January 2022, HMRC opened an enquiry into the return (under s.9A TMA 1970) requesting a response by 28 February 2022.
- The enquiry notice was sent first class post. HMRC produced proof of posting dated 27 January.
- Since no response was received from Mr Monks, on 3 March 2022 HMRC issued an information notice under Schedule 36 FA 2008.
- On 1 April 2022, Mr Monk wrote to HMRC stating that he considered the enquiry to be Out of time as the enquiry notice had not been received until 1 February 2022. He asked for the Schedule 36 notice to be withdrawn on the basis that he would provide the requested information should the enquiry notice be shown to be valid.
- Mr Monks accepted the offer of an HMRC review which concluded that it was for Mr Monks to prove that the enquiry notice was not received within the time limit. The review also found that the information requested by the Schedule 36 notice was reasonably required as the tax return in question was believed to be inaccurate based on information held at Companies House.
- Mr Monks Appealed both notices.
The FTT partly allowed the appeal finding that the enquiry notice was not received by the statutory deadline but the information requested by the Schedule 36 notice was reasonably required.
On the enquiry notice:
- Since in the ordinary course of postal deliveries the enquiry notice could be expected to have been delivered within one day, the notice could be deemed to have been sent within the time limits, meaning HMRC had met the requirements of s.7 Interpretation Act 1978. It then fell to Mr Monks to prove the contrary.
- Mr Monks produced six WhatsApp messages to his accountant which contained a photograph of each page of the notice and which were time-stamped on 1 February 2022 at 16.40. He stated, and the FTT found him credible, that he was a creature of habit who checked his post box every day and immediately sent financial documents to his accountant, and that he had immediately called his accountant (who confirmed this) following the sending of the WhatsApp messages.
- The FTT accepted his evidence as proof that the enquiry notice had not been received until 1 February 2022. It was therefore out of time and invalid.
On the Schedule 36 Notice:
- HMRC had satisfied the requirement at Condition B of schedule 36 that HMRC must suspect, that for the chargeable period, there has been an under-assessment of relevant tax, or more tax is due, or too much relief has been given.
- All of the information required by the notice was reasonably required to check Mr Monk's tax position (as required by para 1 Schedule 36).
- It had been conceded by Mr Monk’s accountant that his declared income for 2019-20 was not sufficient to maintain his lifestyle at that time and the information requested was proportionate with this.
- As Condition B had been satisfied HMRC was entitled to know the full facts relating to Mr Monks’ tax position to enable them to make an informed decision about what to assess.
This decision sits alongside the recent decision in Melvyn and Carol Langley v HMRC, where the FTT found that an SDLT enquiry opening letter, sent by first class by HMRC two days before the enquiry window closed, was deemed to be delivered to the taxpayers in time and therefore valid. The reason for the decision in that case was that the taxpayers had no contemporaneous evidence as to when the enquiry letter was received meaning that S.7 of the Interpretation Act stood and deemed the opening letter to have been delivered when it would have been delivered ‘in the ordinary course of post’.
The advice following these cases? If you receive a notice from HMRC after the statutory deadline, take a time-stamped photo, send it to your accountant and then keep the evidence!
Useful guides on this topic
Sch 36 Information Notices
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?
How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?
Time limits for tax assessments, claims and refunds
What are the time limits for claiming a tax refund? How far can HMRC go back and raise an assessment? How many years back can a taxpayer appeal? What are the time limits for correcting a tax return?
Statutory Review (by HMRC)
What is a Statutory Review? When does HMRC offer a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? When does HMRC offer a Statutory Review?