In Gareth Evans vs HMRC [2023] TC08946, the First Tier Tribunal (FTT) found that information requested by HMRC in regards to Mr Evans's use of a tax avoidance scheme was 'reasonably required' to assess his overall tax position. 

  • During the 2021-2022 tax year, Mr Evans was employed by Total Recruitment Services Ltd (TRS), an offshore employer.
  • TRS had been highlighted by the Counter Avoidance Directorate (CAD) as a potential Disguised Remuneration Scheme via a risk assessment exercise.
  • The risk assessment identified employees who had been receiving PAYE from TRS and highlighted that some employees had moved from a similar type of Tax Avoidance Arrangement to TRS.
  • HMRC understood that the arrangement involved the employee receiving a national minimum wage salary and a Loan Payment on the same day, indicative that employees of TRS may be using a disguised remuneration arrangement.
  • HMRC issued an education notice and an informal request for further information to Mr Evans which he failed to respond to.
  • A formal Schedule 36 Notice was then issued to Mr Evans.

A statutory review resulted in the Notice being upheld with a few minor changes to the information being requested. Mr Evans then appealed the Notice on two grounds:

  • That HMRC had no real intention of checking his tax position and the information requested was not reasonably required to assess his tax position.
  • If the FTT accepted that it was reasonably required, then not all information requested was reasonable, specifically in relation to PAYE Real-Time Information (RTI) which HMRC already held.
  • It was Mr Evans's view that HMRC were not trying to establish his tax position but trying to change his behaviour with regard to his use of a potential tax avoidance scheme and should have approached TRS directly to obtain the relevant information.
  • HMRC disputed this stating it would not be normal practice to approach a third party when investigating an individual’s tax position.
  • Mr Evans believed that HMRC already held much of the information that had been requested via the PAYE RTI. HMRC disagreed stating that the advantage of using a loan-type arrangement is that loan benefits are not reported via tax returns or PAYE RTI, meaning HMRC had no access to the relevant information. 
  • Given that HMRC believed a loan-type arrangement had been used, they argued that to establish a taxpayer's full tax position, the information requested in the Notice was reasonable to determine if a tax advantage had been obtained.

The FTT found that:

  • HMRC were trying to establish Mr Evans's tax position, not that of TRS and there was a genuine enquiry being carried out.
  • There was no breach of human rights by asking Mr Evans for information that he suggested may implicate him at a later date when Penalties are considered.
  • The receipt of Mr Evans's tax return itself did not omit a need to issue a Notice.
  • Schedule 36 does not determine where HMRC should obtain information for an enquiry, it was reasonable in this case, that the information was sought from the employee to compare with PAYE RTI submitted by the employer.
  • With two exceptions, the Notice was deemed to be valid.

The appeal was dismissed.

Useful guides on this topic

Tax avoidance schemes
How do you spot tax avoidance schemes? What are the types of schemes available that should be avoided? What disclosure requirements are there? When are tax clearances needed?

Disguised remuneration loan charge
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?

Loan relationships
What is a loan relationship? How are profits and losses made from loan relationships taxed? What happens if loans are written down or written off? What is the difference between a trading and non-trading loan relationship? What are the rules for connected party loans?

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?

RTI: Real-Time Information for PAYE
What is RTI: Real-Time Information (RTI) reporting for PAYE? How does it work?

External links

Gareth Evans vs HMRC [2023] TC08946