In a case with a twist, HMRC used their Schedule 36 Information Powers to request the relevant data of an opaque offshore entity. This sort of request should become less frequent since the UK introduced a Register of Overseas Entities.
In Apsley Way Property Holdings Limited v HMRC [2024] TC8975, HMRC opened an enquiry AWPH Ltd’s tax return for the 2017-18 and 2018-19 tax years.
- The company is a Non-Resident Landlord, registered in the British Virgin Islands (BVI) and managed and controlled by corporate directors and shareholders in Jersey.
- It became apparent to HMRC that it had bought premises from a UK company that was owned by the same mutual offshore entity. HMRC wanted to know the source of funding.
- As the offshore structure was opaque, HMRC was also curious about the true locus of its central management and control. Had it made or received Loans for the benefit of its participators, which at the time were completely unknown?
- Having made several informal requests for data, HMRC issued formal requests using its Schedule 36 Information Powers.
The company appealed and also requested a Closure notice alleging that HMRC was on a ‘fishing expedition’.
Schedule 36 provides that the information and documents sought must be reasonably required for checking AWPH Ltd’s tax position for the years under enquiry.
The tribunal concluded that none of the items in the information notices amounted to 'a fishing expedition' and the requirement to produce the specified documents and provide the information is not disproportionate or excessively onerous.
Comment
In a bit of a twist to this tale, during the time that it took this appeal to be heard, the legislation creating the Register of Overseas Entities (the ROE) was introduced by Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA 2022). The company Apsley Way Property Holdings Limited complied with its obligations under the ROE as the owner of UK property to disclose its beneficial owner who turned out to be its representative at the appeal.
Useful guides on this topic
Sch 36 information notices (subscriber version)
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?
Sch 36 Penalties
Failure to respond to an Information notice under Schedule 36 FA 2008 will lead to a tax penalty, as determined by HMRC. In cases of extreme default the Upper Tribunal may also impose tax geared penalties.
Non-Resident Landlord Scheme
What is the Non-Resident Landlord scheme? How does it work? Who does it apply to? How can I apply to receive rent without a withholding tax deduction?
How to appeal an HMRC decision
What types of decisions are appealable? What are your different options when you disagree with HMRC? What are the key steps in making an appeal?
Closure Notices
When does HMRC issue a closure notice? Can a taxpayer demand one? Are there appeal rights?
Close company loans
A detailed look at the corporation tax treatment when a Close Company makes a loan to a participator (director-shareholder). It also provides links to our guides for individuals on the making of loans to companies.
Directors' loan accounts tax toolkit
A guide detailing the different outcomes from the personal level of a director when a company makes loans to its directors and participators.
External links
