In Furlong Services Ltd v HMRC [2024] TC09252, the First Tier Tribunal (FTT) largely upheld an Information Notice requiring details of football consultancy income received by a company which had only declared income from farming in its tax computations.
The 2016-17 personal tax affairs of Furlong Services Ltd’s (Furlong) director, Mr Curtis, were subject to an investigation by HMRC.
- HMRC became aware that Mr Curtis had disposed of shares in another company, Select Management Ltd, and requested details of the consultancy income Mr Curtis had received following that disposal.
- Mr Curtis’s tax agent informed HMRC that the subsequent consultancy work had been completed by Furlong, the consultancy agreement having been novated to Furlong on 7 April 2016.
- It was clear from the context that the consultancy work was connected with football, but Furlong had submitted tax computations to HMRC for the periods 31 March 2017, 2018 and 30 September 2019 making references only to Farming activities.
- HMRC opened an investigation into Furlong’s tax affairs and issued an Information notice under Schedule 36 Finance Act 2008 on 1 December 2022 requesting:
- Item 1: a breakdown of income declared for the 2017 to 2021 period ends.
- Item 2: details of income relating to the football industry that Furlong had received over the previous six years.
- Item 4: details of 2019 travelling expenses claimed of £66,854 including an explanation of the business purpose.
- Item 5: copies of all consultancy agreements between Furlong and other parties relating to the football industry.
- Item 7: invoices for travelling expenditure incurred during the period ended 30 September 2019.
- Furlong Appealed to the First Tier Tribunal (FTT).
The FTT had to consider whether:
- Any of the items requested were statutory records: Furlong had no right of appeal in respect of the statutory records of its business.
- Any items that were not statutory records related to a chargeable period for which HMRC did not have a genuine suspicion that Furlong may have been under-assessed to tax.
- The information or documents requested were reasonably required by HMRC for checking Furlong's tax position.
The FTT found that information and documents relating to the periods ending 31 March 2017 and 2018 were not statutory records as Furlong was no longer required to keep and preserve them. The sixth anniversary of the end of each period had passed, meaning that the related information and documents had ceased to be statutory records.
Items 1, 2 and 5
- Items 1 and 2 were statutory records, but only where they related to the periods ending on 30 September 2019, 2020 and 31 July 2021, not the periods ending 2017 and 2018 (as more than six years had passed).
- Item 5 was not statutory records.
- HMRC had demonstrated that there was a reason to suspect that Furlong had failed to declare football consultancy income for the periods ending on 31 March 2017, 2018 and 30 September 2019, but there was no objective justification for suspicion for the 30 September 2020 or 31 July 2021 periods.
- Items 1, 2 and 5 were reasonably required for the purpose of checking Furlong’s tax position.
Items 4 and 7
- Invoices relating to the travelling expenses fell within the definition of a statutory record and they had not ceased to be statutory records through the passage of time.
- It was not clear whether ‘explanation of a business purpose’ was a statutory record, nevertheless, it was reasonably required to check Furlong’s tax position.
The FTT:
- Confirmed Items 1, 4 and 7 of the Information Notice.
- Revised Item 2 to relate specifically to the periods 2017 to 2021.
- Varied Item 5 to remove items relating to the periods ending on 30 September 2020 and 31 July 2021, as Item 5 was not a statutory record and HMRC had no objective reason to suspect an under-assessment of tax for those periods.
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? What penalties apply for a failure to respond to an Information Notice?
Farming: Tax Overview
What is farming? What are the tax consequences and tax considerations of farming? What are the features of agricultural tenancies? What expenses can farmers claim for tax purposes? Are there special tax and accounting rules for farmers? What are the VAT rules for farmers?
Averaging claims
When can profits be averaged? What trades do averaging apply to? How are averaging adjustments calculated and made?
Farming: Capital allowances
What types of expenditure may qualify for capital allowances in farming businesses? What farming-specific points need to be considered?
How to appeal an HMRC decision
Disagree with an HMRC decision? How do you 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?
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