Bemal Patel v Revenue & Customs (INCOME TAX/CORPORATION TAX : Other)

Factual and Procedural Background

The appellant submitted income tax returns for the 2012-13 and 2013-14 tax years, which included employment, self-employment, and UK property schedules. HMRC opened enquiries into these returns, issuing notices under the Taxes Management Act 1970 and the Finance Act 2008 Schedule 36 requiring the appellant to provide various financial information and documents. The appellant, through his accountants, provided some information but contested five items in a Schedule 36 notice issued on 17 May 2016, arguing they were not reasonably required for checking his tax position. The dispute concerned whether the requested items—mainly detailed personal financial account information and transaction documentation—were lawful requirements under HMRC's statutory powers. The appellant appealed the inclusion of these contested items, leading to this tribunal decision.

Legal Issues Presented

1. Whether the contested items in the Schedule 36 notice were "reasonably required" by HMRC for the purpose of checking the appellant's income tax position.
2. Whether HMRC must have a suspicion that the tax return is incorrect before issuing a Schedule 36 information notice.
3. The appropriate allocation of the burden of proof regarding whether requested items are reasonably required.

Arguments of the Parties

Appellant's Arguments

• The contested items were not reasonably required because they were broad, open-ended requests lacking specificity or connection to particular concerns about the accuracy of the tax returns.
• Requests should be specific and targeted, linked to particular issues rather than constituting a 'fishing expedition'.
• HMRC had not demonstrated specific concerns justifying the requests; vague or uncertain suspicions do not satisfy the statutory test.
• Item 3 was redundant as the information had already been provided in relation to a company associated with the appellant.
• The burden of proof should lie with HMRC to justify the requests; it was not accepted that the appellant bore this burden.

HMRC's Arguments

• The contested items were necessary to verify both the correctness and completeness of the appellant's tax returns, including identifying undeclared income or assets.
• Basic financial information such as bank accounts, investments, and transaction statements are directly relevant to the appellant's tax position.
• HMRC is entitled to undertake enquiries without needing to suspect the return is incorrect; suspicion is not a prerequisite for issuing a valid information notice under Schedule 36.
• Item 3 was necessary to check whether sums withdrawn from a related company loan account were properly accounted for in the appellant's tax returns.
• The burden of proof lies on the appellant to show that the requested information is not reasonably required.

Table of Precedents Cited

Court's Reasoning and Analysis

The tribunal analysed the statutory framework under Schedule 36 Finance Act 2008, focusing on whether the contested items were "reasonably required" by HMRC for the purpose of checking the appellant's income tax position. It emphasized that the statutory test does not require HMRC to have a suspicion that the tax return is incorrect when issuing an information notice if Condition A (notice of enquiry outstanding) is met.

The tribunal reconciled apparently conflicting authorities on 'fishing expeditions' by distinguishing between the requirement for genuine direction of the request to the statutory purpose (Derrin Brother) and the absence of a suspicion requirement (Spring Capital). It found that the contested items—comprising basic personal financial account details and transaction documentation—are precisely the type of information reasonably required to check the appellant's tax position given the complexity and breadth of his financial affairs.

The tribunal rejected the appellant's argument that HMRC needed to specify particular concerns or link requests to specific issues within the enquiry, affirming that HMRC's powers extend beyond checking declared items to uncovering omitted income or assets. It also rejected the argument that information already provided in relation to associated companies negated the need for the appellant to provide the same information, as the statutory test applies to the individual taxpayer's tax position.

Regarding the burden of proof, the tribunal acknowledged differing views but proceeded to consider the case under both allocations. It found that on either basis, the contested items were reasonably required.

The tribunal noted HMRC's reasonable conduct in modifying requests and deferring some items, and found no evidence that compliance would cause hardship or undue expense.

Holding and Implications

The appeal is dismissed. The tribunal confirmed that the contested items in the Schedule 36 notice were reasonably required by HMRC for the purpose of checking the appellant's income tax position.

The appellant was directed to comply with the contested information and document requirements within 30 days of the decision release. The decision is final under Schedule 36 Finance Act 2008 paragraph 32(5).

No new legal precedent was established beyond the application of existing statutory principles and case law. The ruling reinforces HMRC's broad powers to request basic financial information during enquiries, including without suspicion of error, so long as the requests are genuinely directed to checking the taxpayer's tax position.