Hargreaves & Ors v Revenue & Customs (INCOME TAX - whether issued to person whose tax position was being checked)

Factual and Procedural Background

This decision concerns a group of 21 consolidated appeals brought by several appellants against information notices issued by the Respondents, the Commissioners for Her Majesty's Revenue and Customs (HMRC), in early 2018. The notices were issued to each appellant in their capacity as scheme administrators of various pension schemes connected with companies associated to them. HMRC sought information to determine whether certain tax liabilities, including potential scheme sanction charges or de-registration charges under the Finance Act 2004, had arisen or might arise in relation to these pension schemes.

The appellants challenged both the validity of the notices—primarily disputing the identity of the person to whom the notices were addressed—and the reasonableness of the information requirements within the notices. The appeals were heard together due to the similarity of facts and grounds.

During the proceedings, four appellants were unrepresented and absent, but the Tribunal proceeded with their appeals alongside the others after being satisfied they had been properly notified and no prejudice would result.

The Tribunal considered documentary evidence and witness statements from representatives of both parties. Applications to admit supplementary evidence were made; the Tribunal admitted a second bundle of documents relevant to the investigation, but rejected the first bundle as irrelevant to the issues.

The background to the dispute involves HMRC's investigation into pension schemes linked to a company formerly acting as scheme administrator. In January 2017, the appellants were recorded on HMRC's pensions online system as scheme administrators, replacing the previous administrator. HMRC issued information notices to the appellants under paragraph 1 of schedule 36 to the Finance Act 2008, requiring information about the pension schemes, their administration, advisers, trustees, and members.

Following review, HMRC upheld the notices with some amendments. The appellants appealed to the Tribunal in November 2018. Between notification of the appeals and the hearing, some pension schemes were wound up.

Legal Issues Presented

1. Whether the information notices were validly issued to the appellants as scheme administrators, including the question of proper identification of the recipient.
2. Whether the notices should have been issued as first party notices to the scheme administrators or as third party notices to other taxpayers.
3. Whether the appellants had been validly appointed as scheme administrators for the purposes of the relevant legislation, particularly given HMRC's suspicion that required declarations were not personally made.
4. Whether the information and documents requested by the notices were reasonably required by HMRC for the purpose of checking the appellants' tax position.
5. The applicable legal test and burden of proof regarding whether information is reasonably required under schedule 36.

Arguments of the Parties

Appellants' Arguments

• The notices were addressed to the pension schemes rather than to the appellants as scheme administrators, rendering them invalid because pension schemes are not legal entities with a tax position.
• The notices were unclear and imprecise, failing the requirement for clarity given the potential for criminal sanctions upon non-compliance.
• If the appellants did not personally make the required declarations to HMRC, they were not validly appointed as scheme administrators and thus could not have tax liabilities or be valid recipients of the notices.
• The primary concern of HMRC's investigation was potential avoidance of corporation tax, national insurance contributions, and income tax by third parties, so the notices should have been issued to those third parties or as third party notices to the appellants, not as first party notices.
• The information requested was not reasonably required to check the appellants' tax position, particularly as the investigation focused on tax avoidance unrelated to the pension schemes themselves.
• Some items requested information outside the appellants' control or relating to periods before their appointment, which they could not comply with.
• Item 12, requesting details of advisers, was a fishing expedition irrelevant to the appellants' tax position.

Respondents' Arguments

• The information notices were validly issued to the appellants as scheme administrators, as evidenced by the covering letters clearly addressing them in that capacity despite the schedule referencing the pension scheme.
• HMRC was entitled to assume the validity of the appellants' appointment as scheme administrators unless proven otherwise, and the information notices remained valid regardless of whether the appellants personally made the declarations.
• The notices were correctly issued as first party notices because the tax liabilities in question related to the pension schemes and their administrators, not third parties.
• The information requested was reasonably required to check for potential tax liabilities including scheme sanction charges and de-registration charges, as well as to verify the validity of the appellants' appointments.
• HMRC accepted that information related to schemes that had been wound up was no longer reasonably required where it concerned de-registration charges or fitness to act as scheme administrator.
• Items requesting information about previous periods were relevant because a new scheme administrator assumes previous liabilities under the legislation.
• Item 12 was not reasonably required to check the tax position and was not justified under schedule 36.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal began by addressing procedural matters, including the absence of four appellants and the admissibility of supplementary evidence, applying established principles to admit relevant documents and proceed in the interests of justice.

The Tribunal then examined the validity of the information notices, focusing on the identity of the recipient. Despite the schedule naming the pension scheme, the covering letter clearly addressed the appellants as scheme administrators and stated their potential tax liabilities, making clear who was required to provide information. The Tribunal rejected the appellants’ argument that the notices were invalid for lack of clarity or for being addressed to the pension schemes rather than the individuals.

Regarding whether the notices should have been third party notices, the Tribunal found that the notices were correctly issued as first party notices to the scheme administrators because the tax liabilities in question related directly to the pension schemes and their administrators, not to other taxpayers.

On the question of whether the appellants had been validly appointed as scheme administrators, the Tribunal accepted HMRC’s position that they could assume validity until proven otherwise and that the information notices remained valid as they sought information relevant to the appellants’ tax position, which includes determining the validity of their appointment.

The Tribunal clarified the legal test for whether information is reasonably required under schedule 36 as an objective test to be assessed at the date of the hearing, with HMRC bearing the initial burden to show the information is reasonably required and the appellants bearing the burden to show it is not.

The Tribunal then considered the specific items requested in the notices. It found that most items were reasonably required to check for unauthorised payments, the validity of appointments, and potential de-registration charges. However, it accepted that items relating to fitness to act as scheme administrator and de-registration were not relevant for schemes that had been wound up. Additionally, the Tribunal found item 12, requesting details of advisers, was not reasonably required as it was a fishing expedition beyond the scope of schedule 36.

The Tribunal also addressed objections to requests for information predating the appellants’ appointments, holding that since new scheme administrators assume prior liabilities, such information is relevant and reasonably required, although appellants are not obliged to comply if the information is not in their possession or control.

Finally, the Tribunal varied the wording of certain items to clarify the information requested and ordered compliance with the amended notices within 28 days.

Holding and Implications

The Tribunal’s final decision was to allow the appeals in part. The information notices issued to the appellants as scheme administrators were upheld subject to amendments made on review and further modifications by the Tribunal. Specifically, the Tribunal:

• Confirmed the validity of the notices as addressed to the appellants in their capacity as scheme administrators.
• Upheld most of the information requirements as reasonably required to check the appellants’ tax positions.
• Deleted items 3 and 7 in relation to schemes that had been wound up, as they were no longer relevant.
• Deleted item 12 entirely as it was not reasonably required.
• Directed the appellants to comply with the amended information notices within 28 days of the decision release.
• Confirmed that the appellants have no right of appeal to the Upper Tribunal against this decision.

IMPLICATIONS: The decision clarifies the proper issuance of information notices under schedule 36 to scheme administrators of pension schemes, affirms the objective test for reasonable requirement of information, and delineates the scope of information that HMRC may compel. It does not establish new legal precedent but provides authoritative guidance on the interpretation and application of schedule 36 in the context of pension scheme tax investigations.