Follow up

Schedule 36 Notice

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Jimenez v HMRC and Other [2017] EWHC 2585

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Landmark case restricts HMRC’s reach

Information. HMRC has the power under Sch 36 Finance Act 2008 to request that your clients provide any information or document that is “reasonably required” for the purposes of checking their tax position. A formal written request is referred to as a “Schedule 36 Notice” (see Follow up ), and there are penalties for non-compliance.

Expatriates. For many years, there has been a great deal of uncertainty as to whether or not HMRC can issue a Schedule 36 Notice to taxpayers that have left the UK and are permanently living elsewhere. Sch. 36 itself is silent on the matter and, perhaps unsurprisingly, HMRC’s view has always been that it can issue a notice to anyone who has been a UK taxpayer at some point.

Tribunal. In the case of Jimenez v HM Revenue & Customs and Other [2017] EWHC 2585 (see Follow up ), the taxpayer (J) had left the UK in 2002, moving to Cyprus, then Dubai. He had continued to co-operate with HMRC on a voluntary basis up until 2012, when an enquiry was opened into a nine-year period - all of which fell after he had become non-resident. A Schedule 36 Notice was issued. J requested a judicial review on the grounds that the notice did not have extra-territorial effect.

Decision. The High Court agreed, and found that HMRC must rely on reciprocal co-operation agreements between tax jurisdictions - and such agreements were in place with Cyprus and Dubai.

Pro advice. The decision is binding (subject to any HMRC appeal) so if your non-resident clients have received a Schedule 36 Notice you can instruct them to ignore it and refer HMRC to the decision. Any penalties for non-compliance should also be appealed - on the grounds that the notice was not lawfully issued in the first place.

Schedule 36 Notice

Jimenez v HM Revenue & Customs and Other [2017] EWHC 2585