2011 Financial Supplement

Page 6

Tribunal is satisfied that they might prejudice

the material they acquire or create. Records

authorities offshore under Tax Information

the assessment or collection of tax [paras.3

concerning any individual’s physical, mental,

Exchange Agreements of which the UK

(4)].

spiritual or personal welfare are likewise not

already has 8 signed and in force and a

liable to be produced to HMRC [para.19] but

further 13 awaiting ratification. The UK also

A third party notice must name the taxpayer

this is more likely to be a problem for doctors

has an extensive network of Double Tax

to whom it relates [para.2(2)] unless the Notice

who fail to keep patients’ and financial records

agreements many of which incorporate the

has been approved by the Tribunal and has

separate.

OECD model exchange of information Article

waived that requirement on the grounds

26. Discussions are under way with several

that the officer has reasonable grounds for

One of the most important and contentious

other fiscal authorities, including Switzerland,

believing that it might seriously prejudice the

protections applies to documents to which a

aimed at amending existing agreements to

assessment or collection of tax [para.3(5)]

claim to legal professional privilege could be

incorporate that Article. HMRC also receives

Similarly the Tribunal can, on the grounds

maintained in legal proceedings [para.23]. It

substantial amounts of information under

of prejudice to the assessment or collection

has always been understood that this applied

various EU Mutual Assistance Directives and

of tax, set aside the requirement that the

to documents in the hands of a solicitor or

through its active participation in the Joint

taxpayer must be given a copy of a third party

barrister. However, after long drawn-out

International Tax Shelter Information Centre.

notice [para.4].

proceedings in Morgan Grenfell & Co Ltd v

Hopefully this overview of the information

Special Commissioners [2002] STC 786, the

gathering process as it relates to direct taxes

an

House of Lords ruled that the same documents

may help advisers and their clients make

application to waive taxpayers’ protections

in the client’s hands were also protected.

sensible judgements not least on matters such

in circumstances where serious tax fraud

HMRC is more and more showing itself

as voluntary disclosures. For instance it is a

was suspected, possibly leading to a criminal

unwilling to accept that the legal professional

matter of public knowledge that HSBC Bank in

investigation.

privilege defence is valid in every circumstance

Geneva has recently suffered a significant data

in which it is claimed.

theft and that sensitive information relating

Clearly

HMRC

would

only

make

HMRC can also serve a notice on a third

to UK customers has almost certainly already

party requiring information or documents

There is a limited protection for tax advice

reasonably required for the purpose of

papers in the hands of a tax adviser [para.25]

checking the UK tax position of a person whose

but an attempt, reported in the case of

identity is not known, or a class of persons

Prudential plc v Special Commissioners [2010]

Andrew Watt

whose individual identities are not known

STC 161, to use the Morgan Grenfell decision to

Managing Director,

[para.5]. This power, and its equivalent in

extend this protection to the same documents

Tax Disputes & Investigations

Section 20 TMA 1970, have been extensively

in the hands of the adviser’s clients, and in so

Alvarez & Marsal Taxand UK LLP

used in recent years by HMRC in connection

doing to help level out a highly uneven playing–

One Finsbury Circus (1st Floor)

with its drive against perceived evasion by

field as between lawyers and accountants, has

London

holders of offshore bank accounts.

so far failed but the appeal process has not yet

EC2M 7EB

been exhausted. An auditor’s working papers

Direct: +44 207 715 5214

In addition to those mentioned already,

are protected from disclosure [para.24] but

awatt@alvarezandmarsal.com

there are a number of protections built

documents which explain entries in accounts

into the legislation. Some of these are more

or tax returns are vulnerable [paras. 25/26]

stringent than others. For instance documents

It should be noted in passing that, somewhat

originating more that 6 years before the date

facetiously

of the notice are exempt from disclosure but

sought to use the legal professional privilege

this can be over-ridden by an authorised

argument to prevent their own records from

officer whose approval is highly unlikely to

having to be produced in the course of an

be withheld. A taxpayer can appeal against

enquiry into their own affairs. These attempts,

a notice unless it relates to information or

perhaps unsurprisingly, failed. R v CIR ex

documents which are part of the statutory

parte Lorimer [2000] STC 751.

perhaps,

some

lawyers

have

records or the Tribunal has approved the notice. A third party may appeal against

As if the intrusive powers described above

a notice if it would be ‘unduly onerous’ to

were insufficient, HMRC can actively pursue

comply [para. 30]

information by visiting business premises, not necessarily with the agreement of the

Information relating to the conduct of a

occupier, in order to inspect (not search) the

pending appeal is, as one would expect,

premises, business assets on the premises and

protected and investigative journalists are

the statutory records [para.10].

also given favourable treatment in respect of

HMRC can also seek information from tax

6

personal finance & wealth management supplement the barrister 2010

found its way into the hands of HMRC.


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