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.