Case: Knowledge of generic scheme does not prevent information notice being reasonable

[2018] UKFTT 0232 (TC)

Judge Victoria Nicholl

Decision released 23 April 2018

Corporation tax – Appeal against Sch. 36, para. 1 information notice – Burden of proof – Whether reasonably required – ITTOIA 2005, s. 625 –ITTOIA 2005, s. 624 –ITEPA 2003, s. 716 – R v IR Commrs, ex parte TC Coombs & Co [1991] BTC 89 (‘Coombs’) – R (on the application of Derrin Brother Properties Ltd) v R & C Commrs [2014] BTC 21 - Gold Nuts Ltd [2017] TC 05828 – Thompson [2013] TC 02521 – New Way Cleaning Ltd [2017] TC 05769 – Phillipou [2017] TC 05586 – Codexe Ltd [2017] TC 06014.

Uppercut Films Ltd [2018] TC 06465


The appeal was against an information notice issued by HMRC on 12 August 2016 under para. 1 of Sch. 36 to the FA 2008. The appeal was designated as the lead appeal under r. 5(3)(b) of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 on 14 August 2017. The information notice issued to Uppercut requires five documents to be provided (‘limited list’). The appeal of Cliftonville Consultancy Ltd [2018] TC 06464 was similarly designated and they were joined to be heard together with this appeal.

The Appellant had used a tax avoidance scheme, which was disclosed by RSM Tenon Group plc on 15 August 2011. The scheme was as follows:

(1)A UK company wished to pay a dividend and either had a subsidiary or incorporated a new one;

(2)Shares in the subsidiary were settled into an interest in possession (‘IIP’) trust for the benefit of the parent company’s shareholders;

(3)The parent retained an interest under ITTOIA 2005, s. 625;

(4)If subsidiary had been incorporated, the parent would inject cash equal to the intended dividend;

(5)The dividend was paid by way of a new share subscription into mainly share premium;

(6)The share premium account was subsequently cancelled, and the reserves transferred to distributable reserves. If an existing subsidiary had sufficient reserves this step was unnecessary;

(7)A dividend paid by the subsidiary to the IIP trusts was passed to the shareholders under the terms of the trust;

(8)Section 624 ITTOIA 2005 treated the income as that of the parent company. The dividend was considered not to be taxed under any other provision due to the protection of ITEPA 2003, s. 716.

The Appellant’s tax return and computation for the accounting period ended 31 May 2012 included a CT600J disclosure. An enquiry was opened on 28 February 2014 and made an informal request for the Appellant to provide five documents. An information notice under was issued on 12 February 2016, requesting:

The Engagement Letter and completed confirmation of engagement section;

Advice Letter including the completed confirmation section;

Completed copy of the deed under which the interest in a share as nominee, was held;

the Letter of Direction issued in respect of any dividends paid on the shares held, and

Board minutes resolving to pay a dividend(s).

The condition for the issue of an information notice is that the officer reasonably requires the information or a document for the purpose of checking the tax position. The FTT considered the burden of proof and what is ‘reasonably required’ for the purposes of checking the tax position.

The FTT confirmed with reference to previous cases that the onus of proof to an appeal against an information notice lies with HMRC. If the notice specifies statutory records within the taxpayer's possession or power the burden shifts to the taxpayer to demonstrate the reason that information or document cannot be produced.

A third-party notice may not be given without the agreement of the taxpayer or the approval of the tribunal. Where the tribunal’s opinion is obtained for a third-party notice, the burden shifts to the appellant on an application for judicial review. Where approval is not sought, HMRC must establish what is reasonably required for the purpose of checking the tax position, the onus is then on the appellant on the grounds of its appeal.

The FTT found that:

HMRC’s suggestion that the scheme could give rise to remuneration, a loan or a dividend did not limit the ‘checking’ to a consideration of these possibilities when determining whether the corporation tax position was correct.

The engagement letter was reasonably required because the Appellant had claimed a corporation tax deduction for the fees incurred under its terms.

It was noted that Parliament considered there could be circumstances where HMRC may reasonably require tax advice for the purpose of checking the tax position. Whilst HMRC may be aware of a generic scheme, the advice letter would refer to the specific needs and requirements of the business.

The Nominee deed, Letter of direction (re dividends) and Minutes of board meeting to pay dividends assisted the understanding of nominee elements and the company’s interest in the scheme.

Completed board minutes relating to dividends were required to establish the amounts paid. The amounts actually paid were relevant to determine the fee payable and to consider its deductibility.


Whilst HMRC knew of the generic scheme, that knowledge did not prevent the specific advice being relevant and reasonably required to check the company’s Corporation Tax position.

For commentary on HMRC Information powers, see Direct Tax Reporter at ¶186-550.

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