FTT: Schedule 36 notices not reasonably required

In Jack George Yerou and Panayiota Yerou v HMRC [2022] TC08410/V, the First Tier Tribunal (FTT) allowed an appeal against Schedule 36 information notices. The information requested was not reasonably required as it was unlikely to bring an end to the underlying tax dispute.

• The appellants were shareholders in Ascot Sinclair Associates Limited (ASA), a UK company.
• In July 2012 they transferred B shares to the appellant’s father who was resident in Cyprus.
• The Company paid dividends on the B shares to the father.
• The father then made funds available to the appellants by way of loan or payment of their children’s school fees.
• HMRC opened enquiries and issued Discovery Assessments contending either the Transfer of Assets Abroad or Settlements provisions rendered the dividends taxable on the appellants.
• Over the course of the enquiry, a substantial amount of information was provided to HMRC.
• HMRC raised Schedule 36 information notices requesting statements for UK and Overseas bank accounts as well as the directors' loan account details.
• The appellants appealed on the basis that the documents were not reasonably required for the purposes of checking their tax position.

The FTT allowed the appeal finding that:

• HMRC had decided that tax was due in one of two ways and issued discovery assessments accordingly, based on the extensive information provided.
• The information under the Schedule 36 notices was requested by HMRC to check the appellants’ arguments against the application of the anti-avoidance provisions.
• If the information was provided it would be unlikely to cause the parties to come to an agreement as to the correct tax position.
• The information is not therefore reasonably required, reasonably being interpreted in the context of proportionality and in achieving the overriding objective of concluding the dispute.

Useful guides on this topic

Transfer of Assets Abroad (TOA)
What are the ToA rules? When do they apply? Is there any defence against the rules?

Settlement anti-avoidance rules
What are the settlement anti-avoidance rules? How do these rules catch some common family tax planning? What are the rules for spouses and other family members?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

Discovery Assessments: At a glance
This is a freeview 'At a glance' guide to Discovery Assessments.

Schedule 36 Information Notices
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?

Schedule 36 Information Notices: At a glance
This is a freeview 'At a glance' guide to Schedule 36 Information Notices.

External links

Jack George Yerour and Panayiota Yerou v HMRC [2022] TC08410/V