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Burden of proof for information notices on taxpayer

30 April 2015. Published by Adam Craggs, Partner

In the recent case of Joshy Mathew v HMRC [2015] UKFTT 139 (TC), the First-tier Tribunal (Tax Chamber) ("FTT"), considered where the burden of proof lies for establishing whether documents or information is "reasonably required", for the purposes of paragraph 1(1), Schedule 36, Finance Act 2008.


HMRC had concerns about apparent discrepancies between Mr Mathew's (the "Appellant") lifestyle and declared income, which fell from £123,489 in 2008-09 to £6,151 in 2011-12. HMRC opened enquiries into the Appellant's self-assessment returns for 2008/09 to 2012/13, and issued two notices under paragraph 1(1), Schedule 36, Finance Act 2008 (the "Notices"), to the Appellant requesting that he supply certain documentation and information to HMRC.

There were a number of issues before the FTT, but for the purpose of this blog I will focus on the 'burden of proof' issue.

FTT's decision

The Appellant submitted that HMRC had the burden of showing that the information and documents sought by the Notices were "reasonably required" by HMRC "for the purposes of checking [his] tax position" (paragraph 1(1), Schedule 36, Finance Act 2008). He relied on Kevin Betts v HMRC [2013] UKFTT 430 (TC) ("Betts"), where it was common ground that the burden of proof was on HMRC. Perhaps rather surprisingly, HMRC did not respond to the Appellant's submissions.

Notwithstanding a lack of response from HMRC, the FTT concluded that the burden of proof was on the Appellant.

The FTT considered, amongst others, the cases of R (on the application of Derrin Brother Properties Ltd) v HMRC [2014] EWHC 1152 ("Derrin"), and R v HMRC ex parte TC Coombs & Company [1991] 2 AC 283 ("Coombs"), in which the burden of proof was found to be on the taxpayer. In the view of the FTT, such a conclusion is in accordance with the "presumption of regularity" which applies where HMRC has acted lawfully pursuant to a statutory power vested in it by Parliament. In such circumstances, it is for the taxpayer to rebut this presumption.

The FTT also considered that the objective of Schedule 36 was to ensure the correct amount of tax was determined. As the Appellant was best placed to know the relevance of the documentation and information sought by HMRC, it was for him to persuade the FTT that the documents and information requested in the Notices were not "reasonably required", if this was his view.


Although the FTT concluded that the burden of proof lay with the Appellant, it did consider it arguable to the contrary (as Derrin and Coombs involved an application for judicial review, and in those cases the tribunal had approved the issue of the information notices), and hypothesised the burden resting with HMRC before concluding that it was met.

Given the FTT's comments that the contrary is arguable and that HMRC accepted in Betts that the burden of proof was on it, there remains some uncertainty as to the correct position. This is an issue which will no doubt be argued in future cases.

HMRC is increasingly resorting to the use of its formal Schedule 36 information powers, and irrespective of where the burden lies, taxpayers should give careful consideration to whether what HMRC has requested is "reasonably required". HMRC often embark on a 'fishing expedition' and in such circumstances, the recipient of an information notice should ask HMRC to explain why what has been requested is "reasonably required". In the absence of a satisfactory explanation from HMRC, the information notice should be challenged before the FTT and the tribunal will decide whether what has been requested is indeed "reasonably required".