Water cooler and triangular chairs

McCabe: HMRC not required to disclose documents relating to discussions with the Belgian tax authority

16 December 2020.

In Kevin McCabe v HMRC [2020] UKUT 266 (TC), the Upper Tribunal (UT) has held that the First-tier Tribunal (FTT) was correct not to order HMRC to disclose documents relating to discussions it had had with the Belgian tax authority, as the documents had no probative value and the tax authorities had raised confidentiality issues.


Following enquiries into Mr McCabe's (the Appellant) self-assessment returns for the years 2006/07 and 2007/08, HMRC concluded that he was resident in the UK and issued closure notices amending his tax returns for those years so as to impose charges to income tax and capital gains tax. 

The Appellant appealed to the FTT against the closure notices. His primary contention was that  he was not resident in the UK in the relevant years and so was not subject to the income tax and capital gains tax that HMRC charged him. 

If, contrary to the Appellant's primary contention, he was resident in the UK in the relevant years, the Appellant argued that he was also resident in Belgium in those years. Where a person is ostensibly resident in both Belgium and the UK, Regulation 4(2) of the double tax treaty between the UK and Belgium of 1 June 1987 (as amended) (the Treaty) contains a 'tie-breaker' that is designed to establish the single jurisdiction in which the person is resident. The Appellant's secondary contention in his appeal was that the application of the tie-breaker resulted in him being resident only in Belgium for tax purposes and therefore he was not subject to the tax HMRC had charged him.

In 2016, at the Appellant's instigation, the UK and Belgian tax authorities applied the 'mutual agreement procedure' (MAP), set out in Article 25 of the Treaty, to try to resolve the issue of the Appellant's residence. That procedure concluded with an agreement between the tax authorities that, although he had a permanent residence and close economic relations in both jurisdictions, applying the tie-breaker provisions of the Treaty, the Appellant was resident in the UK for tax purposes. 

It was common ground between the parties that the agreement reached between the UK and Belgian tax authorities did not provide a conclusive answer to the question and that the Appellant was free to argue in proceedings before the FTT that the Belgian tax authority and HMRC were wrong, and that the tie-breaker provisions of the Treaty resulted in him being resident in Belgium.

The Appellant applied to the FTT for HMRC to disclose documents relating to the application of the MAP, such as the tax authorities' representations on the matter and any advice they had received. HMRC resisted the application.

FTT decision

The application was dismissed.

In the view of the FTT, the documents the Appellant sought were not relevant to the dispute, too focused on the methodology of the MAP rather than the dispute as a whole, and in any event it was central to the functioning of the Treaty that there was a degree of confidentiality between the tax authorities.

The Appellant appealed to the UT.

UT decision

The appeal was dismissed.

Before the UT, the Appellant argued that the FTT had applied the relevance test incorrectly as it had not understood why the documents sought were relevant, erred in its analysis of the OECD's Treaty guidance and placed too much emphasis on the confidentiality considerations. 

The UT agreed with the FTT that the documents were not relevant to the dispute. It acknowledged that the starting point was that HMRC had to disclose relevant documents unless there was good reason not to, however, in the view of the UT, the documents were not relevant as they did not relate to the pleaded cases of the parties – the possibility that they could 'prompt … a chain of enquiry' was not a proportionate interpretation of relevance in the circumstances.  

With regard to the FTT's analysis of the Treaty, the UT confirmed that the outcome of the MAP was not binding on the Appellant; it was simply a reference point for HMRC which could be challenged. The documents the Appellant sought would only record the tax authorities' historical communications and did not constitute evidence, as the tax authorities did not need to prove residence under the MAP. As the MAP was not part of the appeal process, it was only a collaborative process between the competent authorities of two jurisdictions. 

Finally, both HMRC and the Belgian tax authority had objected to disclosure on the grounds of confidentiality. It was argued that confidentiality aided discussions during the MAP and that without it, the tax authorities would find it much harder to co-operate. Although the UT noted that transparency is important when dealing with government bodies, the FTT had been correct to exercise its discretion in favour of maintaining confidentiality when balancing the requirement for transparency and the need to facilitate the functionality of the MAP process.  


This decision suggests that the tax tribunals will attach significant  weight to the issue of inter-jurisdictional co-operation and confidentiality and it is unlikely that taxpayers in a similar position will be able to persuade them to order disclosure of documents relating to the MAP.

The issue of disclosure in tax appeals was considered recently in RBS v HMRC [2020] UKFTT 321(TC) (our blog on the RBS decision can be viewed here). The principle test to be applied by the FTT is whether ordering disclosure will further the overriding objective contained in Rule 2 of the Tribunal Rules. In the instant case, the UT upheld the FTT’s decision because the documents sought could have no bearing on the outcome of the appeal as views expressed in correspondence between the two tax authorities as part of the MAP process were not relevant to determining the Appellant's residence status.

The decision can be viewed here