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HMRC internal manual

Compliance Handbook

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HM Revenue & Customs
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How to do a compliance check: information powers: third party notice: where approval is required: summary of reasons

You must send the person a summary of your reasons for seeking the information or documents before you apply to the tribunal for approval for a third party notice.

There are other occasions when, although you are not required to explain your reasons, it will be good practice to do so. For example

  • asking a person for their approval to issue a third party notice, or
  • notifying a person that you intend to seek tribunal approval for a taxpayer notice.

If you propose to give a third party notice to a bank you must get tribunal approval, you cannot get approval from the person who you are checking, see CH232100. There is a specimen summary of reasons letter at CH232450 for this purpose.

A summary of reasons must be meaningful and informative, although it does not have to reveal all of the relevant data. It should assist the person in making representations, and you should not be secretive for the sake of being secretive. It would not be sufficient to say, for example,

“I believe your self-assessment may be insufficient, and I believe this information may be relevant.”

You should usually state what sort of liability is being investigated, and explain why the documents or information are required.

Example

“I am investigating a tax avoidance scheme, and I believe that certain capital loss claims made in your return are in respect of that scheme. In order to see whether the claims for capital losses should be allowed, I need to consider the basic transactional documents and the surrounding correspondence.”

If relevant, it may be appropriate to explain why the statutory power is being used instead of other less intrusive or burdensome alternatives.

The person is not entitled to a copy of the brief that you use at the application hearing before the tribunal. But you could use that brief as the basis for drafting the summary of reasons.

If there is material which clearly falls within asummary of reasons, but which you do not wish to reveal, you should apply to the tribunal for an exemption under FA08/Sch36/Para3(4), see CH225440.

The case of R v MacDonald and others, ex parte Hutchinson & Co. Ltd 71 TC 1 dealt with these points in relation to predecessor legislation at TMA70/S20. It confirmed that the person is entitled to

“a statement in short form dealing with the main issues which [are] in contention”.

Tax cases where the courts have given a ruling on the interpretation of previous legislation will not be authoritative in the interpretation of Schedule 36 powers. However, you may refer to them as a general guide to how the tribunal may think when considering similar situations in the use of, or compliance with, Schedule 36 powers.