Information and inspection powers: Schedule 36 FA 2008: summary of reasons
You must send the taxpayer a summary of reasons for seeking the information or documents before you apply to the First-tier Tribunal for approval for a third party notice. It is also good practice to issue such a summary when seeking taxpayer approval for a third party notice, or when notifying a taxpayer that you intend to seek tribunal approval for a taxpayer notice.
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 taxpayer in making representations, and you should not be secretive for the sake of being secretive.
It will not generally be sufficient to say ‘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.
‘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.
It will rarely be necessary to explain why the enquiry was begun, or why it is being worked by SI. Nor should anything be said that might compromise informers.
The taxpayer is not entitled to a copy of the brief that you use at the application hearing before the First-tier Tribunal. But you could use a draft of that brief as the basis for drafting the summary of reasons.
If there is material which clearly falls within a ‘summary of reasons’, but which you do not wish to reveal, you should apply to the tribunal for an exemption under paragraph 3(4). See SIOG7420.
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 s20 TMA 1970. It confirmed that the taxpayer 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.