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This latest twist came to light after a restructuring of activities of Whitefields Golf Club in 1999 came to the attention of Customs and Excise during a routine VAT inspection in June 2003.
Whitefields were asked to supply documents, which they did in February 2004. Nothing then happened until HMRC tried to resume the investigation in 2011, despite having destroyed or lost the original documents – so they demanded further copies under the Finance Act 2008.
Whitefields argued it would be unreasonable for them to deliver documents and information they had already supplied in full once, when HMRC had been slow to follow up that information, as well as losing or destroying it in the process – an argument rejected by the tribunal.
The tribunal said that HMRC conduct – which in this case meant losing documents and sitting on an investigation for almost a decade was not relevant in deciding whether documents are 'reasonably required' under Schedule 36 of the Finance Act in order to establish the correct tax liability of the taxpayer.
Reasonable
In effect, the Tribunal said it was not their role to carry out a supervisory review of HMRC’s conduct – but simply to decide whether the requests were reasonable.
Tax expert Mamoon Chaudhary at Oxley and Coward Solicitors said: “Everyone knows HMRC has far reaching powers and it is clear the courts will back them. We will have to see if the ruling is challenged, but for now we need to be a little more cautious about consigning documents to the shredder!
“The tribunal did say that HMRC can only require a person or organisation to produce a document if it is in that person’s possession or power, but that will be cold comfort to many businesses digesting this news..
“This ruling is a challenge for individual taxpayers as much as business as it suggests that HMRC can go back as far as they want for information. We are all comfortable with the six year rule, so this appears to stand things completely on their head. It will probably be some time before we know how this is going to be interpreted by HMRC in practice.”
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Susie Hughes © Shout99 2014
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