In the case of JJ Management LLP and others v HMRC [2020] the Court of Appeal found that HMRC is entitled to conduct informal investigations into a taxpayer’s affairs outside the normal statutory time limits where compliance with requests for information is entirely voluntary and commented that a judicial review into the conduct of such an informal investigation is likely to be entertained and successful only in wholly exceptional circumstances.
Kate Ison and Jessica Hocking of Bryan Cave Leighton Paisner writing in the Tax Journal said of this case that ‘Its effect is to strengthen the already extensive powers available to HMRC to enquire into a taxpayer’s position, with little checks or balances.’
Does it really extend HMRC’s powers at all? If compliance is entirely voluntary, compliance cannot be enforced.
Other than in the event that HMRC’s enquiries are likely to reveal a failure to make a return or the making of an incorrect return, the prudent response, if a taxpayer is presented with such a non-statutory demand for information, would be to decline to comply with it and to invite HMRC to make the demand in a statutory form if it has the power to do so on the ground that parliament has provided restrictions on the use of such statutory powers for good purpose. If HMRC were to threaten unfavourable treatment, except as to the matter of future penalties, for a refusal to comply with voluntary disclosure it seems highly unlikely that Judicial Review would not be available. That would surely be the sort of wholly exceptional circumstances to which the Court of Appeal referred.
