Jimenez, R. (On the Application of) v The First Tier Tribunal (Tax Chamber), [2019] EWCA Civ 51

The taxpayer was a UK national who had formerly resided in the U.K. and was now resident in Dubai. In connection with its investigation of his past and present tax positions including as to when he ceased to be a U.K resident, the HMRC issued a notice under paragraph 1 of Schedule 36 to the Finance Act 2008 to the taxpayer at his address in Dubai asking the taxpayer to produce information including details of bank and credit card accounts since 6 April 2004 and a schedule of his visits to the UK between that date and 5 April 2013. Paragraph 1 provided:

An officer of Revenue and Customs may by notice in writing require a person ("the taxpayer")—

(a) to provide information, or

(b) to produce a document,

if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position.

The decision below to quash the paragraph 1 notice was reversed. After noting (at para. 41) that “HMRC do not of course contend that the civil penalties for non-compliance with the notice could be directly enforced against the taxpayer in a foreign state but … [i]n the case of a UK taxpayer with a residence abroad, there will in many cases be a real possibility that the taxpayer continues to hold assets within the jurisdiction which could be used to recover the civil penalties for non-compliance,” Patten LJ stated (at paras 48 and 49):

Prescriptive (sometimes called legislative) jurisdiction is the power to make rules or issue instructions binding on the persons to whom they are directed. It is distinguishable from the enforcement of those rules by some type of coercive action which in the case of legislation or a direction affecting someone abroad may involve the legislating state taking positive action in the jurisdiction of another state.

…It is sufficient that the sending of a taxpayer's notice to Mr Jimenez in Dubai has not been shown to contravene any international obligation of the UK.

In his concurring reasons (with which Nicola Davies LJ also agreed), Legatt LJ stated (at paras. 52-54):

Counsel for Mr Jimenez … relied on a distinction … adopted … in Oroville Reman & Reload … between documents of notice that merely involve the supply of information with no threat of penalties in the event of non-compliance and documents involving a compulsory process or containing a command. They submitted that a document of the latter kind, such as the notice issued in this case which explicitly threatened penalties if Mr Jimenez did not comply with it, must be regarded as an unlawful exercise of enforcement jurisdiction.

Delineating the precise boundary between prescriptive (or legislative) and enforcement jurisdiction in international law is far from straightforward. But I do not accept that sending a notice by post to a person in a foreign state requiring him to produce information that is reasonably required for the purpose of checking his tax position in the UK violates the principle of state sovereignty. Such a measure does not involve the performance of any official act within the territory of another state – as would, for example, sending an officer of Revenue and Customs to enter the person's business premises in a foreign state and inspect business documents that are on the premises pursuant to paragraph 10 of Schedule 36. Nor does it seem to me objectionable that the notice is expressed as a command rather than a mere request for the supply of information. …

It is a further and separate question whether the imposition of a civil penalty under Part 7 of Schedule 36 for failure to comply with such a taxpayer notice would involve an exercise of enforcement jurisdiction. Again, however, I cannot see that it would, provided that no steps are taken to seek to enforce the penalty in a foreign state.

The UK tax legislation contained a blanket provision stating:

An officer of Revenue and Customs may by notice in writing require a person ("the taxpayer")—

(a) to provide information, or

(b) to produce a document,

if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position.

The taxpayer was a Dubai resident who also was a UK national and former UK resident. HMRC was investigating his past and present tax positions including as to when he ceased to be a UK resident, and issued a notice to him at his Dubai address asking him to produce banking information and a schedule of his visits to the UK over a nine-year period.

The Court found the notice to be valid for U.K purposes. Leggatt LJ stated (at paras. 52-54):

Counsel for Mr Jimenez … relied on a distinction … adopted … [by Rossiter CJ] in Oroville Reman & Reload … between documents of notice that merely involve the supply of information with no threat of penalties in the event of non-compliance and documents involving a compulsory process or containing a command. They submitted that a document of the latter kind, such as the notice issued in this case which explicitly threatened penalties if Mr Jimenez did not comply with it, must be regarded as an unlawful exercise of enforcement jurisdiction.

… I do not accept that sending a notice by post to a person in a foreign state requiring him to produce information that is reasonably required for the purpose of checking his tax position in the UK violates the principle of state sovereignty. Such a measure does not involve the performance of any official act within the territory of another state – as would, for example, sending an officer of Revenue and Customs to enter the person's business premises in a foreign state and inspect business documents that are on the premises … .

[T]he imposition of a civil penalty … for failure to comply with such a taxpayer notice would [not] involve an exercise of enforcement jurisdiction … provided that no steps are taken to seek to enforce the penalty in a foreign state.