Court ruling prevents UK tax man from seeking certain information from expats

by Ray Clancy on January 12, 2018

A landmark ruling in the British High Court means that the taxman cannot pursue expats who have moved abroad permanently to countries that do not have a reciprocal tax agreement with the UK.

It comes after expat Michael Jimenez, who used to be a co-owner of Charlton Athletic Football Club, challenged HMRC over the issuing of a Schedule 36 notice demanding tax information some 10 years after he had moved abroad.


The High Court has ruled that HMRC cannot chase expats overseas for such information, effectively paving the way for expats to ignore enquiries made through this route if they live in a location where there is no reciprocal tax agreement.

Jimenez left the UK in 2002, lived in Cyprus and then in Dubai. When HMRC sought information he pointed out that he had been living away from the UK for a decade having cut all ties with the country.

HMRC then issued a Schedule 36 notice to him at his home in Dubai demanding information but he challenged their right to do so. The court was tasked with deciding how much power HMRC has outside of the UK. As a general rule, countries will not assist other countries to collect tax unless they have a reciprocal arrangement.
It was argued by HMRC that Jimenez was a taxpayer for the purposes of Schedule 36 and it did have the power to give a notice to such taxpayers outside the UK to help establish that taxpayer’s tax position.

In court Mr Justice Charles agreed that HMRC’s approach was both unlawful and unreasonable and that Schedule 36 does not provide a power to give the taxpayer notice that was given to Jimenez in Dubai.

Mr Justice Charles made it clear that the British tax authorities were only empowered to make demands of non-UK resident citizens if a reciprocal tax-related agreement was in place between the UK and the expat’s present country of residence.

Independent Tax, which specialises in HMRC disputes, said that the firm has seen many instances of HMRC issuing Schedule 36 notices to taxpayers outside the UK and the judicial review should end that practice.
‘The judgment recognises that HMRC already has a viable and lawful route through the international tax enforcement arrangements protocol to seek information or documents held outside the UK,’ said a spokesman.
He added that the ruling applies to outstanding Schedule 36 demand and there may be recourse for expats who have complied with the notices in the past as the judgement can only be overturned by the Court of Appeal.

Jimenez hopes it will help other expats. ‘For a long time HMRC have held the view that distance was no object to their powers meaning any expats outside of the UK were in their sights long after they had left the UK. Young or old, rich or poor, retired or not or simply wanting to move to warmer climates and having made the decision to no longer be a resident of the UK, made no difference the attitude that HMRC adopted towards these e-pats. This ruling shows that this is fundamentally not the case and that HMRC’s powers actually stop at the UK border,’ he said.

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