“(1) An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”)— (a) to the person whose return it is (“the taxpayer”), (b) within the time allowed. (2) … (3) A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 9ZA of this Act.”
“(1) This section applies in relation to an enquiry under section 9A(1) of this Act. (1A) Any matter to which the enquiry relates is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “partial closure notice”) that the officer has completed his enquiries into that matter. (1B) The enquiry is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “final closure notice”) — (a) in a case where no partial closure notice has been given, that the officer has completed his enquiries, or (b) in a case where one or more partial closure notices have been given, that the officer has completed his remaining enquiries. (2) A partial or final closure notice must state the officer's conclusions and — (a) state that in the officer’s opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions. (3) A partial or final closure notice takes effect when it is issued.”
“40. Paragraph 1 Schedule 36 provides that an officer of HMRC may by notice in writing require a taxpayer to provide information or documents if reasonably required for the purpose of checking the taxpayer’s tax position. 41. Paragraph 29 Schedule 36 provides that a taxpayer can appeal against an information notice or any requirement in an information notice unless the requirement is to provide information or produce documents which form part of the taxpayer’s statutory records. 42. Paragraph 62 Schedule 36 provides that information or documents will form part of a taxpayer’s “statutory records” for present purposes if: “ …it is information or a document which the person is required to keep and preserve under or by virtue of - (a) the Taxes Act, or (b) any other enactment relating to tax.” 43. The relevant enactment relating to income tax is section 12B TMA 1970 which in so far as relevant provides that any person who may be required by section 8 to make and deliver a self-assessment return shall keep and preserve “all such records as may be requisite for the purpose of enabling him to make and deliver a correct return…”. 44. I considered the position of statutory records in the case of Holmes & Knight v HM Revenue & Customs[2018] UKFTT 678 (TC) where I said as follows: “13. Once it is accepted that a document is a statutory record, Schedule 36 provides no right of appeal against an information notice requiring production of that document. The reason for that is clear. If a taxpayer is legally required by the Taxes Acts to keep and preserve a document, there is no reason for the taxpayer to resist production of the document to HMRC. In those circumstances HMRC are entitled to production of the document as a matter of course. They are not required to justify to a tribunal that the document is reasonably required in order to check the taxpayer’s tax position. The nature of the document, as one that is required to enable the taxpayer to make a correct and complete return, leads to what is in effect an irrebuttable presumption, at least as far as the tribunal is concerned, that it is reasonably required for the purposes of checking the taxpayer’s tax position.” 45. I remain of that view, although my reference to HMRC not being required to justify that a statutory record is reasonably required should not be taken in the present context as meaning that HMRC do not need to satisfy me that there are reasonable grounds for not issuing a closure notice. I must still be satisfied that HMRC have reasonable grounds not to issue a closure notice.”
“I am satisfied on the basis of the documentary evidence before me, and on the basis of Mr Sinclair’s evidence, that HMRC have not been provided with the information and documents requested by them in their letter dated18 April 2019 and repeated in the letter dated14 June 2019 . Those documents, subject to a point I make below in relation to client account statements, are reasonably required to check the Return. In particular, HMRC are entitled to documents that might help to reconcile the turnover figure drawn up by the applicant’s previous accountants to the fees invoiced. That is why they require the applicant’s bank statements. The bank statements are statutory records and the applicant could not object to production of such records under Schedule 36. So too are fee notes which support the opening and closing trade debtors. HMRC are also reasonably entitled to enquire into the relationship between trade debtors and turnover in order to check the accuracy of the Return.”
“47. The applicant also submitted that the enquiry was oppressive and disproportionate. In particular, that it was wrong for HMRC to expand the enquiry to include depreciation and accountancy costs. HMRC have acknowledged that Mr Green ought to have expressly told the applicant that he was widening the enquiry and why that was the case. He did not do so until his letters dated18 April 2019 and14 June 2019 . In my view Mr Green was reasonably entitled to extend the enquiry because he took a different view to Mr Siddique of certain matters. There may be cases where personnel changes at HMRC take place, and different officers take a different view to their predecessors as to an enquiry or aspects of an enquiry. Such changes are to some extent inevitable, and HMRC should ensure that proper respect is paid by officers to the approach of predecessors. Enquiries can present a significant burden to taxpayers and any disruption to an enquiry caused by personnel changed should be kept to a minimum. Enquiries must not be conducted in a way which is unreasonable, disproportionate or oppressive. In those cases, the Tribunal has power on applications such as this to direct a partial or final closure notice. However, the present case is not such a case. I do not consider it was unreasonable for Mr Green to extend the enquiry to cover depreciation and accountancy costs.”
“I need a list of your debtors for the following reasons: Your opening unpaid invoices for 2016 will inform your 2017 return – it would be not be possible to accurately calculate your 2017 turnover without this information Your bank statements show a deposit of£50,307.32 on22 April 2016 . This doesn’t correspond to any of the fee bills that you have sent me for 2017. This may relate to a debt from the 2016 tax year, but I cannot confirm this without the fee bills I have requested. As I have previously explained, I am concerned about the debtor figure in comparison to your turnover. It also appears that some payments are not in line with your 30 day payment terms stated on your fee bills. Clearly these are vital documents which are needed to submit a complete and correct tax return and are statutory in nature, and I require them to complete my enquiry.”
“ I still require to establish precisely how your SA turnover was arrived at. I am sorry, but your explanation it not satisfactory. You have stated that the figure was produced by your accountants without giving any information as to their methodology or even as to what information they were provided with. This does not help me further my enquiry and it does not fulfil the request that I put to you and you have provided no supporting sales reconciliation on this point. A sales reconciliation is vital to produce any accounts and is certainly a record keeping requirement. It is crucial to my enquiry that I can establish how this turnover figure was arrived at, and it is your responsibility to keep the statutory records to support this figure. Thank you for providing a breakdown of the trade creditors as of5 April 2018 . You have not provided any supporting documentation for this breakdown, so I am requesting this now. I require a figure for Stock and Work In Progress as of5 April 2018 , and I need to understand the valuation method used to determine this figure. – You have not adequately explained why or how this valuation method was used or determined. I would also note that in your 2017 return, your explanation was that this figure was simply a % estimate of your employee’s salary and came to£8,500 . This figure has very clearly changed for your 2018 SA return, and I need to know why it has changed, the reasoning for the change and the method behind the change in order to complete my enquiries. Please provide a breakdown and analysis of any trade debtors at5 April 2018 with supporting fee bills. As with the fee bill requests of 2017, these are vital when examining a tax return. They are statutory documents which I need to complete my enquiry.”
“[52]The calculation of turnover is as follows: [53] minus opening debtors, minus opening wip, plus fee notes in the year, plus closing wip, plus closing debtors = turnover.” (Emphasis added)