WhatsApp messages used to challenge enquiry noticeby
WhatsApp screenshots were successfully used as evidence by a taxpayer to prove that HMRC had been late in delivering a notice of enquiry.
Richard Monks saw some success at the first tier tribunal (FTT), using WhatsApp messages to prove that HMRC had delivered a notice of enquiry late. However, the taxpayer was less successful in challenging the validity of his schedule 36 information notice.
Under section 9A TMA 1970, HMRC has up to 12 months after the day an on-time return is delivered to open an enquiry.
Monks lodged his 2019/20 tax return on 29 January 2021. On 27 January 2022, HMRC issued Monks a notice of enquiry under section 9A.
In March 2022, HMRC wrote to Monks by email as none of the information requested had been provided and issued him an information notice under schedule 36, FA 2008.
Monks argued that the notice of enquiry (and consequently, the information notice) had been received late, and that the information notice requested items that were not reasonably required.
Both the enquiry and information notice were upheld on review. Monks appealed to the first tier tribunal [TC08954].
WhatsApp messages provide crucial evidence
On the basis of HMRC’s evidence, the FTT was satisfied that HMRC had posted the notice of enquiry to Monks on 27 January 2022. The FTT found that HMRC had met the requirements of section 7 Interpretation Act 1978, and that in the ordinary course of post it would have been expected that the letter would have been delivered within one day (in other words, the letter was deemed delivered on time). As an aside, while both parties’ arguments gave reference to the impact of Covid-19 on postal times, no definitive evidence was given on this point.
However, Monks produced WhatsApp messages with pictures of the enquiry letter that were dated 1 February 2022. Monks’ evidence, which the FTT found credible, was that his post box was checked every day and that any mail relating to his financial affairs was sent immediately to his accountant. Monks’ accountant also confirmed that he had received a number of missed calls and that he had then contacted Monks.
In light of this evidence, the FTT found that the enquiry had not been delivered promptly, and accordingly it was not valid.
Condition B satisfied
For an information notice to be valid where a tax return has been lodged, it’s necessary for a taxpayer to meet at least one of the conditions in paragraph 21, schedule 36 FA 2008.
With the notice of enquiry found not to be valid, condition A could no longer be satisfied. However, HMRC argued that condition B under paragraph 21(6) was met on the basis that HMRC believed that taxable income had been omitted from Monks’ 2019/20 return.
HMRC produced links to Companies House, showing Monks as a director of various companies. HMRC argued that Monks’ income in 2019/20 was insufficient to support his lifestyle and expenditure and therefore the self assessment was insufficient, noting that Monks had only declared one directorship and associated income there from in his tax return.
The FTT found that condition B had been satisfied.
The FTT then turned its attention as to whether the information HMRC sought in the information notice was reasonably required to check Monks’ tax position.
HMRC argued it had a suspicion of a loss of tax, but did not know what, if any, income Monks had derived from the other companies, or indeed from any other source. In a situation where it was known that the declared income in the year did not suffice to cover expenditure, it was reasonable for HMRC to seek information about Monks’ tax position in that year and to ascertain all relevant sources of income or capital.
The FTT agreed – where condition B is satisfied, as it was in this case, HMRC was entitled to know the full facts related to Monks’ tax position so that it could make an informed decision whether and what to assess.
While the FTT allowed the appeal in respect of the validity of the enquiry notice, it dismissed Monks’ appeal regarding the schedule 36 information notice and the requirements within.
With self assessment season kicking into full swing, this case serves as a timely reminder to hold onto evidence of correspondence with HMRC.