Since June 2012, HMRC has successfully prosecuted 34 people for offences associated with offshore tax evasion, resulting in more than 154 years of custodial sentences and 15 years of suspended sentences. It currently has around 120 individuals under criminal investigation.
All of this, despite reduced staffing. How is it finding the time?
One answer could be that more information is being passed to HMRC than ever before. Under schedule 36, Finance Act 2008, it is empowered to issue “information notices”, requiring a taxpayer or third party to provide documents or information “reasonably required” to check the tax position of an identified taxpayer, within a “reasonable” period. These are known as “taxpayer” and “third party” notices respectively.
Some law-abiding taxpayers will inevitably become entangled in the regime. This article identifies steps they and their advisers can take to ensure proper, but proportionate, compliance.
Test the terms
Ignoring the notice is not a viable option. HMRC can even issue information notices overseas (see R (oao Jimenez) v First-tier Tribunal (Tax Chamber)  EWCA Civ 51 and Revenue and Customs Commissioners v PQ  UKFTT 371 (TC)) and although it will require cooperation from local authorities to enforce abroad, many taxpayers may still hold UK assets, which will be vulnerable.
Instead, do study the terms of the notice – is the timescale unduly onerous or are the documents requested not reasonably required, outside the addressee’s possession, too old, or otherwise carved out under the rules (e.g. certain documents held by auditors or tax advisers)? It may be helpful to instruct lawyers to review the notice and to attempt to negotiate revised terms.
Assess an appeal
If HMRC should refuse to revise the terms, it is worth considering an appeal.
The options are, however, limited. Regrettably, there is no right to appeal where the notice has been pre-approved by the Tribunal (which can be done without notice), although judicial review may be possible. Whilst any requirement of an unapproved taxpayer notice can be appealed, a third party notice may be appealed solely if it is “unduly onerous”.
Further, in R (oao PML Accounting Limited) v Revenue and Customs Commissioners  EWCA Civ 2231, the Court of Appeal held that the taxpayer was not able to argue the invalidity of a taxpayer notice as part of its penalties appeal. By previously settling an appeal against the deadline in the relevant notice, the taxpayer had inadvertently concluded all appeals as to validity.
Late appeals are only permitted where no notice of appeal is filed in time, and additional grounds can only be added within the 30-day limit to amend.
It is therefore vital to consider all routes to appeal at the earliest opportunity and to consolidate all challenges in a carefully drafted notice, ideally having sought legal input.
Accidentally disclosing privileged documents, or having unprotected discussions, risks those documents or discussions being used in future proceedings and leaves taxpayers and their advisers exposed.
It may be prudent to instruct lawyers from the start – confidential communications between a lawyer and their client for the purpose of giving or receiving legal advice is protected by legal advice privilege, allowing for full and frank discussions about how to approach HMRC.
Conversely, litigation privilege will not automatically apply, leaving correspondence between a taxpayer and their accountants or other non-lawyer advisers unprotected. The test is a question of fact (SFO v ENRC  EWCA Civ 2006 and Bilta v RBS  EWHC 3535 (Ch)) and will turn on whether litigation is reasonably in prospect (e.g. where HMRC has already set out the strength of its case in correspondence).
A final warning…
In PML Accounting, HMRC was ordered to return documents disclosed in response to an information notice but refused to delete work product deriving from them.
Disclosure to HMRC is a one-way track. Advisers and taxpayers should set their boundaries from day one.