Landmark High Court ruling lets expats off HMRC taxman hook

A landmark ruling in the British courts has taken away HMRC’s power to chase expats overseas for information used in a tax enquiry.

n the past, expats who live permanently overseas have been called on by Her Majesty’s Customs and Excise office to release information or documentation related to possible tax evasion or avoidance. However, a recent judgement in the High Court of Justice has ruled against the British taxman, allowing UK expatriates the right to ignore any tax enquiries without worrying about comebacks or penalties.

The ruling was given in the case of HMRC versus Michael Jiminez, who contested HMRC’s claim by arguing the issued Schedule 36 Notice demanding tax information was only valid within UK borders. Jiminez emigrated from the UK in 2002, initially settling in Cyprus before moving on to Dubai. During those 10 years, the was pursued by HRMC over tax matters until, in 2012, the taxman issued a Schedule 36 Notice concerning nine of the 10 years in which he’d been an expat living overseas.

Jiminez and his counsel demanded a judicial review of HMRC’s right to pursue information he as a non-resident might hold, arguing the taxman could only do so whilst he was resident in the UK. High Court judge Mr Justice Charles agreed with him, saying the 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.

According to the judge, Schedule 36 does not confer the power needed for HMRC to send the notice to Jiminez in Dubai, therefore the authority should not have sent it in the first place. He added the notice ‘was not lawfully given and therefore should be quashed’. As a result, the High Court’s ruling now applies to all outstanding HMRC Schedule 36 demands, and the judgement can only be overturned by a court of appeal.

In addition, all British expats who are officially non-resident are now able to legally ignore their Schedule 36 demands, and should refer their tax inspector to the results of the Jiminez case. As the notice is now judged to have been issued illegally, those in receipt of the demand can also appeal any non-compliance penalties.

Jiminez told reporters HMRC had decided distance was no object to their enquiries, meaning expatriate Brits remained in its sights long after they’d left the UK permanently for retirement or any other reason. The ruling, he said, clarifies that HMRC’s powers stop at the UK’s borders.