The long arm of the British tax man can reach out to expats in other countries, a court in London has decided.
The UK Court of Appeal has ruled that HM Revenue & Customs can send a notice demanding financial information to a former UK resident living in Dubai.
Lawyers confirm the move is a recent trend for UK courts to back official agencies wanting to extend their powers overseas.
The decision came in the long-running case of Tony Jimenez, who once lived in the UK but now has a home in Dubai.
HMRC issued him a notice after he had left the UK demanding financial information to assess if he owed tax in Britain.
Jimenez challenged the notice and won on the grounds that HMRC did not have jurisdiction now he had left the UK.
HMRC appealed and asked the court to apply a ‘sufficient connection’ test in a separate case brought by the Serious Fraud Office, which was also seeking financial information from an expat.
The court agreed HMRC had jurisdiction over Jimenez because he had an identifiable relationship with the UK as he had once lived here and was liable to pay tax.
“The question of extra-territorial effect is likely to depend upon close examination of the interaction between any relevant principle of international law which would operate against giving the domestic legislation process some extra-territorial effect and the public interest considerations which favour a construction that involves the power being exercised in relation to persons outside the jurisdiction,” said the court.
Strong public interest
Lord Justice Patten also remarked that there was a strong public interest in enabling HMRC to perform its public function.
“The court’s interpretation of HMRC’s powers as having ‘the widest territorial reach that is consistent with international law’ and adoption of the sufficient connection test may lead to other UK authorities testing the limits of their statutory information-gathering powers,” said legal bloggers Dominic Stuttaford and Andrew Reeves of law firm Norton Rose Fulbright.
This has been the case for some time in tax matters, as HMRC has been given ever-increasing powers to have access to information and documents held overseas.