Jimenez is best known as an owner of Charlton Athletic and for his work at Newcastle United.
HMRC had issued him with a Schedule 36 order, which gives inspectors far reaching powers to visit businesses and demand paperwork if they suspect wrongdoing.
However, the judge agreed with lawyers for the Brixton-born entrepreneur that if HMRC wants to seek information about liability to UK tax from expats like Jimenez, it should rely on mutual assistance agreements between jurisdictions.
“This case is significant for a number of reasons,” Adam Craggs tax partner at law firm RPC commented. “Not only does it confirm that Schedule 36 does not have extra-territorial effect, but the court was critical of the fundamental process regularly used by HMRC to issue Schedule 36 notices through ex-parte applications to the First-Tier Tax Tribunal (FTT).”
HMRC ‘should reconsider their approach’
In his verdict, the judge said HMRC and the tribunal might wish to reconsider their approach to information notice appeals based on fairness and open justice.
The verdict suggests that the subject of a notice should be allowed to attend application hearings – unless notifying that person might prejudice the collection of tax.
Craggs adds: “If changes are not made to the way in which such notices are issued and approved, HMRC and the FTT will run the risk of future public law challenges on substantially the same grounds.
“Given that HMRC appear to be relying on its information powers with increasing frequency, it is to be hoped that this judgment will encourage a period of review and reflection on the part of HMRC with a subsequent improvement in the process by which Schedule 36 notices are issued.”
Steve Thomas, Jimenez’s solicitor, said: “Jimenez left the UK 15 years ago; since leaving he has openly and voluntarily cooperated with queries raised by HMRC about his residence status.
“Yet despite Jimenez’s cooperation, HMRC sought to force matters by issuing a production notice to Jimenez at his Dubai residence. In his ruling, Mr justice Charles agreed this was an unlawful and unreasonable approach by HMRC. Jimenez has been awarded his costs incurred.”
If the judge’s words are heeded future tribunals should, at least, require fuller justification for closed hearings.
International Adviser reached out to HMRC for a comment, but none has been provided.