Posted on 31st July 2014

Latimer Hinks Urges Caution Following "Worrying" Tax Tribunal Warning

Elizabeth Armstrong, Partner

Latimer Hinks Solicitors is warning businesses to be cautious when discarding historic paperwork, following a landmark tax ruling.

Under existing rules, businesses are required by law to retain documentation going back six years.

In the lengthy case of Whitefields Golf Club Ltd and others v HMRC, over a routine VAT inspection following a restructuring of the golf clubs activities, it was ruled that Whitefields Golf Club had to supply copy documents to HMRC. This was despite handing the documentation over in 2004, which HMRC had since lost or destroyed.

The ruling, which determined that the conduct of HMRC wasnt relevant in this case, said that it was reasonable for HMRC to demand copies of certain documents that taxpayers had already provided eight years earlier.

The investigation resumed in 2011 following another VAT inspection in 2010 and, despite Whitefields arguing it would be unreasonable to provide the documentation again after it had been lost, the tribunal ruled in HMRCs favour.

Elizabeth Armstrong, partner in the private client department at Latimer Hinks Solicitors, said: "This is a challenge for both business and individual taxpayers, as it suggests that HMRC can go back as far as they want for information. We are all comfortable with the six year rule, so it will probably be a little while before we know how it will be interpreted.

HMRCs request was made under paragraph 1 of Schedule 36 to the Finance Act 2008, which gives officers of HMRC powers to obtain information and documents.

However, the Tribunal did say that HMRC can only require a person to produce a document if it is in that persons possession or power.

Elizabeth added: "As a result of the ruling, it would be wise for businesses to remain cautious when discarding documents, regardless of how long ago they were drafted.

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