Analysis
The appellants had established a remuneration trust by a trust deed dated 26 March 2010 and of which they were the protectors. As such, they had the power to appoint and remove trustees, including Bay Trust International Ltd (the trustee). On the day of its establishment, the appellants applied to the trustee for loans of £550,000 which were duly advanced the same day. They were also directors of GSA Investments Ltd, a UK company to which the trustee (via another company in Belize) delegated powers to invest the trust funds.
The respondent issued an information notice dated 14 September 2012 requiring the appellants to produce certain information and documents in their possession or power, including the accounts of the trust, details and evidence of all loans made by the trust, details of any payments made to the beneficiaries and others, and details of all assets retained or transferred. The appellants wrote on 11 October 2012 asking the trustee to provide and comment on the information and documents requested in the information notice. There was no response and, by a decision dated 27 September 2013, the appellants were directed to serve on the tribunal and respondents a witness statement stating which, if any, documents requested in the information notice were not in their possession or power but in the possession of the trustee, describing their relationship and communications with the trustee generally and, in relation to the documents, setting out the steps taken to obtain them, including what steps, if any, they had taken to obtain a response from the trustee. The appellants made a witness statement on 10 October 2013 stating that the documents requested in the information notice were not in their possession or power, being in the possession of the trustee which was independent of the other parties involved in the trust. They alleged that their powers to influence trust matters were limited. It was further stated (without producing evidence) that the appellants had sent a further reminder to the trustee and, subsequently, their representatives wrote to the effect that they had emailed the trustee on 16 October 2013 requesting a response to their letter of 11 October 2012.
The trustee responded to the appellants on 18 October 2013 to the effect that they were not in a position to comply as they considered such information and documents private and confidential. The appellants, who had appealed against the information notice, agreed with the respondents that the appeal be dealt with without a hearing on the basis of written submissions.
Held (dismissing the appeal)
The appellants had not discharged their burden of proof, on a balance of probabilities, that the information and documents requested were not in their possession or power. Although they had produced some material to support their case, there was no evidence to explain why the information and documents were not in their possession or power. It was clear from the trust deed that, as founders and protectors, the appellants did have the power to influence the behaviour of the trustee in relation to such matters as the provision of information and documents. The fact that the appellants had been able to ask for and obtain substantial loans from the trustee showed that the trustee did respond to and take account of the appellants’ wishes. There was nothing to show that the trustee’s compliance with the request to provide information and documents would be unlawful or unreasonable, and the only conclusion to be drawn from the steps which the appellants had taken was that they had not made any serious attempt to obtain the relevant information and documents from the trustee.
JUDGMENT JUDGE GREG SINFIELD: Introduction: [1] This decision is further to and should be read with my decision dated 27 September 2013 with directions in relation to this appeal. As explained more fully in the earlier decision, this is an appeal against an information notice dated 14 September 2012 issued to the appellants by the …Continue reading "H A Patel and K Patel (a partnership) v HMRC [2014] UKFTT 167 (TC)"