The First-Tier Tax Tribunal (FTT) has recently held that HMRC can issue third party information notices to non-UK residents under paragraph 2 of Schedule 36 to the Finance Act 2008 (Schedule 36).

The FTT in Mr and Mrs PQ v HMRC[1] held that the residency status of individuals will not in itself determine HMRC’s ability to issue third party notices if there is a “sufficient connection” between the required information and its intended recipient. The FTT noted that both intended recipients were British nationals and had been the shareholders and directors of the company investigated by HMRC, which taken together was enough to establish a sufficient connection. Therefore, even if the recipient is not a British national, other factors could mean that there was the requisite connection.

The FTT considered the Court of Appeal’s recent decision in on extraterritoriality in relation to the issue of taxpayer notices in Jimenez [2]. The FTT held that much of the Court of Appeal’s reasoning in Jimenez could be applied to third party notices:

What the Court of Appeal said […] in respect of paragraph 1 appears […]  to apply equally to paragraph 2 and that was that the territorial scope of Sch 36 would have been intended by Parliament to have no restriction on it other than would be strictly required to comply with international law.

The FTT also referred to the Administrative Court’s decision in KBR v SFO[3] in concluding that the “sufficient connection” principle applies in determining whether HMRC can issue a third party notice to a non-resident (see our previous blogpost for a more detailed analysis of the KBR decision). In May 2019, the UK Supreme Court granted KBR leave to appeal against the decision. It is not clear whether the recipients of the third party notice will seek a judicial review of the FTT decision.

The PQ v HMRC decision is another step towards the ever-increasing extension of UK authorities’ powers to obtain documents from overseas. Notably, the Crime (Overseas Production Orders) Act 2019 (COPO Act), which received Royal Assent in February 2019, allows UK enforcement agencies, including the SFO, HMRC and the FCA, to obtain electronic data from overseas service providers by issuing a court order with extraterritorial effect – or “Overseas Production Order” (OPO). An OPO can only be served in a foreign jurisdiction where a designated international cooperation agreement exists between that country and the UK, and will therefore bypass the traditional Mutual Legal Assistance (MLA) regime by providing a quicker access to data generated or stored abroad. Currently, the UK has not concluded any such arrangements, although there are ongoing negotiations for a data access agreement with the US. This means that, for the time being, UK enforcement agencies will need to continue relying on the MLA regime.


[1] [2019] UKFTT 371 (TC) (PQ v HMRC)

[2] R. (on the application of Jimenez) v First Tier Tribunal (Tax Chamber) [2019] EWCA Civ 51)

[3] R (on the application of KBR Inc) v The Director of the Serious Fraud Office [2018] EWHC 2012 (Admin)