JJ Management Consulting: HMRC’s right to conduct informal investigations

When HMRC opens a formal enquiry or issues a formal information notice in accordance with its statutory powers, the taxpayer can benefit from certain safeguards as set out in the legislation. However, what happens when HMRC does not use its statutory powers but instead commences an informal investigation? The recent decision of the Court of Appeal in JJ Management Consulting LLP v HMRC explores the balance (or should we say imbalance) between HMRC’s power to conduct informal investigations to assist in the fulfilment of its primary function of collecting tax, and the corresponding lack of safeguards afforded to taxpayers. The effect of the decision is to strengthen HMRC’s extensive powers by affirming its right to conduct enquiries on an ‘informal’ premise, even where there is no statutory basis for this.