In that case (reported here), the recipient company wanted to ensure the accuracy and legitimacy of a request from HMRC to the Isle of Man Tax Authority.
The Court stated that evidence amounting to a “knockout blow” would be required to resist a request for disclosure.
In appropriate cases, representations can be made and requests for clarification put forward. However, it is extremely difficult to formally challenge a TIEA request, in part due to the limited information provided to a recipient.
The only routes to challenge a request involve either at a Court hearing, if the tax authority seeks to enforce a notice, or alternatively by way of Judicial Review, (Petition of Doleance in the Isle of Man).
Either route will involve time and expense for recipients of notices.
A change in procedure?
The BVI Administrative Court, in the conjoined cases of Quiver Inc. & Friar Tuck Limited v International Tax Authority, allowed judicial review of two TIEA notices and stressed the importance of ensuring procedural fairness for persons in the BVI receiving TIEA requests.
The Court held that public bodies must disclose to the recipient sufficient information about the request to enable the recipient to challenge its validity where appropriate.
The argument was that it is unfair, and denies recipients the basic right of procedural fairness, if notices are issued without information as to the underlying request. Otherwise, a recipient could not, for example, provide the requesting tax authority with relevant information that it may not be aware of, and which may impact the validity of a request.
The BVI Court agreed and stated that the tax authority must provide sufficient information to determine if a notice is lawfully issued.
The Court rejected the tax authority’s argument that the duty of confidentiality under the TIEA prevails over common law rights of procedural fairness.
We await future developments in this important and evolving area of law.
DQ has a specialist team with extensive experience of advising clients in relation to international tax, securities and criminal investigations, TIEA requests and multi-jurisdiction insolvencies in the Isle of Man and many other jurisdictions. For further information, please contact Annemarie Hughes, Sinead O'Connor or Adam Killip.