Judgment summary
Dr Garai, a medical doctor, undertook locum work arranged through Canopaye Ltd, an umbrella company, from around October 2021 to May 2023 (paragraph 6). HMRC understood that Canopaye offered disguised remuneration arrangements involving National Minimum Wage payments under PAYE plus untaxed 'annuity' payments (paragraphs 9-10).
HMRC issued an informal information request on 16 September 2022, followed by a formal information notice under FA 2008, Sch 36 on 15 December 2022 (paragraphs 11-12). Dr Garai appealed, disputing all items in the notice (paragraph 1).
The Tribunal confirmed the notice was validly issued but varied it, removing certain items and narrowing the scope, with the varied schedule set out in Appendix 2 (paragraph 2, paragraph 79).
Background
Dr Garai was introduced to Canopaye Ltd by a recruitment agency in or around October 2021 and was told the company was 'legitimate' and would handle HMRC arrangements; he had no opportunity to negotiate his pay terms (paragraph 7). He received payments under PAYE broadly in line with the National Minimum Wage (paragraph 8).
HMRC's understanding, based on Officer Jamie McIntyre's evidence, was that Canopaye's arrangements involved a taxed minimum wage payment reported under RTI, plus an additional untaxed 'annuity payment' not reported to HMRC (paragraph 10).
HMRC identified Dr Garai as a Canopaye employee and issued an informal request on 16 September 2022, then the formal Notice on 15 December 2022, covering the period 6 April 2021 to 16 September 2022 (paragraphs 11-13). Dr Garai authorised Canopaye to deal with HMRC on his behalf, and a barrister engaged by Canopaye appealed the Notice on 20 January 2023 (paragraphs 14-15). HMRC's review upheld the Notice but varied the bank statement period to begin on 26 October 2021 (paragraph 16). Dr Garai appealed to the Tribunal on 24 April 2023 (paragraph 17). Canopaye subsequently went into liquidation, with liquidators reporting on 22 December 2025 insufficient assets for any distribution to creditors (paragraph 21).
Core dispute
Dr Garai challenged the validity of the entire Notice on three grounds: that the nearly 17-month period covered was onerous and there was no 'sensible or reasonable possibility' of imposing tax liability absent an open enquiry; that HMRC should be checking the PAYE position with the employer rather than numerous employees; and that HMRC had acted outside their statutory powers by using the Notice to instil fear in taxpayers, rendering it invalid (paragraph 26).
He also appealed each individual item in the Notice, arguing that the information and documents were not reasonably required to check his tax position, and separately argued that HMRC should obtain the information from Canopaye rather than from him, given Canopaye's role as payroll provider (paragraphs 39, 58).
A further issue was whether the requested items, including payslips and bank statements, were in Dr Garai's possession or power as required by FA 2008, Sch 36, para 18 (paragraph 48).
Court findings
The Tribunal held that a person's 'tax position' under FA 2008, Sch 36, para 64 includes future tax liabilities, so HMRC could issue the Notice even before assessments could be raised, distinguishing Johnson v Branigan (paragraphs 31-32).
On the absence of an open enquiry, the Tribunal found it could not determine the dates on which Dr Garai submitted his tax returns for 2021-22 and 2022-23, and therefore could not find the Notice invalid for failing to meet Condition A in FA 2008, Sch 36, para 21 (paragraphs 35-37).
The Tribunal rejected the argument that HMRC should pursue Canopaye rather than Dr Garai, noting that under section 13 ITEPA 2003 and as confirmed in Stephen Hoey v HMRC [2022] EWCA Civ 656, liability to income tax on employment income rests with the employee notwithstanding the employer's PAYE obligations (paragraphs 43-47).
On possession or power, applying HMRC v Mattu [2021] UKUT 245 (TCC) and Parissis v HMRC [2011] UKFTT 218 (TC), the Tribunal found HMRC had raised a prima facie case that the documents were in Dr Garai's possession or power, and he had not shown he had made a serious attempt to obtain them, including payslips he had not tried to access (paragraphs 51-54).
The Tribunal found no evidence to support the assertion that HMRC used the Notice to instil fear in taxpayers (paragraph 55).
On individual items, applying the test from One Call Insurance Services Ltd v HMRC [2022] UKFTT 184 (TC), the Tribunal found some items, such as the identity of other persons involved in the arrangements, end users, intermediaries, and charge-out rate, were not reasonably required to check Dr Garai's tax position and removed them, while retaining items concerning his understanding of pay, actual amounts received, type of work carried out, bank statements (with redaction of outgoings permitted), contracts, loan/credit agreements, payslips, and relevant correspondence, all restricted to his employment with Canopaye and the period from 26 October 2021 to 16 September 2022 (paragraphs 66-77).
Outcome
The Tribunal confirmed that the Notice was validly issued but varied it, removing certain items (including Item 3 in its original form) and narrowing others, as set out in Appendix 2 (paragraphs 2, 60, 79).
Dr Garai was directed to provide the information and documents in the varied Notice within 45 days of the release of the decision (paragraph 80).
Under FA 2008, Sch 36, para 32(5), the Tribunal's decision on the appeal is final (paragraph 81).
Major issues / areas of contention
- Whether HMRC's information notice under FA 2008, Sch 36 was valid despite covering a period straddling two tax years and no open enquiry existing at the time of issue.
- Whether a person's 'tax position' under FA 2008, Sch 36, para 64 includes future tax liabilities, permitting HMRC to request information before an assessment could be raised.
- Whether the absence of a finding on the dates Dr Garai submitted his tax returns prevented a finding that Condition A under FA 2008, Sch 36, para 21 was unmet.
- Whether HMRC should have sought the requested information from Canopaye Ltd, the employer, rather than from Dr Garai, given PAYE obligations under section 13 ITEPA 2003.
- Whether the requested documents and information were in Dr Garai's possession or power under FA 2008, Sch 36, para 18.
- Whether each individual item requested in the Notice was reasonably required to check Dr Garai's tax position, applying the test from One Call Insurance Services Ltd v HMRC.
- Whether HMRC acted outside their statutory powers by using the Notice to instil fear in taxpayers.