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Steve Allen of VAT Advisers Ltd highlights a recent case on what constitutes a 'document' and HMRC access.

HM Revenue & Customs' Rights of Access to Documents

A recent judicial review case has once again raised the issue of the data kept on business computers, and HMRC’s right to access it in the course of their enquiries.

In Glenn & Co (Essex) Ltd, the High Court rejected an application to judicially review HMRC's powers to ‘inspect’ computers. The Appellant was a registered dealer in excise goods, and was visited by a team of HMRC officers. The visit was unannounced, and no warrant had been obtained for it.

Is it a 'Document'?

Relying on inspection powers granted under the Customs & Excise Management Act 1979 (CEMA), the Officers decided to remove a number of computers and a server to enable the hard drives to be interrogated. All but one of the computers were returned the next day, with the remaining computer and the server being returned the day after.

The Appellant sought judicial review of the scope of HMRC’s powers to inspect ‘documents’ under CEMA, alleging that it did not extend to computers, despite the fact that Finance Act 2008 s 114 widened HMRC’s powers to inspect computerised records. The High Court rejected the Judicial Review application and confirmed that HMRC’S inspection powers do apply to computers.

At first glance, it seems surprising, if not plain worrying, that the absence of a search warrant seemingly had little or no bearing on the outcome of the case. However, it should be noted that the Appellant originally requested a review on two grounds; the first was on the absence of a warrant, and second that the powers to inspect ‘documents’ do not extend to computers.

For reasons not clear, the Judge only gave the hearing on the basis of the second one.

Timely Reminder

This case should serve as a timely reminder to all businesses to think carefully about the information being kept on their computers. This is said not just in terms of your business records, but also in relation to private information, given that we live in an age where many people have computers at home which are used for both business and private purposes. 

The reality is that the chances of an HMRC Officer inadvertently getting access to private files as a result of his VAT enquiries have clearly increased. In short, if you do not want such data to be seen, either remove it from the computer, or else transfer all the business records (to a wholly business computer) so that the computer becomes wholly private.