The Irish Revenue Commissioners (“Revenue“) are increasingly exercising their statutory powers to require taxpayers to produce documents and information, both in connection with domestic tax enquiries and in response to exchange of information (“EOI”) requests from foreign tax administrations.
While focused on HMRC’s powers to request documents from a UK subsidiary relating to its US parent company in the course of a transfer pricing (“TP”) enquiry, the recent UK First-Tier Tribunal (“FTT”) decision in Lifeplus Europe Ltd v Commissioners for HMRC[1] nonetheless provides useful guidance when considering the scope and limits of Revenue’s powers in this area.
In particular, the FTT’s consideration and analysis of the concepts of ‘reasonably required’ and ‘possession or power’ is instructive in terms of how to interpret the analogous Irish statutory provisions.
The Irish legal framework
Revenue’s powers to compel the production of documents and information are principally contained in sections 900 and 902 of the Taxes Consolidation Act 1997 (“TCA“). These provisions enable Revenue to require a taxpayer or a third party to produce documents or furnish information where such documents or information are, broadly, in the taxpayer’s ‘power, possession or procurement’[2], or where there may be information, explanations or particulars relevant to a taxpayer’s liability which an authorised officer may ‘reasonably require’.
Unlike the UK where a taxpayer may exercise a statutory right of appeal to the FTT in respect of an information request, there is no equivalent statutory appeal mechanism in Ireland – instead, a formal legal challenge to a Revenue information notice under section 900 or section 902 TCA would likely need to be brought by way of judicial review in the High Court. Given the formal and involved nature of this type of challenge (including the need to ground such a challenge on the basis of legitimate expectations or procedural unfairness for example), it is not, in most instances, a practical or realistic mechanism available to taxpayers to challenge information notices issued by Revenue.
While the introduction of an equivalent statutory right of appeal in Ireland would certainly be welcome, it is, in the absence of such an appeal mechanism, even more important for taxpayers to understand the parameters of when a Revenue office may ‘reasonably require’ information / documentation or when information / documentation may considered within the taxpayer’s ‘power, possession or procurement’.
The UK decision — Lifeplus Europe Ltd v HMRC
Lifeplus Europe Ltd (“Lifeplus“), a wholly owned UK subsidiary of Eurark LLC (a US-incorporated company), was the subject of a TP enquiry by HMRC into the pricing of product sales from Eurark LLC to Lifeplus.
HMRC challenged the use of the Transactional Net Margin Method (“TNMM“) and issued a notice requiring Lifeplus to produce the consolidated and entity-level financial statements of Eurark LLC for 2014 to 2022 (the “Documents“).
Lifeplus lodged an appeal to the FTT against this notice. As detailed further below, the FTT allowed the appeal, holding that the Documents were not “reasonably required” nor were the Documents within Lifeplus’ “possession or power“[3].
Interestingly and notably, HMRC had also previously requested these documents from the US Internal Revenue Service (“IRS“), but the IRS refused on the basis that the financial statements comprised the activities and balances of foreign subsidiaries not relevant to HMRC’s investigation, and that the role of Lifeplus was already explained in the TP study.
1. The Documents were not ‘reasonably required’
In the FTT’s view, HMRC failed to demonstrate that the Documents were ‘reasonably required’ for the purposes of HMRC’s enquiry. The FTT affirmed that the appropriate test is whether there was a “rational connection” between the Documents and the underlying enquiry[4]. The FTT confirmed that documents which are merely ‘informative’ or provide ‘useful context’ do not satisfy the ‘reasonably required’ threshold and HMRC cannot embark on “fishing expeditions”.
Interestingly, as part of its reasoning, the FTT cited paragraph 3.22 of the OECD TP Guidelines, which provides that where a one-sided TP method (such as TNMM) is chosen and the tested party is the domestic taxpayer:
“the tax administration generally has no reason to further ask for financial data of the foreign associated enterprise.”
The FTT therefore concluded that the TNMM method used by Lifeplus did not rely on its parent company’s financial statements and that they would not further inform the functional analysis of either company.
This aspect of the FTT’s reasoning is very relevant in the context of EOI requests received by Revenue from foreign tax administrations in the course of TP audits being conducted in foreign territories in respect of arrangements where a one-sided TP methodology (typically TNMM) is being applied and where the tested party is the local affiliate in the foreign territory.
Recently, we have seen a growing trend where these EOI requests are seeking voluminous information relating to the Irish affiliate of the foreign taxpayer. Per the FTT decision in Lifeplus, in order to demonstrate that the requested information is ‘reasonably required’, there needs to be a ‘rational connection’ between the requested information and the underlying foreign TP enquiry / audit – in many of these instances, this rational connection is not apparent.
Therefore, upon receipt of an information request / notice from Revenue (on foot of an EOI request from a foreign tax authority), taxpayers should seek to establish the basis upon which Revenue is satisfied that the information is ‘reasonably required’ to the ongoing foreign TP audit.
2. The Documents were not within Lifeplus’ ‘possession or power’
It was common ground that Lifeplus did not ‘possess’ the Documents.
The FTT held that a person will not normally have ‘power’ over documents held by a third party unless that person has an enforceable legal right to access those documents without the consent of the third party. The FTT acknowledged that while ‘power’ may be established where there is a standing or continuing practical arrangement between the parties, there must be specific and compelling evidence that such an arrangement (eg, evidence of unfettered access to the third party’s documents) exists.
In this regard, the FTT held that:
- it is not sufficient merely to demonstrate a close legal or commercial relationship such as that of parent and subsidiary; and
- each company in a group is a separate legal entity and that there is no general principle that all companies in a group are to be regarded as one when assessing whether or not particular information or documentation is within a specific entity’s ‘possession or power’.
Key takeaways for Irish taxpayers
While the FTT decision in Lifeplus is not binding on the Irish courts, it is certainly informative and relevant in interpreting the analogous Irish concepts of ‘power, possession or procurement‘ and ‘reasonably required’.
As noted above, these concepts are becoming increasingly relevant given Revenue’s use of its powers in an EOI context. Therefore, upon receipt of information notices from Revenue, taxpayers should engage promptly with their legal advisors on the scope of any such notice, their compliance obligations and available options in terms of establishing the basis upon which Revenue is satisfied that the information is ‘reasonably required’.
Contact Us
For more information, please contact any member of our Tax team or your usual Matheson contact.
[1] [2026] UKFTT 797 (TC).
[2] While it is notable that the Irish provisions include the word ‘procurement’ (a word which is not present in the equivalent UK provisions considered in Lifeplus), the Irish Supreme Court decision in Thema International Fund Plc v HSBC Institutional Trust Services (Ireland) Ltd [2013] 1 IR 274 (albeit dealing with a litigation discovery matter) is instructive where it was held that the word ‘procurement’ did not extend the scope of discovery in a litigation proceedings context – rather, it aligned the phrase with its common usage (ie, a party either has documents in its possession or has the legal entitlement (ie, power) to obtain possession).
[3] Within the meaning of those terms as set out in Schedule 36 of the Finance Act 2008.
[4] Citing R (Kotton) v First-tier Tribunal (Tax Chamber) [2019] EWHC 1327 (Admin), paragraph 62.
