In R (oao Glenn & Co (Essex) Ltd) v Commissioners of HMRC [2010] EWHC 1469, it has been confirmed by the High Court that HMRC officers can potentially remove computer equipment without the need for a search warrant.
The case concerned the extended definition of "document" contained in section 114 Finance Act 2008. Removal of computer equipment has traditionally taken place pursuant to a search warrant but, for the purposes of HMRC's new information powers, section 114 FA 2008 now extends the definition of "document" to "anything in which information of any description is recorded". This was interpreted as allowing HMRC to seize (albeit temporarily) 19 computers and a server whilst visiting premises because information was recorded on those items. This is despite the fact that there is a specific provision in section 114 FA 2008 which provides for on-site access to computers without them being removed.
The High Court acknowledged that the underlying powers of search and inspection contained in section 118B of the Customs and Excise Management Act 1979 permit "a substantial intrusion into the affairs of persons against whom it may be invoked" but then went on to remark that the extended interpretation of "document" in section 114 would also apply to other electronic items such as mobile phones, memory sticks, digital cameras and i-pods.
Aileen Barry, Director of National Tax Investigations at DLA Piper commented:
"This case shows how important it is to call an experienced investigations specialist if HMRC turn up unannounced. There is always scope to discuss and reason with HMRC about anything they wish to take copies of, and it shouldn't involve removing computers that are arguably the heart of most businesses these days. For one thing, material on the computer might be legally privileged, or it might be highly personal and irrelevant to the enquiry. HMRC should be 'blue-bagging' privileged material or copying specific information whilst on site. Seizing an entire computer system will often be a wholly disproportionate course of action, especially if there is an on-site operator who can access relevant information whilst HMRC are in attendance. On the strength of this case, taxpayers who face visits from HMRC without legal representation are risking serious disruption to their business".
The court noted that section 118B only permitted HMRC to remove 'documents' at a reasonable time and for a reasonable period although it was not necessary to give advance notice of a visit or obtain a warrant. The court's decision appears to reflect the reality of the electronic age and the fact that HMRC can often obtain valuable information from electronic "metadata" that may reveal when and by whom a record or file was created or amended, sent or received.
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