1. Services

Schedule 36 Information Notices

Information Notices: what are they?

In 2009, Schedule 36 of the Finance Act 2008 was enacted to assist HMRC with ongoing inquiries. Originally, these powers were intended to be used only in extreme cases of non-compliance. It has become more common, however, to issue Schedule 36 Notices, and often the Notices issued are inappropriate and/or incorrect due to HMRC staff not being properly trained or appraised on the requirements of issuing such Notices. Therefore, any Notice received should be reviewed carefully for accuracy and competence. Upon receiving one of these Notices, the average taxpayer will not know what their rights are, and may end up complying with an unreasonable request by HMRC without their knowledge, assuming that HMRC has the right to request such information without their knowledge. Further unnecessary time, costs and resources can be spent on corresponding with HMRC as a result.

Penalties

In contrast, failing to comply with a Notice can prove costly. If a taxpayer fails to comply with a Notice under Schedule 36 of the Finance Act 2008, HMRC can charge a penalty. If you fail to provide the requested information or documents by the specified date, you will be charged a penalty of £300. After a further 30 days, HMRC can impose daily penalties of up to £60 per day if the contents of the Notice remain outstanding. The charges can be levied indefinitely, and they accumulate quickly. Such penalties will also impact HMRC's ability to mitigate any potential behavioural penalties that may be charged as a result of a tax loss by viewed as a failure to cooperate.

Dealing with the Notice

Since we have all worked on both sides of the fence, we can critically examine Schedule 36 Notices and interpret what HMRC is legally entitled to request. There are many instances where a Notice may be incompetent due to:

• The Notice is too broadly drafted by HMRC. I.e., there is no specificity or date range for the documents requested.
• Documents that are not in the taxpayer's "power or possession" are requested by HMRC.
• The HMRC requests personal information such as bank statements without a valid reason. This violates Article 8 of the Human Rights Act.
• HMRC is not "reasonably required" to request the information.
• A lack of explanation from HMRC as to how the information they are requesting will help them check the taxpayer's tax position.