Significance of HMRC Schedule 36 Information Notices

HMRC Schedule 36 Information Notices are tools employed by HMRC to obtain information and documents required for tax assessments.

Understanding these notices, their implications, and restrictions is essential for taxpayers to ensure compliance and avoid potential penalties.

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(Read Time: Approx. 7 minutes)

Topics Discussed:

• Understanding the purpose and scope of Schedule 36 Information Notices.
• Restrictions and conditions associated with these notices, including third-party involvement and appeal rights.

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The Essence of Schedule 36 Information Notices

A Schedule 36 notice must be issued in writing, detailing the information or documents required and the timeframe for compliance by HMRC.

The time specified should be reasonable, depending on the nature of the request. If the timeframe is insufficient, it’s advisable to promptly request an extension from HMRC.

Key Elements of Schedule 36 Notices

• Reasonableness: The notice must specify a reasonable period for the provision of the requested information or documents.

• Possession or Power: Information must be within the taxpayer’s possession or power, meaning HMRC can request records that the taxpayer can reasonably be expected to produce, such as CSV files from accounting software.

HMRC can also issue notices to third parties to obtain information related to a taxpayer, with or without the taxpayer’s approval.

However, there are specific restrictions and protections in place to prevent the misuse of these notices.

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Restrictions on Information Notices

Part 4 of Schedule 36 outlines several key restrictions, ensuring that certain types of information cannot be requested through these notices.

This includes:

• Legally privileged materials.

• Information related to pending tax appeals.

• Journalistic material.

• Personal records related to physical or mental health, counselling, and well-being.

• Documents older than six years, unless approved by an authorised officer.

• Information concerning individuals deceased for more than four years.

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Specific Provisions for Auditors and Accountants

While auditors’ working papers and tax advisers’ communications with clients are not legally privileged, they remain the property of the respective professionals.

However, papers analysing how a return or accounting entry is derived are considered statutory records and can be requested.

Tax advice may be relevant to a taxpayer’s position, especially in cases involving purpose tests in legislation, purposive construction of laws, or non-compliance with anti-avoidance rules like the General Anti-Abuse Rule (GAAR).

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The Role of Third-Party Notices

HMRC has the authority to require third parties to provide information or produce documents concerning a taxpayer, provided they have the taxpayer’s agreement or the approval of the First Tier Tribunal (FTT).

This approval is often sought without the taxpayer’s knowledge to prevent potential tampering with records.

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Conditions for Issuing Notices During Tax Enquiries

When a taxpayer has filed a return, HMRC can issue an information notice under Schedule 36 only if one of the following conditions is met:

• Condition A: An ongoing enquiry into the return is still open.

• Condition B: HMRC suspects under-assessment or incorrect relief in the chargeable period.

• Condition C: The notice is for checking tax positions other than Income Tax, Corporation Tax, or Capital Gains Tax, such as VAT.

• Condition D: The notice is for obtaining information related to specific reliefs or deductions, such as Stamp Duty Land Tax (SDLT) reliefs.

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Business Records Checks (BRC) and Statutory Records

Information notices can be issued concerning statutory records during a Business Records Check (BRC).

Taxpayers are required to maintain and preserve these records to facilitate future tax liability assessments.

There is no right of appeal against requests for statutory records. Disputes must be resolved by refusing to provide the documents, prompting HMRC to impose penalties, which can then be appealed.

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Appeal Rights and Procedures

Taxpayers have the right to appeal against an information notice or its requirements.

Appeals must be:

• In writing.
• Submitted within 30 days from the date of the notice.
• Addressed to the HMRC officer who issued the notice.

The tribunal can confirm, vary, or set aside the notice or its requirements.

However, once confirmed or varied, compliance is mandatory, and no further appeals are possible.

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Penalties for Non-Compliance

Failing to comply with an information notice or obstructing HMRC can result in penalties, including:

• An initial penalty of £300.

• Daily default penalties of up to £60 per day.

• Increased daily penalties of up to £1,000 per day for prolonged default.

• Tax-related penalties determined by the Upper Tribunal.

• Penalties for providing inaccurate information or documents, up to £3,000.

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Appeal Rights and Procedures

Understanding and navigating Schedule 36 Information Notices requires diligence and, often, professional guidance.

Taxpayers should consult with experts to ensure compliance and to protect their interests.

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Summary

Schedule 36 Information Notices play a pivotal role in HMRC’s tax compliance efforts.

Understanding their scope, restrictions, and the rights of appeal is crucial for taxpayers.

If you find yourself dealing with such notices, seeking expert advice is essential to ensure compliance and protect your financial interests.

For personalised guidance on handling Schedule 36 Information Notices, contact Ilyas Patel Accountants.

Our team of experts is here to help you navigate these complexities and ensure your compliance with HMRC regulations.

Fill out our form here to start your claim and include all relevant information.

For any questions, please give us a call at 01772 788200, or message us on our WhatsApp for out of office hours.

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Kind regards,

Ilyas Patel