HMRC Disputes

What is an Information Notice?

Schedule 36 of the Finance Act 2008 was brought into force in 2009 to assist HMRC in gathering information in respect of ongoing enquiries.

It was originally intended that these powers would be used only in cases of extreme non-compliance. However, the issuing of Schedule 36 Notices has become more and more common, and often the Notices being issued are inappropriate and/or incorrect due in part to HMRC staff not being properly trained or appraised of the requirements of issuing such Notices. As a result, any Notices received should be reviewed carefully for accuracy and competency.

The average taxpayer will be none the wiser as to what their rights are when they receive one of these Notices, and may end up complying with an unreasonable request by HMRC through no fault of their own, by mistakenly assuming that HMRC have the right to request such information. This can lead to longer investigations, and further unnecessary time, costs and resources spent in corresponding with HMRC.

Penalties

On the other hand, failing to comply with a Notice can be an expensive mistake to make. Schedule 36 of the Finance Act 2008 allows HMRC to charge a taxpayer penalties for failure to comply with a Notice. The initial penalty is charged at £300 upon failure to provide the requested information or documents by the specified date. If the contents of the Notice remain outstanding after a further 30 days, HMRC are then able to impose daily penalties of up to £60 per day. These charges can be levied indefinitely, and it does not take long for them to add up.

Furthermore, the imposition of such penalties will be viewed as a failure to cooperate by HMRC, and thus impacting the mitigation of any potential behavioural penalties that may be charged as a result of a loss of tax.

Dealing with the Notice

As experienced tax practitioners who have all worked both sides of the fence, we are able to cast a critical eye over Schedule 36 Notices and interpret what HMRC are legally allowed to request. There are many instances where a Notice may be incompetent due to:

• HMRC drafting the Notice too widely. I.e., there is no specificity or date range for the documents requested.
• HMRC asking for a document to be created, or asking for documents that are not in the taxpayer’s “power or possession”.
• HMRC requesting personal information such as bank statements when there is no reason to. This contravenes Article 8 of the Human Rights Act.
• HMRC not being “reasonably required” to request the information.
• HMRC not showing why the information they are requesting helps check the taxpayer’s tax position.

If you or one of your clients have received an information notice or think that they might be imminent and would like to discuss the matter, for a confidential no obligation chat please call 01757 630010 or email info@independent-tax.co.uk.