HMRC Information Notices Under Schedule 36: Limits, Appeals, and Penalties

HMRC information notices under Schedule 36 of the Finance Act 2008 are formal written demands that require you to hand over information or documents the tax authority says are reasonably required to check a tax position.¹ Ignoring one triggers a £300 penalty, followed by daily charges and, in serious cases, an additional tax-geared penalty imposed by the Upper Tribunal. If a notice lands on your desk, what you do in the next 30 days matters a great deal.

What HMRC Can Ask You For

Schedule 36 creates three kinds of notice. A taxpayer notice under Paragraph 1 goes to the person whose tax is being checked and is by far the most common. A third-party notice under Paragraph 2 goes to someone else who holds relevant records, such as a bank, employer, or accountant; HMRC cannot issue one without either the taxpayer’s agreement or approval from the First-tier Tribunal.² An identity-unknown notice under Paragraph 5 is aimed at uncovering who a taxpayer or class of taxpayers actually is, and needs Tribunal approval based on reasonable grounds to believe a serious tax loss is likely.³

Every notice must be in writing, and the material demanded must be “reasonably required” to check the taxpayer’s tax position.⁴ That threshold is meant to keep officers away from speculative requests. But the scope of what can be demanded is still wide, and several restrictions in Schedule 36 are worth knowing before you start pulling records together.

Statutory Records vs. Everything Else

One distinction runs through the whole Schedule. Statutory records are documents you are already legally required to keep and preserve under tax legislation, such as business accounts, VAT records, and payroll data.³ When HMRC asks for statutory records, the officer does not have to justify the “reasonably required” test, and you have no right of appeal. For anything else, the test applies in full and you can challenge the demand. In practical terms, this is often the first question worth asking about a notice: which items are statutory records, and which are not?

The Six-Year Document Limit

A notice cannot require you to produce a document if the whole document is more than six years old, unless an authorised (more senior) HMRC officer has given or agreed to the notice.³ Older records need higher sign-off.

Legal Professional Privilege

A notice cannot require you to hand over privileged information or any part of a privileged document. Material is privileged if a claim to legal professional privilege could be maintained in court proceedings.⁵ This covers confidential communications with your lawyer for the purpose of legal advice, and documents prepared for litigation. It does not extend to routine tax-return correspondence with your accountant. Disputes about whether specific documents are privileged can be referred to the Tribunal, but only the taxpayer can make that referral, not HMRC.⁶

Other Limits

Notices cannot require personal records as defined in the Police and Criminal Evidence Act 1984, or journalistic material, though HMRC can ask for redacted copies of personal records and any non-personal information they contain. Information relating to a pending tax appeal is also excluded. And a notice only requires you to produce a document that is in your possession or power — you cannot be penalised for failing to hand over something you do not have and cannot get.³

Responding to the Notice

The notice states a compliance deadline, which must be at least 30 days from the date you receive it.⁷ Work off the actual date printed on the notice rather than assuming a generic 30-day window.

Go item by item. Typical requests cover bank statements, sales invoices, purchase receipts, ledgers, property deeds, loan agreements, and contracts, often with specific date ranges or categories called out. Find originals where you can; HMRC wants legible copies with signatures and dates visible. Reconciling bank movements against reported income before sending anything is sensible, because inconsistencies between the two are exactly what the officer will look for.

Send your response to the named caseworker using the method the notice specifies, whether that is post to a stated address or upload through a secure HMRC portal. Ask for written acknowledgment of receipt and keep it, because that confirmation is your evidence of compliance if a penalty is later raised.

If you cannot locate part of what has been requested, say so in writing before the deadline. Partial compliance with a clear explanation is treated very differently from silence.

When You Can Appeal

Not every notice can be appealed. What you got and what it asks for both matter.

Taxpayer notice for non-statutory documents: you can appeal on the grounds that the material is not reasonably required to check your tax position.
Taxpayer notice for statutory records only: no right of appeal.
Third-party notice for non-statutory documents: the third party can appeal, but only on the narrow ground that complying would be unduly onerous.
Third-party notice for statutory records: no right of appeal.
Identity-unknown notice: appealable.

Where an appeal is available, it must be in writing and reach HMRC within 30 days of the date on the notice.⁸ If HMRC offers an internal review and you neither respond to it nor take the case to the Tribunal, the appeal is treated as settled 30 days after that offer.⁹

One more thing worth flagging: if the notice was approved in advance by the First-tier Tribunal, appeal rights are more limited. And appealing does not suspend the notice. Penalties can still run while your challenge is pending, so get advice quickly.

Penalties If You Don’t Comply

The penalty structure escalates in stages, which is why compliance — even reluctant compliance — is almost always the cheaper outcome.

The £300 Initial Penalty

Failing to comply with any part of an information notice, or deliberately obstructing an HMRC inspection, triggers a £300 penalty under Paragraph 39.¹⁰ In practice, HMRC usually writes first to warn that the £300 will be charged unless you comply within 14 days.¹¹

Daily Penalties of Up to £60

If non-compliance continues after the £300 penalty, Paragraph 40 allows daily penalties of up to £60 for each further day of failure. These can start 30 days after the initial penalty and mount up quickly.¹¹

Up to £3,000 Per Inaccuracy

Providing inaccurate information carries a separate penalty of up to £3,000 per inaccuracy. It applies where the inaccuracy is careless or deliberate, where you knew about it when you sent the response, or where you discovered it afterwards and did not tell HMRC.¹² A single document containing several inaccuracies can attract a penalty for each one. Sloppy compliance can cost almost as much as no compliance.

Tax-Geared Penalties From the Upper Tribunal

The most serious consequence is reserved for continued non-compliance that has let someone pay significantly less tax than they owe. Under Paragraph 50, an HMRC officer can apply to the Upper Tribunal for an additional penalty linked to the amount of tax lost. The Upper Tribunal decides both whether to impose it and how much, taking into account the tax that has been or is likely to be lost.¹³ The application must be made within 12 months of the relevant date, and this penalty sits on top of any Paragraph 39 and 40 charges already imposed.

The Reasonable Excuse Defence

No penalty arises under Schedule 36 if you had a reasonable excuse for the failure and you complied as soon as possible after the excuse ended.¹¹ There is no statutory definition, but HMRC’s own guidance treats the following as examples:

Loss of records through fire, flood, or theft
Serious illness or bereavement
Computer breakdown
Loss of key personnel
Unavoidable delays beyond your control

Lack of money is generally not a reasonable excuse unless the shortage itself was caused by events outside your control. The excuse must also be connected to the actual failure; a general claim of being too busy will not carry. If you think you have one, document it and tell the caseworker before the deadline rather than waiting for the penalty and arguing after.

How Far Back HMRC Can Go

The power to issue an information notice is tied to the time limits for making tax assessments. The standard limit for a discovery assessment is four years from the end of the relevant tax year. Where a taxpayer failed to notify HMRC of their chargeability to tax, that limit extends to 20 years.¹⁴ If HMRC cannot legally assess a year, it has no basis to issue an information notice about it. That works alongside the six-year document rule: notices reaching further back for whole documents need authorised-officer sign-off.³

1
Legislation.gov.uk. Finance Act 2008 – New Information Etc Powers
2
Legislation.gov.uk. Finance Act 2008 Schedule 36 – Paragraph 3
3
Legislation.gov.uk. Finance Act 2008 Schedule 36 – Information and Inspection Powers
4
GOV.UK. Compliance Handbook – CH20150
5
Legislation.gov.uk. Finance Act 2008 Schedule 36 – Paragraph 23
6
GOV.UK. Compliance Handbook – Information and Inspection Powers: Conditions and Safeguards: Restrictions: Legal Professional Privilege: How LPP Disputes Are Resolved
7
GOV.UK. Statutory Payments Manual – SPM240800 – Information Powers – Time to Comply With a Formal Information Notice
8
GOV.UK. Compliance Handbook – Information Notices: Appeals: Appeal Procedures
9
GOV.UK. Compliance Handbook – How to Do a Compliance Check: Information Powers: Rules That Apply to All Notices: Appeals
10
Legislation.gov.uk. Finance Act 2008 – Schedule 36 Paragraph 39
11
GOV.UK. Debt Management and Banking Manual – DMBM570290 – Schedule 36 FA 2008 Penalties
12
Legislation.gov.uk. Finance Act 2008 – Schedule 36: Penalties for Inaccurate Information and Documents
13
Legislation.gov.uk. Finance Act 2008, Schedule 36, Paragraph 50
14
HM Revenue & Customs. Enquiry Manual – Discovery: Making a Discovery – Whether There Is a Discovery: Checking a Potential Discovery Position – Information Powers – Schedule 36, FA 2008