Schedule 36 information notices: Where HMRC’s powers start and stop

A Schedule 36 information notice is a formal written notice issued by HMRC requiring information or documents to be provided.

HMRC’s own guidance confirms that Schedule 36 powers apply across Income Tax, Capital Gains Tax, Corporation Tax, VAT, PAYE, NIC and CIS.

The powers are therefore relevant to individuals, companies, partnerships, employers, contractors and other parties involved in the tax system.

In practice, these notices are often used during compliance checks, enquiries and more serious civil investigations.

They may follow an informal request for information, but once a Schedule 36 notice is issued, the request becomes formal and non-compliance can result in penalties.

That is one of the reasons you should not treat these notices as ordinary correspondence.

They need to be reviewed carefully, both for what they ask for and for whether HMRC has stayed within its powers.

The main types of Schedule 36 notice

Schedule 36 includes several types of information notice, but the three most commonly encountered are taxpayer notices, third-party notices and tribunal-approved notices.

• A taxpayer notice is issued directly to the person whose tax position HMRC is checking and can require them to provide information or produce documents reasonably required for that purpose. These are often the most straightforward notices, but HMRC must still show that each request is reasonably required.
• A third-party notice is issued to someone other than the taxpayer, such as a bank, accountant or supplier, requiring them to provide information relevant to another person’s tax position. These notices are powerful but subject to additional safeguards, and HMRC will often need either the taxpayer’s agreement or tribunal approval before issuing them.
• A tribunal approved is used when HMRC seeks approval from the First-tier Tribunal. Tribunal-approved notices may have more limited appeal rights and are intended to provide an additional safeguard before the notice is issued.

It’s important to note that tribunal involvement does not mean every request is beyond challenge, and the statutory conditions and scope of the notice still need to be considered carefully.

What does “reasonably required” mean?

The phrase “reasonably required” is central to Schedule 36.

It is not enough for HMRC to say that information might be interesting, useful or worth having. The information or document must be reasonably required for the purpose of checking the tax position.

That creates a practical test.

HMRC should be able to explain the connection between the request and the tax risk being checked.

A request for records relating to a specific transaction, tax period or accounting issue may be easier to justify.

A request for every document connected to a business over several years may be much harder to defend unless HMRC can show why that breadth is necessary.

In my view, this is where many disputes arise.

HMRC may begin with a legitimate enquiry but then draft an information request in terms that are wider than the enquiry justifies.

The issue is not always whether HMRC is allowed to ask questions. It is whether the actual request has been properly framed.

A well-drafted Schedule 36 notice should be specific enough for the recipient to understand what is required, why it is required and how it relates to the tax position under review.

When might a Schedule 36 request be too broad?

A Schedule 36 notice may be open to challenge if it is disproportionate, unclear or insufficiently connected to the tax issue being checked.

Examples of potentially problematic requests include:

• requests for “all documents” relating to a wide topic without narrowing the time period, tax issue or relevant transactions
• requests for records outside the period under enquiry without explanation
• requests for documents that do not appear to have any tax relevance
• requests for information already provided to HMRC
• requests that would impose an excessive burden compared with the issue being checked
• requests for documents that are not in the recipient’s possession or power

Schedule 36 only requires a person to produce a document if it is in their possession or power.

That distinction can be important, particularly where HMRC asks for documents held overseas, by a third party or by a former adviser.

You should not ignore a broad request, but nor should you assume it must be complied with exactly as drafted.

Often, the right approach is to engage with HMRC, ask for clarification, identify concerns and, where appropriate, offer a narrower response that meets the legitimate purpose of the enquiry.

All of this should be done through a tax investigations specialist.

Can you appeal a Schedule 36 notice?

In many cases, yes.

A recipient may be able to appeal against an information notice or against specific requirements within it.

Common grounds include that the information is not reasonably required, the request is too wide, the documents are protected or the recipient does not have possession or power over the documents.

However, appeal rights are not universal.

For example, appeal rights may be limited where the notice has been approved by the tribunal.

There are also restrictions on appealing against a requirement to produce statutory records.

This makes timing important. Schedule 36 notices usually specify a deadline for compliance and any appeal must be made within the relevant time limit.

A taxpayer who is concerned about a notice should not wait until the deadline is about to expire. The sooner the notice is reviewed, the more options there usually are.

Informal requests versus formal notices

Not every HMRC request is a Schedule 36 notice.

HMRC often starts with informal requests, and cooperation can help resolve matters quickly. However, these requests should still be reviewed carefully.

Responses can influence the direction of an enquiry and HMRC’s view of the taxpayer, so they should not be treated as consequence-free.

Equally, taxpayers are not obliged to comply with informal requests that are excessive, unclear or irrelevant.

The possibility of a formal notice does not mean every informal request should be accepted without question.

How you should respond to a Schedule 36 notice? 

A Schedule 36 notice should be handled methodically.

The first step is to identify exactly what type of notice has been issued and whether HMRC has followed the correct process.

The next step is to review each requirement in the notice and ask:

• What tax position is HMRC checking?
• Is the request clearly connected to that tax position?
• Is the information or document reasonably required?
• Is the request specific enough to comply with?
• Are any documents privileged or otherwise protected?
• Are the documents in the recipient’s possession or power?
• Is there a right of appeal?
• Is the deadline realistic?

In some cases, the best response will be full compliance. In others, it may be appropriate to provide some information, challenge parts of the notice or ask HMRC to narrow the request.

The worst response is usually to ignore the notice or provide a rushed disclosure without understanding the consequences.

Why control over your information matters

Schedule 36 notices are about control.

HMRC seeks to control the flow of information, but taxpayers must stay in control of their response by being precise, informed and measured.

Understanding HMRC’s powers allows you to cooperate where appropriate, challenge where necessary and avoid disclosing information you are not required to provide.

While HMRC’s powers are significant, they are not unlimited and must meet strict statutory conditions.

If you are dealing with a Schedule 36 notice or any HMRC enquiry, it is worth speaking to an experienced tax investigations specialist who understands how HMRC operates in practice.

The right advice can help you respond confidently, protect your position and avoid unnecessary risk.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email jeremy.johnson@intaxltd.com.

inTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. However, we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients