Information requests

During self-assessment enquiries, and investigations of any nature, it is common for HMRC to ask for documents and information with lengthy lists of data being requested. HMRC’s power to make such demands are in Schedule 36 FA 2008 which has a very wide scope, referring to past, present and future tax liabilities and tax investigations of any kind, thereby enabling HMRC to obtain a considerable amount of data from the taxpayer or third parties. Schedule 36 has also widened in scope in recent years, for example with the addition of Financial Institution Notices enabling HMRC to approach third-party banks for data relating to their clients with little or no oversight. 

Despite this, data requests are often issued informally hence, despite having the appearance of a Schedule 36 notice, are asking the recipient to volunteer responses to HMRC. The nature of any information notice should be carefully considered before responding.

While widely drawn, Schedule 36 also includes important restrictions and safeguards for the taxpayer, but these are often overlooked and it is not uncommon for HMRC to demand data that is outside the scope of its powers. We continue to see regular examples of this, for example requests for data relating to transactions undertaken in earlier tax years not under self-assessment enquiry; data relating to other parties such as companies, Trustees or even family members; or data that has nothing to do with the tax return in question such as how the acquisition of capital assets were funded many years previously. A self-assessment enquiry should focus only on the specific tax return in question. 

It is possible for HMRC to use Schedule 36 outside a self-assessment enquiry, for example in a ‘discovery’ context but, again, this is not an unfettered power. HMRC must have a genuine and supportable reason to suspect that tax in past years has been under-declared before a valid information notice can be issued; seeking data in the hope that a reason to suspect then develops is not permitted, although in our experience HMRC often ignores these restrictions and taxpayers and their advisors respond by providing data unnecessarily. The legislation and case law is complex and nuanced, so any response or volunteering of data should be considered very carefully.

There is also an overriding safeguard in that anything requested in any enquiry or investigation must be ‘reasonably required’ for the purpose of checking the person’s tax position, so it is possible to resist demands on that basis, for example documents that originated in prior years that can no longer be assessed because of the passage of time. Similarly, requests for lists, such as a list of bank accounts operated might be resisted if not income producing, such as a current account, hence of no relevance at all to the tax return under enquiry.

Finally, HMRC often assert, without further explanation or reasoned argument, that no appeal against their demands is possible because the data requested is reasonably required or is made up of so-called ‘statutory records’. In our experience, that assertion is often incorrect and it should also be remembered that an appeal can be made not only against a demand for inappropriate data but also against the validity of the notice itself if the relevant pre-conditions are not met.