HMRC information powers under Schedule 36 of the Finance Act 2008 allow HMRC to obtain information and inspect business premises to check a person’s tax position. However, these powers come with clear legal limits and safeguards that protect taxpayers from overreach.
HMRC can issue information notices to taxpayers and third parties, and can visit business premises for inspections, but only to obtain information reasonably required for tax checks.
There are important restrictions on HMRC information powers, including protections for legally privileged material, personal welfare records, journalistic material, and some documents over six years old. Taxpayers usually have a right of appeal against many information notices and penalties, and can challenge requests that are too broad or amount to a “fishing expedition.”
If HMRC issues a Schedule 36 notice without prior tribunal approval, taxpayers have the right to appeal the notice within 30 days of its issuance, while notices issued with tribunal approval do not allow for such an appeal. The Taxcom can review any HMRC information notice, advise on what must be provided, negotiate with HMRC and represent clients before the tax tribunal where necessary. Let’s guide you on HMRC information powers and what they mean in tax investigations.
How HMRC Information Powers Affect You
If you have received a letter from HMRC requesting documents or announcing an inspection, you are likely wondering what they can legally demand and what rights you have. HM Revenue and Customs possesses broad civil information and inspection powers primarily governed by Schedule 36 of the Finance Act 2008. These HMRC information powers allow officers to check whether individuals and businesses are paying the correct amounts of tax.
For company directors, sole traders, and private individuals, an HMRC tax investigation can feel overwhelming. Understanding how HMRC information powers work in practice is the first step to managing the process effectively.
- HMRC relies on information and inspection powers during compliance checks, investigations and disputes. These powers can cover statutory records, bank statements, electronic documents and access to business premises.
- Common situations where clients first encounter an information notice include after a self assessment enquiry, a PAYE review, a VAT visit, or when HMRC suspects undeclared income from sources like property lettings or online trading.
- Understanding your rights and obligations at the outset is crucial. Early action helps avoid unnecessary disruption, potential penalties, and prolonged disputes with HMRC.
At The Taxcom, we are a specialist tax investigations firm and HMRC dispute firm. We regularly assist clients across the UK regarding HMRC information powers and when HMRC seeks to obtain information or conduct inspections, helping them respond correctly and protect their interests.
Legal Framework: Schedule 36 HMRC Information and Inspection Powers
HMRC information powers are mainly contained in Schedule 36 to the Finance Act 2008. This legislation has applied to most modern compliance checks since 1 April 2009 and consolidated earlier, fragmented powers into a unified framework.
Schedule 36 is HMRC’s primary information-gathering power, allowing them to request documents or information deemed reasonably necessary to verify a taxpayer’s tax position. The powers under Schedule 36 took effect on 1 April 2009 and have been extended to various taxes over the years, including the digital services tax and plastic packaging tax.
Key legal concepts behind HMRC information powers include the following:
- Schedule 36 allows HMRC powers to request information, issue information notices and carry out inspections to check a person’s tax position, subject to conditions and safeguards designed to prevent abuse.
- The main taxes covered include income tax, corporation tax, capital gains tax, inheritance tax, VAT, and PAYE. VAT and National Insurance provisions came into force from 1 April 2010 for relevant periods.
- The key concept of checking a person’s tax position is interpreted broadly. It includes verifying declared liabilities, determining potential liabilities, checking reliefs, allowances, repayments, penalties, and even future tax positions.
- HMRC must be able to justify why each item of information or each inspection is reasonably required for that tax check. This requirement prevents demands that amount to “fishing expeditions” without a proper legal basis.
The origins of these HMRC information powers trace back to a 2006 review by Sir David Varney, which highlighted inefficiencies in HMRC’s pre-2009 approach. The resulting reforms balanced enforcement needs with taxpayer protections under the Human Rights Act 1998, particularly Article 8 on privacy.
Types of HMRC Information Notices
HMRC can issue different types of information notice under Schedule 36, depending on whether they are dealing with the taxpayer directly or seeking information from third parties. HMRC can issue information notices under Schedule 36 when it is reasonably required for determining tax assessments, especially when no tax return has been submitted.
HMRC can issue several types of information notices to gather evidence, including Taxpayer Notices, Third-Party Notices, Financial Institution Notices (FINs), Identity Unknown Notices, and Identification Notices. Let’s find out which notices are included in HMRC information powers.
Taxpayer Notices
A taxpayer notice under paragraph 1 of Schedule 36 can be issued during an open enquiry into a tax return (known as a paragraph 21 notice) or as a standalone notice where no return exists or for unfiled periods (a paragraph 5 notice). These notices require the taxpayer to provide specified information or documents within set time limits as per HMRC information powers.
Third Party Notices
Third-Party Notices are issued to external parties such as banks, accountants, or employers to verify transactions. These generally require taxpayer consent or prior approval from the First-tier Tax Tribunal. This safeguard exists to prevent HMRC from bypassing the taxpayer entirely without oversight. HMRC’s 2022-23 annual report indicates around 1,200 tribunal applications for such notices annually, with over 90% approved, though often narrowed in scope.
Financial Institution Notices
Financial Institution Notices (FINs) allow HMRC to demand financial records directly from banks without requiring taxpayer consent or prior Tribunal approval. These represent a significant expansion of HMRC information powers for checking financial data.
Identity Unknown and Identification Notices
Identity Unknown Notices are sent to third parties to investigate unnamed taxpayers when a significant loss of tax is suspected. They allow HMRC to probe groups of taxpayers where individual identities are not yet known, with tribunal oversight.
Identification Notices demand basic details according to HMRC information powers from a third party to connect financial data to a specific taxpayer, such as name, address, and date of birth using partial identifiers like account numbers.
All information notices must specify what information or documents are required, the period covered, how they should be provided, and the compliance deadline.
What HMRC Can Request: Scope of Information and Documents
Although HMRC information powers are wide, they are not unlimited. Every request must be linked to what is reasonably required for a particular tax check. Taxpayers can challenge overly broad or irrelevant information requests made by HMRC under the “Reasonably Required” defence depending on the extent of information.
Categories of Information Commonly Requested
HMRC can request information that relates to taxpayer’s identity, tax details, relevant foreign tax records and financial matters. E.g.
| Category | Examples |
| Statutory records | Company accounts, VAT records, PAYE records, CIS returns |
| Financial records | Bank and building society statements, loan agreements |
| Commercial documents | Contracts, invoices, purchase orders, supplier agreements |
| Operational data | Payroll records, CRM exports, website order reports |
| Electronic records | Emails, cloud-stored documents, accounting software exports |
| Physical evidence | Till rolls, CCTV footage, stock records |
HMRC may also require less obvious material where relevant to turnover and cash takings, such as internal emails, Amazon seller dashboards, or Uber driver logs.
Possession or Power
HMRC can require a taxpayer to provide information or produce documents that are in their possession or power, which includes both physical control and the ability to obtain documents from others. These HMRC information powers extend to documents held by cloud providers, parent companies, or advisers which the taxpayer can obtain on request.
The case of One Call Insurance Services Ltd v HMRC [2018] demonstrates this principle clearly. The company was compelled to retrieve deleted emails from a service provider despite initial claims they were unavailable. The tribunal ruled that “power” demands diligent efforts, including formal requests to third parties. If a person fails to obtain documents after making serious attempts, he must document those efforts thoroughly.
Taxpayers are protected by several statutory safeguards against HMRC information powers, including the limitation that HMRC cannot demand the creation of new documents. However, you need to have full knowledge of HMRC’s statutory powers to use your safeguards. E.g. You cannot be forced to synthesise spreadsheets from raw data, for example, but you can be required to provide existing electronic records.
Inspection Powers and HMRC Visits to Business Premises
HMRC information powers under Schedule 36 include specific inspection powers, allowing officers to enter and inspect business premises to check records and assets. Under Schedule 36, HMRC has the right to conduct physical inspections of business premises to review documents and assets, but cannot enter private residences without a search warrant.
What Counts as Business Premises?
Business premises includes any place used for business activities:
- Shops and retail units
- Restaurants and cafes
- Warehouses and storage facilities
- Offices and professional premises
- Workshops and manufacturing sites
- Any part of a home used for business, such as a home office
Types of HMRC Visits
| Visit Type | Characteristics |
| Unannounced visits | For certain VAT and PAYE checks, up to 6 months post-tax year |
| Pre-arranged visits | Scheduled in advance with the taxpayer |
| Tribunal-approved inspections | Required if access has been refused |
What HMRC Can Do During an Inspection
During a visit, HMRC information powers include the following steps:
- Examine the person’s statutory records and business documents
- Test check stock and verify inventory
- Review till rolls and point-of-sale data
- Interview staff under formal declarations
- Inspect computer systems and business assets
- Request copies of documents found on site
Inspections must be carried out at reasonable times (typically 9am-5pm on weekdays), with officers showing proper identification. Special rules apply for inspecting dwellings that are partly used as business premises, where HMRC cannot access purely domestic areas without tribunal approval.
The case of R (oao Derrin Brothers) v HMRC [2016] saw the Court of Appeal quash an inspection for disproportionality, reinforcing that HMRC must respect human rights and privacy throughout.
Restrictions and Safeguards Limiting HMRC Information Powers
Schedule 36 builds in important safeguards which prevent HMRC from obtaining certain categories of information or documents, even where they relate to tax affairs. These protections balance enforcement with the person’s rights under the Human Rights Act.
Time Limits on Old Documents
HMRC cannot routinely request documents more than six years old unless specific reasonable grounds exist to suspect deliberate tax evasion. In such circumstances involving deliberate behaviour, assessment time limits can extend up to 20 years under TMA 1970 sections 36 and 37.
Protection for Appeal Documents
Documents created solely for the conduct of a pending tax appeal are generally protected. This includes counsel’s written advice prepared specifically for an ongoing appeal. They don’t come under HMRC information powers and you do not have to provide these to HMRC.
Legal Professional Privilege
HMRC cannot require disclosure of communications protected by legal professional privilege (LPP). This covers confidential communications between a client and their solicitor or barrister for legal advice. However, tax advice from non-lawyers, including accountants, will not usually be privileged against HMRC information powers unless a barrister is involved.
The distinction was clarified in R v Inland Revenue Commissioners, ex parte Popely [2000], where the court confirmed that solicitor-client advice communications are protected, but routine accountancy work is not.
Other Protected Material
Certain types of documents are exempt from HMRC’s inspection powers, including personal records (welfare, health, and counselling information), journalistic material, and documents related to a pending tax appeal. Where protected information appears alongside relevant material, redaction can be used so HMRC obtains what it needs without seeing protected details.
Deadlines, Extensions and Practical Compliance with Information Notices
When HMRC issues an information notice under Schedule 36, it must clearly reference the schedule and outline the specific information required, along with a reasonable timeframe for compliance, typically suggested to be around 30 days. Missing this deadline risks penalties.
HMRC’s Standard Approach
HMRC’s internal guidance often treats around 30 days as a starting point for a reasonable compliance period. However, this can be longer or shorter depending on:
- The volume of material requested
- The complexity of gathering information
- Whether third parties need to be contacted
- The taxpayer’s circumstances
Best Practice for Extensions
If you cannot meet the original deadline:
- Contact the HMRC officer promptly, before the deadline passes
- Explain clearly why more time is needed
- Provide a realistic alternative timetable
- Document all communications
Practical Compliance Tips
Compliance to HMRC information powers involves:
| Action | Benefit |
| Create a clear schedule of requested items | Ensures nothing is missed |
| Log attempts to obtain information from banks or third parties | Provides evidence of diligent efforts |
| Provide information in an organised, labelled format | Demonstrates cooperation and professionalism |
| Keep copies of everything sent | Creates a clear audit trail |
At The Taxcom, we can liaise with HMRC information powers on behalf of clients to agree sensible extensions, narrow the scope of requests, and avoid unnecessary penalties or enforcement action.
Appealing HMRC Information Notices and Challenging Overreach
Not every HMRC information notice can be appealed, but many can. Early legal advice for HMRC information powers is often critical in deciding whether to challenge a notice and on what grounds.
When You Can Appeal
Taxpayers have the right to appeal an information notice issued under Schedule 36 if they believe the information requested is not reasonably required. The appeal process starts with the officer who issued the notice and can potentially escalate to the First Tier Tax Tribunal.
If HMRC issues a Schedule 36 notice without prior tribunal approval, taxpayers have the right to appeal the notice within 30 days of its issuance. Notices already approved by the First-tier Tribunal have very limited appeal rights, with the main remedy being judicial review in the Upper Tribunal or High Court, which is rare and more complex. Knowledge of HMRC information powers is necessary for appeals.
Grounds for Appeal
Issues that can be raised on appeal include:
- Whether the information is reasonably required for checking the taxpayer’s tax position
- Whether the request is too wide, burdensome, or disproportionate
- Whether it properly relates to the person’s tax position and relevant periods
- Whether any protected material has been wrongly included
- Whether the notice would unreasonably interfere with the person’s rights
The case of Murphy v HMRC [2017] saw a notice quashed as a “scattergun” approach. Tribunal statistics suggest 20-30% of appeals against HMRC information powers succeed on grounds of overreach.
Negotiated Outcomes
HMRC may agree to amend or withdraw an information notice during the appeal process, particularly where representations are made by experienced advisers. At The Taxcom, we regularly achieve reductions of 50% or more in scope through skilled negotiation with HMRC information powers.
Penalties for Non-Compliance with HMRC Information Notices
Failing to comply with an HMRC information notice or obstructing an inspection can lead to financial penalties, which can escalate if non-compliance continues. Failure to respond to an information notice under Schedule 36 can result in penalties imposed by HMRC, which may include tax geared penalties in cases of extreme default.
Penalty Categories
Penalties for non-compliance with HMRC information requests can be categorised into four types:
| Penalty Type | Amount | When Applied |
| Initial fixed penalty | £300 | First failure to comply |
| Daily default penalty | £60 per day (max £3,000 for income tax/CGT, £20,000 others) | Continuing non-compliance |
| Tax-geared penalty | Up to 100% of potential lost tax | Deliberate non-compliance |
| Obstruction penalty | £300 plus £60/day | Obstructing inspections |
How HMRC Decides on Penalties
HMRC considers several factors when deciding whether to charge penalties:
- The taxpayer’s overall cooperation
- Reasons for non-compliance
- Whether there has been deliberate concealment
- The taxpayer’s compliance history
- Whether a reasonable excuse exists
Appeal Rights Against Penalties
Taxpayers have the right to appeal against penalties on the basis that they had a reasonable excuse (such as illness or genuine unavailability) and on the basis that the underlying information notice was invalid or went beyond HMRC’s powers. If a taxpayer believes that an information notice is invalid, they may argue against penalties imposed for non-compliance, as they cannot be penalised for failing to comply with an invalid notice.
HMRC’s own data shows they remit approximately 40% of charged penalties annually when circumstances warrant.
How The Taxcom Assists with HMRC Information Powers
The Taxcom is a specialist UK tax advisory firm that deals regularly with HMRC enquiries, Schedule 36 information notices, and business premises inspections. We understand HMRC’s responsibilities and how they apply their powers in practice.
Our experience spans HMRC investigations, Code of Practice 9 (CoP9) cases, voluntary disclosures, and director-level disputes. We see firsthand how HMRC information powers are applied and where taxpayers have legitimate grounds to push back.
How We Support Clients
- Notice review: We review the legality and scope of any information notice, identifying protected material and advising what must genuinely be disclosed.
- Negotiation: We negotiate with HMRC to narrow excessively broad requests, often achieving significant reductions in scope.
- Inspection support: We represent clients whose business premises are subject to inspection, including advance planning, attending the visit where appropriate, and ensuring HMRC stays within its powers.
- Tribunal representation: Where necessary, we represent clients before the First Tier Tax Tribunal and beyond.
If you have received an information notice or inspection letter from HMRC, contact The Taxcom for an initial discussion about your options and potential strategies. Our experts provide tailored support through HMRC disputes and investigations. Early advice on HMRC information powers can make a significant difference to the outcome.
FAQs about HMRC Information Powers
This FAQ section addresses common practical concerns that arise when dealing with HMRC information notices and inspections.
Can I ignore an HMRC information notice if I think it is unfair?
Ignoring an HMRC information notice is risky and will usually lead to penalties. The correct course is to seek advice promptly, consider your appeal rights, and respond to HMRC explaining any objections or difficulties in complying. Even if you plan to appeal, you should engage with the process rather than simply failing to respond.
Do HMRC information powers allow officers to search my home?
Schedule 36 HMRC information powers are not the same as criminal search warrants. HMRC normally cannot enter purely private dwellings under these powers. Special rules apply where part of the home is used as business premises, but even then, HMRC cannot access domestic areas without specific tribunal approval. Criminal search warrants under PACE are a separate matter entirely.
What happens if I genuinely cannot obtain documents HMRC has requested?
If documents are not in your possession or power, you cannot be compelled to produce personal records or other items you simply do not have. However, you must demonstrate that you made serious efforts to obtain the documents and should keep detailed records of those attempts. The One Call Insurance Services Ltd case shows tribunals expect diligent efforts before accepting that documents are truly unavailable.
Will complying with an information notice make HMRC more likely to charge extra tax?
Providing accurate information helps HMRC reach the correct tax position and can actually reduce penalties through cooperation credits. Attempting to withhold relevant information often worsens the outcome. Managed, advised disclosure through experienced tax advisers typically leads to better settlements than stonewalling or providing inaccurate information.
When should I involve a professional adviser like The Taxcom?
Professional help should be sought as soon as you receive an HMRC information notice, inspection letter, or any indication of an investigation. Early involvement allows the scope of HMRC information powers to be checked properly and a compliant but protective strategy to be put in place from day one. Waiting until deadlines have passed or penalties have been issued makes the situation significantly harder to manage.
Need help with an HMRC information notice or investigation? Contact The Taxcom todayfor expert advice and representation.