Background
David Hill and David McCracken were scheme administrators of pension schemes operated by Liddell Dunbar Ltd. HMRC issued each of them with a Schedule 36 Finance Act 2008 information notice in January 2018. After the schemes were wound up, Liddell Dunbar and Independent Tax advised the appellants that no response was needed because the schemes no longer existed.
HMRC repeatedly said that the notices had been issued to the individual administrators, not the schemes, and imposed an initial £300 penalty and successive daily penalties for continuing non-compliance. The appellants maintained that they reasonably relied on their advisers’ advice. The First-tier Tribunal dismissed their appeals and upheld the penalties in full.
The Court’s Holding
The Upper Tribunal rejected the appellants’ challenge to the finding that they lacked a reasonable excuse. Although a taxpayer may rely on competent professional advice and is not required to second-guess it, Schedule 36 requires reasonable care where another person is relied upon. The First-tier Tribunal was entitled to find that the appellants had relied on brief and unclear updates without asking questions, checking what was being said to HMRC, or clarifying apparent changes and uncertainties in the advice.
However, the Upper Tribunal allowed the appeal on the amount of the penalties. The First-tier Tribunal had treated paragraph 49A of Schedule 36 as relevant when answering the appellants’ submission that the penalties left no scope for more serious cases. Paragraph 49A applies to person-unknown notices under paragraph 5, not to these notices. That legal error might have affected the assessment of seriousness and quantum. The Upper Tribunal directed the parties to make submissions on whether quantum should be remitted to the First-tier Tribunal or remade by the Upper Tribunal.
Key Takeaways
- Reliance on an adviser is not automatically a reasonable excuse for failing to comply with an HMRC information notice.
- A taxpayer must take reasonable care in receiving and acting on advice, assessed in all the circumstances.
- The appellants’ liability for penalties remained upheld, but the level of the penalties must be reconsidered.
Why It Matters
The decision confirms that lay taxpayers need not resolve technical tax questions themselves, but cannot simply assume that advisers are handling repeated enforcement action properly. Reasonable reliance may require seeking clarification where communications are sparse, inconsistent, or unclear.
It also illustrates the importance of identifying the correct statutory penalty regime when assessing proportionality and seriousness. A tribunal’s reliance on an inapplicable provision can require the penalty assessment to be revisited even where the underlying non-compliance is established.