In PML Accounting Limited v HMRC [2015] TC04612 the First Tier Tribunal (FTT) upheld the company's appeal against penalties issued for failure to comply with a Schedule 36 information notice on the grounds that it was invalid. The notice did not relate to the tax position of the company but to the tax position of its clients.


The detail of Schedule 36, Finance Act 2008, which gives HMRC the power to obtain information and documents from a taxpayer, can be reached via the link below.

However, by way of summary:

  • Paragraph 1 gives HMRC the power to request information or documents from a taxpayer if they are reasonably required to check the taxpayer's tax position.
  • Paragraph 2 gives HMRC the power to request information or documents from a person if they are reasonable required to check a known third party's tax position.  In order to issue a third party notice either the approval of the tribunal or the agreement of the taxpayer must be obtained.
  • Paragraph 5 is similar to Paragraph 2 but applies where the identity of the taxpayer is not known.  Again, the approval of the tribunal is required.


PML provides accounting, tax and corporate services to contractors and consultants.  These services include company formation, bookkeeping, preparation of tax returns and calculations of taxes due.

HMRC advised PML that they were considering whether the arrangements between PML and its clients would bring PML within the scope of the managed service company (MSC) legislation.

HMRC issued an Information Notice to PML in order to check the company's position and requested substantial documentation and information relating to a sample of clients of PML.  Approval was not sought from the Tribunal.

There followed a number of requests and permissions to extend the required deadline due to a number of factors, including the time of year (it was January) and illnesses affecting both PML's agents and the daughter of one of the directors.

Ultimately, the requested information was not provided to HMRC and penalties totalling £4,560 were issued.

PML appealed against the penalties on a number of grounds, including reasonable excuse and lack of time to produce the information.

Decision of the Tribunal

The tribunal found that PML had not complied with the Information Notice, and that they had no reasonable excuse for the failure to do so.

The tribunal also found that the documents and information sought by the Information Notice were reasonably required and that PML had been given a reasonable period of time to comply.

However, the FTT found that:

  • the Information Notice did not comply with the requirements of Schedule 36 paragraph 1, as it did not relate to the tax position of PML but to the tax position of its clients
  • the Information Notice breached the rights of PML's clients under article 8 of the European Convention (the right to respect for private and family life)
  • HMRC should have applied for an Information Notice under Schedule 36 paragraph 2 or 5

As a result of the above, the Information Notice was invalid, and therefore no penalties could arise for non-compliance.


The key point to note from this case is that whilst the Tribunal agreed with HMRC in respect of the content, scope and timing of the Information Notice, all penalties were cancelled because HMRC had not followed the proper procedure in issuing it, and in fact had issued an incorrect form of Information Notice.

Had the prior approval of the tribunal been sought and granted, then all penalties would have stood.

HMRC do not always get things right when initiating enquires and imposing penalties.  All correspondence from HMRC relating to enquiries and requests for information should therefore be carefully checked to ensure that they are issued appropriately and in time. 

Small print and links

See our guide Schedule 36 information notices

Case: PML Accounting Ltd v HMRC [2015] UKFTT TC04612

Legislation: Schedule 36, Finance Act 2008