In HMRC v AML Tax UK Ltd [2022] UKUT 00081, the Upper Tribunal granted HMRC's request for a higher than usual penalty to be applied to the taxpayer for failure to provide information under a Schedule 36 notice. This was despite the fact that the penalty was tax based and HMRC were unable to assess the liability due to a lack of information.

  • AML Tax UK Ltd (AML) was incorporated in 2009 as a tax and accountancy practice. The practice was known to have been involved in tax avoidance schemes. 
  • HMRC opened enquiries into the returns for 2014 and 2015. After failing to produce requested records, HMRC issued a Schedule 36 notice. AML still did not provide the requested information.
  • HMRC issued a fixed £300 penalty for failure to comply, followed by daily penalties and another £300 fixed penalty.
  • Under para 50 Schedule 36, HMRC has the ability to apply to the Upper Tribunal for a tax geared penalty to be imposed.
  • AML contended that the tax paid was not significantly less than should have been and that the penalty sought was excessive. 
  • The HMRC case officer provided a witness statement setting out his belief that the tax at risk was £1.34m. 
  • The UT found the HMRC officer to be reliable and credible, but that his methodology was not necessarily reliable.
  • It found, in contrast, that Mr Lancaster, AML's director, was evasive and often inconsistent. Any of his evidence provided was to be treated with caution unless supported by documentation.
  • The UT held that there was a serious and prolonged failure to comply with not only no excuse as to why but factors that only aggravated the seriousness of the non-compliance. All of the facts meant that a penalty was appropriate, although due to the lack of information provided it was very difficult to estimate the tax at risk.
  • Using daily penalties due, of £56,040, as a base, a total penalty was imposed of £150,000.

Useful guides on this topic

Schedule 36 Information Notices
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?

Penalties: Schedule 36 information notices
What penalties apply if you fail to comply with an Information Notice request by HMRC? What are your rights of appeal?

External link

HMRC v AML Tax UK Ltd [2022] UKUT 00081


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