In Paul Baxendale-Walker v HMRC [2024] UK154, HMRC found its case struck out by the Upper Tribunal (UT) which decided they had 'no reasonable prospect of success' in imposing £14m of tax-geared penalties for failure to provide information because the conditions for a Paragraph 50 Schedule 36 Information Powers penalty could not be met.

Investigations fraud

Tax-geared penalties issued under Paragraph 50, for Failure to Respond to a Schedule 36 Information Notice are so onerous that as a safeguard, they have to be approved by the Upper Tribunal.

  • The appellant, a former barrister and solicitor who was made bankrupt in 2020, was heavily involved in both the creation and promotion of tax avoidance schemes.
  • His tax planning relies heavily on the use of trusts and the subsequent amending of transactions to create 'smoke and mirrors'. Few schemes seem to have worked when tested by the courts.
  • HMRC has subsequently continued its investigations and enquiries into his affairs and assets. He has resorted to tactics such as multiple changes of address to avoid being served with both Information and Decision notices.
  • Concluding that he was failing to comply with a batch of information notices HMRC sought to impose tax-geared penalties under paragraph 50 for the sum of £14,031,851.01.

As the UT must sanction the imposition of these penalties, the appellant made an application to the UT to have HMRC's application struck out.

HMRC had sent a series of different notices and letters to the appellant. Because of the address changes, HMRC apparently altered the dates for compliance.

Unpacking the correspondence, the UT concluded that either:

  • The appellant had not yet failed to comply with the information notice.
  • Or the period in which HMRC could apply for a paragraph 50 penalty, had already expired on 15 March 2023.

In either case, the requirements of paragraph 50 could not be met. HMRC's case was struck out.

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? What penalties apply for a failure to respond to an Information Notice?

Professional Conduct in Relation to Taxation (PCRT)
Professional Conduct in Relation to Taxation (PCRT), adopted by the main professional accounting and tax bodies, sets out the professional standards that are expected of a member when undertaking tax work.

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Paul Baxendale-Walker v HMRC [2024] UK154