Information requests from HMRC
Within certain limits, by issuing a Notice under Schedule 36 Finance Act 2008, HMRC can ask for information and documentation from first party (the taxpayer) or a third party (such as a bank). An Inspector has to follow strict guidelines and procedures to ensure that such a Notice is valid.
A Notice should not be ignored as financial penalties can become payable to HMRC. However, before complying with such an information request, the recipient is advised to seek specialist advice to ensure that it is valid.
An experienced Inspector may anticipate the need to send a Notice as part of the tax investigation at some time and will have this in mind when communicating with the taxpayer or agent.
A Notice can be sent as part of an ordinary letter from HMRC and as such it looks quite innocent. Typically it will be printed on plain white paper in a format prescribed in law. In practice, the recipient may simply notice that the text is within rectangular text box(es) with a single black line around each block of text. This is to facilitate and identify the text that may ultimately be copied and pasted into a formal Notice.
An Inspector will not take issuing a Notice lightly. It is part of a process. The start of that process may be simply asking for the information and documentation as part of a “normal” letter from HMRC. The Inspector will ask for a response by a given date which must be a minimum of 30 calendar days time from the date of the letter (with no upper limit). The Inspector does not have to state the legislation being used (Schedule 36 Finance Act 2008). This is known as an informal request.
If after the requisite deadline has passed either no response or an incomplete response has been received to HMRC’s first letter, then HMRC will move on to a formal request. In the covering letter, HMRC will refer to the previous request and the legislation that HMRC is now using. A further deadline for a response will be given which again must be a minimum of a further 30 calendar days from the date of this second letter and details of the consequences of not complying with the Notice.
Initially, HMRC can issue an initial penalty of up to £300 per Notice and a daily penalty of up to £60 per day that the Notice has not been complied with. In addition, HMRC may consider this to a sign of non cooperation which in turn may impact upon the level of any further penalties ultimately levied as part of a Settlement.
As previously stated, specialist advice should be sought before any response is given to HMRC.
A lot of care should have been taken by HMRC in formulating the wording in the Notice. It therefore follows that a lot of care should be taken in formulating the response. What should be borne in mind is the expression “say what you mean and mean what you say”. There should be no ambiguity in what is being said nor should the answer deviate from the question being asked. Nor should there be any latitude for interpretation.