Lack of documents did not invalidate Schedule 36 Notice

In William Lawson v HMRC [2021] TC08298, the First Tier Tribunal (FTT) dismissed an appeal against a Schedule 36 information notice. The information requested was reasonably required to check Mr Lawson’s tax position as HMRC had reason to think he may have underdeclared his income. 

HMRC had information from their risking service about significant payments made by UK companies to Mr Lawson. His 2017-18 tax return was checked and there was no record of any such payments.

• HMRC opened an enquiry into Mr Lawsons 2017-18 tax return enclosing a schedule setting out the documents and information required.
• They then issued a formal Schedule 36 Notice asking for this and further information.
• Mr Lawson appealed the notice. He confirmed to HMRC that he received £55,834 in 2017-18 as capital and not income from an Overseas discretionary trust. He could not fully name the trust and said that all information he had about it was verbal, he had nothing in writing. He did later obtain correspondence from the offshore trustee confirming the payments received were capital and that he was not a settlor of the trust.
• A Statutory Review upheld the notice and Mr Lawson Appealed to the tribunal. His only ground of appeal was that he did not have any documents about the trust.

The FTT dismissed the appeal.

• The notice was intelligible and the information reasonably required to check Mr Lawson’s tax position as HMRC had good reason to suspect that Mr Lawson’s Self Assessments might be insufficient.
• It was reasonable for HMRC to seek explanations and evidence as the nature of Mr Lawson’s relationship with the trust and to establish the original source of the trust funds. In particular:
  • Since HMRC had only requested bank statements for 2017-18 and Mr Lawson must either have these or the power to obtain them, this was also a reasonable request.
  • Since he had known about the trust for five years it was reasonable for HMRC to ask about the three tax years prior to 2017-18 and periods after that date.
• Had HMRC issued an assessment on the amounts received the burden of proof would have rested with Mr Lawson to show that the amounts were capital and not income and to do so he would have had to answer the questions raised by HMRC in the notice. 

Useful guides on this topic

Sch 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?

Statutory Review
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

Sch 36 third party notices
When can HMRC require a third party to provide information or produce a document in relation to a taxpayer? Who can appeal a notice? What rights does the taxpayer have?

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External link

William Lawson v HMRC [2021] TC 08298