How to Appeal an HMRC Schedule 36 Information Notice

If HMRC has issued a Schedule 36 taxpayer notice and you believe its requirements are disproportionate or HMRC has no genuine checking purpose, you have the right to appeal to the First-Tier Tribunal (FTT). Most appeals face a high threshold, but even where the full appeal does not succeed, the process can buy critical time and force HMRC to justify the scope of its demands. This guide takes you through the appeal right step by step.

The appeal right: paragraph 29

Paragraph 29 of Schedule 36 Finance Act 2008 gives a taxpayer the right to appeal a taxpayer notice (or any requirement within one) to the First-Tier Tribunal. This is the primary statutory mechanism by which a taxpayer can challenge HMRC’s use of its information-gathering powers. The appeal is heard by the Tax Chamber of the FTT, the same tribunal that hears tax assessment appeals.

The appeal right is specific and limited in two important respects. First, it is available only in relation to taxpayer notices, not to third-party notices or inspection notices approved by the FTT in advance. Second, the grounds on which an appeal can be brought are restricted to the two grounds set out in the legislation. This is not a general merits review of HMRC’s decision to investigate: it is a targeted challenge to specific requirements in the notice.

The two grounds of appeal

A taxpayer may appeal a notice or any requirement in it on either or both of the following grounds:

1. The notice or requirement is “unduly onerous” in the circumstances; or
2. HMRC does not have the purpose of “checking the taxpayer’s tax position” in relation to the notice or requirement.

These grounds are mutually independent. A taxpayer can advance both simultaneously, arguing both that compliance would be disproportionately burdensome and that HMRC lacks a legitimate checking purpose.

What “unduly onerous” means

The “unduly onerous” test is not satisfied merely by showing that compliance will be time-consuming, expensive or inconvenient. HMRC’s information-gathering regime accepts that compliance involves some burden on the taxpayer; the question is whether the burden is disproportionate to any legitimate purpose being pursued.

The leading case on this standard is R (Derrin Brother Properties Ltd) v HMRC [2016] EWCA Civ 15, in which the Court of Appeal confirmed that the threshold is high. A notice is unduly onerous where the burden imposed exceeds what is reasonably proportionate to HMRC’s legitimate checking purpose, not merely where it causes operational difficulties. Examples that may approach the threshold include:

• A requirement to produce 20 years of records for a minor compliance query involving a single year
• A requirement to produce enormous volumes of documents held in non-searchable form that would require months of manual review
• A requirement to produce records that the taxpayer has already explained are no longer in existence
• Simultaneous notices demanding substantially the same material from both the taxpayer and multiple third parties, creating duplicative obligations

A partial appeal, challenging specific requirements that are disproportionately burdensome while accepting others, is often more credible than a wholesale challenge and is expressly permitted by paragraph 29 (“the notice or any requirement in it”).

What “checking the taxpayer’s tax position” means

The second ground requires demonstrating that HMRC does not have a genuine compliance-checking purpose. This ground is most relevant in two types of situation:

Fishing expeditions

Where HMRC issues a broad, unfocused notice seeking extensive historical records across multiple years and multiple tax heads without any identified discrepancy, it may be arguable that the notice is a fishing expedition rather than a targeted compliance check. The fact that HMRC has opened an enquiry does not by itself establish that every item in the notice is genuinely required for that enquiry’s purpose.

Criminal investigation purpose

HMRC’s civil Schedule 36 power can only be used for civil compliance checking. If HMRC is in fact conducting a criminal investigation and is using Schedule 36 to gather evidence for a potential prosecution rather than for the purpose of assessing a civil tax liability, the notice may lack a valid “checking” purpose. Identifying this situation requires knowledge of the broader investigation context and is one area where specialist representation is particularly valuable.

What you cannot appeal

It is important to understand the limits of the paragraph 29 appeal right:

• The selection of documents: You cannot appeal simply because you object to HMRC’s choice of which documents to request (as opposed to the burden of producing them or HMRC’s purpose in requesting them).
• Third-party notices: As a taxpayer, you have no standing under paragraph 29 to challenge a notice served on your bank, accountant or adviser. Only the recipient of the third-party notice can appeal. See our guide to third-party notices.
• FTT pre-approved notices: Where the FTT has already given advance approval to a notice (as it does for third-party notices and financial institution notices), that approval cannot be challenged via paragraph 29.
• The existence of an enquiry: You cannot use a paragraph 29 appeal to challenge HMRC’s decision to open an enquiry or to argue that the enquiry period is wrong.

The appeal process step by step

1. Instruct specialist representation immediately , ideally within days of receiving the notice. Drafting effective grounds of appeal requires knowledge of the legal tests and of HMRC’s investigation practice.
2. Prepare written grounds. The appeal is made in writing to the FTT, setting out the specific requirements challenged and the grounds relied upon. Grounds should be precise, fact-specific and anchored in the statutory tests.
3. Lodge the appeal within 30 days. Use the FTT’s standard Notice of Appeal form (T240 or equivalent). Include the notice itself as an exhibit.
4. Apply simultaneously for a stay of compliance. This is critical, see below.
5. HMRC files its response. HMRC will file a written response to the grounds of appeal, explaining why it considers the notice proportionate and purposeful.
6. FTT determines the appeal. Most paragraph 29 appeals are decided on the papers without an oral hearing, though either party can request one. Oral hearings are more common where the facts are disputed or the notice is particularly extensive.
7. FTT decision. The FTT can vary, confirm or set aside the notice. It can reduce the scope of specific requirements. Its decision is binding on both parties.

Applying for a stay of compliance

Lodging an appeal does not automatically suspend the compliance deadline in the notice. If you do nothing more than file the appeal, you remain obliged to comply by the original deadline, which means you could be penalised for non-compliance while the appeal is pending.

It is therefore essential to apply to the FTT for a stay of the compliance obligation at the same time as lodging the appeal. The FTT has the power to suspend the notice pending determination, and it routinely does so where the appeal appears arguable on its face. The stay application should be explicit and should briefly explain why it is needed, usually simply that compliance before the appeal is determined would render the appeal pointless.

If HMRC objects to the stay, the FTT will consider both parties’ submissions. In practice, FTT judges are reluctant to require compliance before an appeal they have not yet determined has been heard, unless the case is clearly without merit.

Practical reality: most appeals fail but still have value

The candid advice that experienced practitioners give is this: most paragraph 29 appeals do not succeed in setting aside a notice in its entirety. The threshold for “unduly onerous” is genuinely high, and HMRC almost always has at least a plausible checking purpose. That said, appeals have significant practical value even when they ultimately fail:

• Time: An appeal and associated stay buys weeks or months of additional time before compliance is required. This is time to negotiate the scope of the notice, to locate documents, to identify privilege and to understand where HMRC’s investigation is headed.
• Forcing HMRC to justify scope: HMRC’s response to the appeal grounds forces its officers to articulate why each challenged item is “reasonably required.” This often produces a narrower, better-defined production obligation than the original broad notice.
• Negotiating lever: Once HMRC knows that a taxpayer is willing to litigate over scope, it is more likely to agree a sensible production schedule and to drop overly broad requests in exchange for the appeal being withdrawn.

For the penalties that arise if you simply ignore the notice without appealing, see our guide to Schedule 36 penalties.

Judicial review where FTT appeal is unavailable

Where no paragraph 29 appeal right exists, most importantly, where HMRC has served a third-party notice, the only judicial challenge available to the taxpayer is judicial review of HMRC’s decision to issue the notice. Judicial review is a High Court remedy and the threshold is high: the claimant must show that HMRC acted unlawfully, irrationally or in a procedurally improper way.

Judicial review of a third-party notice has occasionally succeeded where: HMRC failed to obtain proper FTT approval; the notice had a demonstrably improper purpose; or the notice targeted material that was plainly outside Schedule 36’s scope (e.g. clearly LPP-protected documents). Outside these narrow categories, the High Court is generally reluctant to intervene in HMRC’s operational investigative decisions. For income tax investigations or VAT fraud cases, HMRC’s use of third-party notices is rarely successfully challenged by judicial review alone.

Frequently asked questions

Related guides in this series

• HMRC Schedule 36 Information Notices: The Complete Guide
• HMRC Third-Party Information Notices
• Penalties for Non-Compliance with HMRC Schedule 36 Notices
• HMRC Inspection Powers: Business Premises Visits