HMRC Information Notices and Remuneration Trusts: Tribunal Criticises Overreach in Schedule 36 Case

In the current climate, it is worth recalling a notable First-tier Tribunal decision in R D Utilities Ltd v HMRC TC/2013/02028, which highlighted an important limitation on HMRC’s powers under Schedule 36 to the Finance Act 2008, particularly in the context of remuneration trust enquiries and disputed tax avoidance arrangements. 

The case arose from HMRC’s enquiry into a company tax return which included a substantial contribution — approximately £700,000 — to a remuneration trust. HMRC issued a Schedule 36 Information Notice seeking further information about the structure and operation of the trust. The taxpayer appealed.

What followed was an unusually direct judicial criticism of the way HMRC had framed its requests.

The Tribunal ultimately set aside key parts of the Information Notice on the basis that HMRC had gone beyond requesting factual information and had instead sought material founded upon assumptions, opinion, and speculation. 

Importantly, the Tribunal accepted submissions advanced on behalf of the taxpayer that HMRC had fundamentally misunderstood the structure and legal effect of the remuneration trust itself.

The dispute centred on two requests made by HMRC.

First, HMRC sought explanations regarding alleged “constructive obligations” said to arise in relation to payments made through the remuneration trust. The taxpayer’s position was that HMRC’s request was based upon a legally flawed assumption that the company was under an obligation to make payments through the trust structure. It was argued that the information requested simply could not properly be provided because the premise of the request itself was incorrect. 

Second, HMRC requested details of all “potential providers” under the trust deed. The taxpayer argued that the trust definition was drafted so broadly that it could potentially encompass an unlimited class of persons and that HMRC’s request was therefore incapable of sensible compliance. 

The Tribunal agreed that serious difficulties arose from the assumptions embedded within HMRC’s requests.

In a significant passage, the Tribunal observed that Information Notices should request “facts and not opinion” and that the assumptions underlying HMRC’s requests made it impossible for the parties to know whether the notice had in fact been complied with. 

The Tribunal concluded that it would not be “fair and just” to uphold the disputed requests because information which was impossible to provide could not be “reasonably required” under Schedule 36. 

The decision is notable for several reasons.

First, it demonstrates that HMRC’s Schedule 36 powers are not unlimited. Information Notices must be drafted carefully and must seek objectively ascertainable factual material rather than requiring taxpayers to speculate, interpret legal assumptions, or answer effectively unanswerable questions.

Secondly, the case is an example of a taxpayer successfully resisting HMRC procedural overreach in the remuneration trust context — an area in which HMRC has historically adopted an increasingly aggressive investigative approach.

Thirdly, the decision serves as a reminder that HMRC enquiries into remuneration trusts frequently turn not merely on accounting documents, but on the precise legal architecture of the trust itself, including the scope of trustee discretions, beneficiary definitions, and the assumptions embedded within HMRC’s analysis.

Although the Tribunal expressly stated that setting aside the disputed parts of the Information Notice did not determine the substantive tax dispute itself, the decision nevertheless represented a meaningful procedural victory for the taxpayer against HMRC in the course of a remuneration trust enquiry. 

For businesses, advisers, and taxpayers facing Schedule 36 notices in the context of remuneration trusts, COP8/COP9 enquiries, or wider HMRC investigations, the case remains a useful reminder that HMRC’s information powers are subject to statutory limits and may be challenged where notices are drafted excessively broadly or upon incorrect legal assumptions.