August 20, 2026
Information notices, reasonable excuse and the separate question of penalty quantum.
Taxpayers routinely depend on accountants, lawyers and pension specialists. The reasonable-excuse rules recognise that reliance on professional advice can sometimes explain a failure to comply with a tax obligation.
But reliance does not transfer every responsibility to the adviser. Hill & McCracken examines the point at which accepting advice becomes unreasonable—particularly where HMRC is saying the opposite and penalties continue to accrue.
The Upper Tribunal’s decision is also a reminder that liability for a penalty and the amount of that penalty are separate questions. HMRC or the FTT cannot use considerations from one statutory penalty regime to justify a penalty imposed under another.
Mr Hill and Mr McCracken were administrators of two pension schemes. The schemes had been managed on their behalf by a business that subsequently entered liquidation.
HMRC served information notices on the two men personally in their capacities as scheme administrators. Their advisers told them that, because the schemes had been wound up, there should be no need to respond. A review of the notices was requested, but the review upheld them, subject to some variation. No appeal against the notices was then made.
HMRC imposed the standard £300 penalties for non-compliance and later assessed daily penalties while the failure continued. Correspondence from HMRC made clear that the notices remained in force and that the absence of an appeal meant compliance was still required.
The appellants argued that they had acted reasonably by following specialist advice. They also challenged the amount of the penalties.
A reasonable excuse is assessed objectively but in the circumstances of the particular taxpayer. The question is what a reasonable and prudent person, placed in the same position and possessing the same relevant attributes, would have done.
Reliance on an adviser is not automatically excluded. A taxpayer is not generally required to distrust competent professional advice, repeat the adviser’s work or obtain a second opinion whenever HMRC disagrees.
Equally, the existence of an adviser does not end the inquiry. The taxpayer must still take reasonable care. That may include understanding the broad basis of the advice and asking for clarification when the advice is surprising, internally inconsistent or contradicted by clear official correspondence.
The First-tier Tribunal concluded that the appellants had not taken reasonable care. The advice on which they relied was brief and did not explain why winding up the schemes removed the obligation to answer notices addressed to them personally.
The position also became progressively harder to justify. HMRC’s review confirmed that the notices remained valid. Penalty correspondence explained that no appeal had been made. The appellants were copied into communications showing that HMRC continued to require the information.
In those circumstances, the FTT considered that a reasonable person would have asked further questions rather than continuing to assume that nothing needed to be done.
The Upper Tribunal held that this was an evaluative conclusion the FTT was entitled to reach. It did not create a general duty to obtain second opinions. Instead, it confirmed that the reasonableness of reliance depends upon the quality of the advice and the warning signs confronting the taxpayer.
· There is no rule that reliance on an adviser can never be a reasonable excuse.
· There is no automatic requirement to verify every piece of professional advice independently.
· The taxpayer should nevertheless understand the essence of the advice and why it applies to the obligation in question.
· A taxpayer may need to seek clarification where HMRC has expressly rejected the adviser’s position or where the advice changes without explanation.
· Passive reliance becomes harder to defend as penalties accumulate and the surrounding correspondence exposes the risk.
The decision therefore avoids two extremes. It neither treats professional reliance as a complete defence nor expects clients to become shadow tax advisers.
Although the appellants failed on reasonable excuse, they succeeded in challenging the way the amount of the penalties had been assessed.
The Upper Tribunal concluded that the FTT’s reasoning had been influenced by paragraph 49A of Schedule 36—the separate regime for increased daily penalties—when dealing with penalties that were not imposed under that provision. Paragraph 49A contains its own statutory conditions and tribunal process. Its seriousness threshold could not simply be imported into the assessment of a different penalty.
That error was capable of affecting the amount. The appeal was therefore allowed on quantum, with the next procedural step to be determined following further submissions.
This part of the decision is technically important. Even where non-compliance is established, the penalty must be calculated by reference to the correct statutory power, factors and limits.
A further practical point arises from the history. The information notices were reviewed and upheld, but no appeal was made against them. Once the appeal window passed, the appellants could not treat their advisers’ disagreement with HMRC as though it suspended the obligation.
Where a taxpayer considers that a Schedule 36 notice is invalid, excessive or seeks material that is not reasonably required, the notice should be challenged promptly through the statutory review and appeal process. Ignoring the notice while debating its merits with HMRC leaves the taxpayer exposed to fixed and daily penalties.
· Put important advice in writing and record the legal or factual basis for the recommendation.
· Confirm whether the adviser is addressing the validity of the information notice, the duty to comply, the availability of an appeal or merely the practical relevance of the information requested.
· If HMRC’s review upholds a notice, diarise the appeal deadline immediately.
· Where advice conflicts with HMRC’s stated position, ask the adviser to explain the conflict and the risks of non-compliance.
· Do not assume that a wound-up pension scheme or dissolved entity removes the personal obligations of its former officers or administrators.
· When challenging penalties, separate liability, reasonable excuse, special reduction and quantum. Each has a distinct statutory basis.
Hill & McCracken is not hostile to professional reliance. The Upper Tribunal expressly recognised that following competent advice can constitute a reasonable excuse and that taxpayers need not routinely second-guess their advisers.
The decision is instead about the limits of passive reliance. A client who receives brief advice, is shown that HMRC disagrees and sees penalties mounting may reasonably be expected to ask why the advice remains sound.
At the same time, HMRC and tribunals must apply the penalty code with precision. A failure to comply does not permit the amount to be justified by borrowing criteria from a different statutory regime.
