Introduction: Why a Schedule 36 Information Notice Lands Differently on Americans
A Schedule 36 information notice turns an HMRC question into a legal obligation. Wealthy Americans in Britain receive them more often than almost any other group of taxpayers. Notably, the reason is structural rather than personal. Your financial life spans two countries, so HMRC almost always has something it cannot see.
For instance, most guidance on these notices is written for British taxpayers with British assets. Consequently, it stops at the UK border. That omission matters enormously. What you hand HMRC can travel to the Internal Revenue Service under the treaty. Moreover, an answer given in Britain can undermine a US catch-up filing you have not yet made.
What a Schedule 36 Information Notice Actually Is
Schedule 36 to the Finance Act 2008 gives HMRC statutory power to require information and documents that are reasonably required to check a person's tax position. Specifically, you can read the legislation in full on legislation.gov.uk. Additionally, HMRC's own operational guidance sits in its Compliance Handbook at CH23000, updated in August 2026.
Crucially, this is not a request. Ignore it and penalties begin automatically. Therefore the first decision you make on receipt shapes everything that follows.
Why US-Connected Taxpayers Receive Them
Importantly, HMRC receives your US account data automatically each year. However, automatic data tells HMRC that an account exists and roughly what it earned. It does not explain your cost basis, your partnership allocations, your stock plan or your pension. A Schedule 36 information notice closes that gap.
In particular, investment bankers, fund principals and company owners sit at the top of this list. Complex US-source income sits alongside UK residence. Specifically, that combination produces the pattern HMRC's wealthy compliance teams are trained to query.
The Mistake That Costs the Most
For example, clients often answer immediately, in full, in writing, without reviewing their US filing history first. That instinct feels cooperative. Nevertheless, it can be expensive, because the narrative you give HMRC becomes a fixed record that a later US disclosure must match. Accordingly, we look at both sides before a single document leaves the building.
The Five Notices HMRC Can Issue Under Schedule 36
Schedule 36 is not one power. Rather, it contains a family of them, and your rights differ sharply depending on which one arrives.
Taxpayer Notices
First, a taxpayer notice goes directly to you and demands your own information or documents. Importantly, HMRC issues most of them without asking the First-tier Tribunal first. Accordingly, you retain an appeal right, which you lose entirely when the tribunal has approved the notice in advance.
Third Party Notices
A third party notice goes to someone else about you, such as an employer, a nominee or a professional adviser. Ordinarily HMRC needs either your agreement or tribunal approval. Furthermore, you are usually entitled to a copy, so you learn what has been demanded.
Financial Institution Notices
In contrast, the Financial Institution Notice changed the landscape. The Finance Act 2021 introduced it, and HMRC's policy paper on amending its civil information powers explains the change. It lets HMRC demand records from a bank or broker with no tribunal approval and no taxpayer consent. An authorised officer signs it off internally instead.
Safeguards remain, though they are thinner. The notice must name you, it must give you a summary of the reasons, and compliance must not be onerous for the institution. Nevertheless, the practical effect is that your UK bank can be required to hand over years of statements before you have argued anything.
Identity Unknown and Identification Notices
HMRC can also issue notices about people it cannot yet name, or to establish who someone is. Typically, these arise in bulk enquiries rather than individual cases. Consequently, most private clients never see one.
What the Numbers Actually Show
HMRC must report annually to Parliament on how it uses Financial Institution Notices, and the figures are more revealing than any commentary.
The 2024 to 2025 Report
In the year to 31 March 2025, HMRC issued 1,307 Financial Institution Notices, according to its report on Financial Institution Notice powers, published on 15 January 2026. Of those, 1,134 were domestic and 4 related to debt collection. Notably, HMRC rejected a further 208 internal applications.
The Figure That Matters to Americans
The remaining 173 notices were issued to answer international requests. In other words, more than one in eight Financial Institution Notices existed because a foreign tax authority asked Britain for help. HMRC took an average of 116 days to process those requests, down from 127 days the year before.
Ultimately, that single statistic reframes the whole subject. A Schedule 36 information notice is not only a domestic enquiry tool. It is also the mechanism through which another country reaches into your UK banking records.
Volume in Context
HMRC ran roughly 316,000 compliance checks in the same period, so these notices remain a small fraction of its activity. However, they cluster heavily at the wealthy and offshore end of the caseload. Therefore a high-net-worth American in London faces a far higher probability than the raw percentage suggests.
What HMRC Can and Cannot Demand
However, the powers are broad rather than unlimited. Knowing the boundaries is what turns a defensive response into a controlled one.
The Reasonably Required Test
Above all, everything hinges on whether the material is reasonably required to check your tax position. HMRC bears that burden if you appeal. Consequently, a notice demanding ten years of everything, with no explanation of relevance, is frequently narrower after a conversation than it looked on arrival.
Documents Held in America
Schedule 36 reaches documents in your possession or power, not merely those sitting in a British drawer. Therefore your US brokerage statements, your Form 1040 and your K-1s are all within scope if you can obtain them. Saying that the records are in New York achieves nothing.
The Statutory Restrictions
Several protections apply. For instance, HMRC cannot normally demand documents more than six years old without an authorised officer's approval. A taxpayer notice is also restricted once you have filed a return and the enquiry window has closed. The restriction lifts where an enquiry is open, or where an officer suspects an under-assessment. Part 1 of Schedule 36 sets out the framework these restrictions modify.
Nevertheless, one restriction has no exception worth relying on. You can never appeal a requirement to produce your statutory records, so the accounting records underpinning your return must be produced regardless.
Appeal Rights and the Tribunal Trap
Appeal rights exist, but they are narrower and shorter than most people assume.
Thirty Days, In Writing
You must appeal a taxpayer notice within 30 days of the date of the notice, in writing, stating your grounds. Subsequently, HMRC considers it, and the matter can proceed to the First-tier Tribunal. GOV.UK explains the general tax appeals process, though the Schedule 36 route has its own rules.
The Approval That Removes Your Rights
Here is the trap. Where HMRC obtained tribunal approval before issuing the notice, there is no right of appeal at all. In practice, the tribunal has already heard HMRC, usually without you present. Consequently, the only remaining challenge is judicial review, which is slow, expensive and rarely available.
What the Tribunal Can Do
On a valid appeal, the tribunal may confirm the notice, vary it or set it aside entirely. Moreover, it can extend an unrealistic deadline. In practice, a well-argued appeal often produces a narrowed notice rather than an outright win, and that narrowing is frequently worth far more than the fight.
The Penalties for Getting It Wrong
Non-compliance escalates quickly, and the escalation is largely automatic.
The Opening Charges
Failure to comply attracts an initial penalty of £300. Thereafter, daily penalties of up to £60 accrue for each day the failure continues. Moreover, HMRC sets out when each charge bites in its Compliance Handbook at CH26200.
The Thousand-Pound Days
Once the default runs beyond 30 days, HMRC can apply to the tribunal for increased daily penalties of up to £1,000 per day. Notably, you cannot appeal the amount, because the tribunal sets it rather than HMRC. A three-month standoff therefore becomes a five-figure penalty before any tax is even assessed.
Inaccuracy and Tax-Related Penalties
Providing inaccurate information or documents carries a penalty of up to £3,000. Separately, where a failure continues and significant tax is at risk, the Upper Tribunal can impose a tax-related penalty by reference to the tax itself. Ultimately, the structure is designed so that resistance costs more than compliance.
Reasonable Excuse
You can appeal the penalties, though not usually the notice, on the ground of reasonable excuse. However, the bar is high, and "my records are held by a US institution" rarely clears it on its own. Instead, acting early and documenting your efforts is what makes the argument credible.
Privilege: Where the Protection Actually Sits
This is the area where American clients hold the most dangerous assumptions, because US and UK privilege rules diverge fundamentally.
Lawyers Only in Britain
Notably, the UK Supreme Court settled the point in the Prudential litigation. Legal advice privilege covers communications with lawyers and does not extend to accountants or other non-lawyer tax advisers. Consequently, advice from your UK accountant on a technical tax question must be produced if HMRC demands it.
The Narrow Tax Adviser Protection
Paragraph 25 of Schedule 36 offers a limited carve-out. It protects documents that belong to the tax adviser and consist of relevant communications about your tax affairs. Importantly, it does not protect your copies, and it does not protect the underlying source records at all.
Why Section 7525 Does Not Help You
Americans often rely on the federally authorised tax practitioner privilege in section 7525 of the Internal Revenue Code. That privilege is a creature of US law. It applies only in non-criminal tax matters before the IRS and the federal courts. Consequently, it has no effect whatsoever on HMRC. Therefore a US CPA's advice memorandum enjoys no protection in a British enquiry.
The American Layer Nobody Explains
Everything above is available, in some form, on a dozen British professional websites. What follows is not, and it is the part that decides outcomes for dual filers.
Article 27 and the Journey Your Documents Take
Crucially, the US-UK double taxation convention contains an exchange of information article. Article 27 obliges each country to exchange information needed to administer the treaty and their domestic tax laws. Notably, it extends to information held by financial institutions, nominees and fiduciaries.
Accordingly, documents you provide to HMRC can lawfully reach the IRS. The IRS explains its treaty network and operates the same power in reverse. Therefore, assume anything you write for one authority may be read by the other.
Your Answer Becomes Your Certification
This is the practical consequence. If you later file under the IRS Streamlined Filing Compliance Procedures, you must certify under penalty of perjury that your failure to file was non-wilful. That certification has to sit comfortably alongside whatever you already told HMRC.
An explanation drafted quickly for a British enquiry can therefore close off the cheapest American route months later. Sequence the two disclosures deliberately, or you may find you have chosen without meaning to.
What HMRC Already Knows
Before HMRC writes to you, it typically holds your US account data through automatic exchange, which GOV.UK describes in its guidance on automatic exchange of information. The IRS describes the reciprocal FATCA framework on its own site.
That knowledge cuts both ways. Sometimes HMRC already received the relevant information and could reasonably have been expected to act on it. In that case, section 36A of the Taxes Management Act 1970 can remove the extended twelve-year offshore assessment window. Consequently, establishing what HMRC held, and when, is often the single most valuable piece of analysis in the whole case.
Inspections: When HMRC Wants to See the Premises
Schedule 36 carries inspection powers as well as information powers, and company owners should understand both. The heading of HMRC's own guidance says so plainly: information and inspection powers travel together.
What an Inspection Covers
HMRC may enter and inspect business premises, along with business assets and business documents held there. Importantly, the power does not extend to a purely private home. However, a room used as the registered office of your UK company sits in a grey area, and HMRC treats the business part as inspectable.
Announced and Unannounced Visits
Ordinarily, most inspections come with at least seven days' written notice. Nevertheless, HMRC can arrive unannounced where an authorised officer approves it, and the tribunal can approve an inspection in advance. Tribunal approval again removes your right of appeal, exactly as it does for a taxpayer notice.
Why This Matters to a US-Connected Owner
American founders frequently run a UK company from a London office while holding the group's records in cloud storage administered from the United States. However, the location of the server changes nothing. Furthermore, obstructing an approved inspection carries the same £300 opening penalty and daily charges as ignoring a written demand.
Accordingly, treat a request to visit with the same seriousness as a letter. Establish whether the visit is approved, what is genuinely a business document, and which records belong to the company rather than to you personally.
Case Study: A London Banker and a Six-Year Demand
Consider a client profile we see repeatedly. An American citizen, UK resident for nine years, works in London as a managing director. Specifically, he holds a US brokerage account worth $2.4 million and a legacy US deposit account. He has filed UK returns declaring his salary, and he stopped filing US returns five years ago after moving.
The Notice
In September, HMRC opens an enquiry and issues a taxpayer notice. It demands six years of statements for both US accounts, together with his US tax returns and any brokerage cost basis reports. Simultaneously, it issues a Financial Institution Notice to his UK bank, which he learns about only from the summary of reasons.
Meanwhile, the unreported UK exposure is real. Dividends and realised gains across six years produce roughly £38,000 of additional UK tax before interest.
What Delay Would Have Cost
Had he ignored the deadline and replied on day 41, the arithmetic would have been unforgiving. The initial charge is £300. Eleven days at £60 adds £660, producing a £960 total before HMRC even considers the tax. Push the standoff past 30 days and the tribunal route to £1,000 daily penalties opens.
What We Actually Did
We appealed the six-year scope in writing within the 30 days, on the ground that HMRC had held FATCA data for four of those years. Consequently, HMRC narrowed the notice to four years. Meanwhile, we prepared the US position first, so his written explanation to HMRC and his later non-wilful certification told one consistent story.
Subsequently, the five missed US returns went in under Streamlined. The UK settlement generated foreign tax credits. Claimed within the ten-year window that applies to credit claims, they recovered $18,400 against the American liability. He paid the UK tax, interest and a prompted-disclosure penalty, and he paid no Schedule 36 penalty at all.
What to Do in the First Thirty Days
Importantly, the clock starts on the date of the notice, not the date you open it. Move deliberately, and move early.
Read the Notice Properly
Identify which type of notice you hold, whether the tribunal approved it, and precisely what is demanded. Furthermore, note the deadline in writing on day one. Those three facts determine your entire strategy, and clients routinely misread all three.
Reconcile Both Countries Before You Reply
First, establish what your US returns say, what your UK returns say and where they disagree. Additionally, check the FinCEN foreign bank account report and Form 8938 for each year. Gaps found now are manageable. Gaps found by HMRC are not.
Negotiate the Scope, Then Comply
Open a dialogue rather than a dispute. In practice, HMRC frequently narrows a notice or extends time when approached with a credible timetable. Nevertheless, appeal formally within the 30 days if the scope is genuinely unreasonable, because the right expires. Finally, professional bodies publish helpful commentary on both sides of the Atlantic. Useful sources include the Chartered Institute of Taxation, ICAEW and the AICPA. HMRC publishes the underlying guidance itself.
How TaxYork Can Help
TaxYork prepares US and UK tax returns for high-net-worth individuals, investment professionals and company owners who file in both countries. When a Schedule 36 information notice arrives, we start with the position rather than the paperwork.
Our first step is a reconciliation of both filing histories, because the answer you give HMRC should never be drafted in isolation. Subsequently, we handle the response itself, negotiate the scope, and prepare any offshore account reporting that turns out to be missing.
Where American filings are behind, we manage the catch-up in the right order through IRS Streamlined Filing, and we make sure the UK settlement produces every credit available through tax treaty optimisation. Finally, we bring the ongoing returns back into compliance with our US tax return preparation service.
Conclusion
A Schedule 36 information notice is a legal demand with a short deadline, automatic penalties and, in some cases, no appeal at all. Furthermore, the Financial Institution Notice means HMRC can reach your bank without asking you or a judge first. Consequently, treating the letter as correspondence rather than litigation is the error that costs the most.
For an American in Britain, the stakes run wider still. Article 27 lets your answers travel to the IRS, and a hurried explanation can compromise a Streamlined certification you have not yet signed. Ultimately, the taxpayer who reconciles both countries before replying keeps every option open. The taxpayer who replies first rarely does.
Contact Us
If a Schedule 36 information notice has arrived, or you expect one, book a consultation with our cross-border team before you respond. We will identify the notice type, test the scope, protect your appeal rights and align the response with your US position. Email hello@taxyork.com or call 020 3488 8606 to speak with a specialist today. Our full range of US and UK tax services supports high-net-worth clients throughout an HMRC enquiry.
Disclaimer
This article provides general information about UK and US tax rules and does not constitute tax advice for any specific person or situation. Tax legislation and HMRC guidance change frequently, and penalty figures quoted are those applying at the date of publication. The application of these rules depends entirely on individual circumstances, and case study figures are illustrative. You should obtain professional guidance before responding to any HMRC notice. TaxYork accepts no liability for decisions taken solely on the basis of this content.