On 7 August 2026 the Upper Tribunal released David Hill and David McCracken v HMRC [2026] UKUT 00306 (TCC). The headline for boards and CFOs is blunt: if HMRC serves a Schedule 36 information notice on you personally, “my adviser said we need not reply because the scheme/company was wound up” is not a free pass. Reliance on professional advice only helps if you took reasonable care in selecting, reading and testing that advice. Blind reliance under escalating daily penalties failed.
Primary sources: the GOV.UK decision page, the full UT judgment PDF, Finance Act 2008 Schedule 36, HMRC’s CH160700 — reliance on another person, the Perrin framework in CH160950, and the leading authority Perrin v HMRC [2018] UKUT 156 (TCC). Practitioner notes: Pump Court Tax and Academy of Tax Law.
What actually happened
Mr Hill was scheme administrator of the Molten Metal 2012 Pension Scheme. Mr McCracken held the same role for the DMI Pension Scheme. In January 2018 HMRC issued Schedule 36 information notices to them as individuals — not to the schemes as abstract entities. Liddell Dunbar Ltd ran the schemes as practitioner and engaged Independent Tax to advise and correspond with HMRC.
A review conclusion letter in October 2018 varied some content but otherwise upheld the notices. The advisers’ line, relayed to the appellants, was that because the schemes had been wound up there “should be no need to respond.” The appellants followed that line. HMRC disagreed — repeatedly — and the penalty machine ran:
- Initial fixed penalties of £300 each (December 2018)
- First daily tranche £2,040 each at £30/day (February 2019)
- Second daily tranche £8,040 each at £60/day (July 2019)
- Third daily tranche £9,720 (Hill) and £10,020 (McCracken) at £60/day (December 2019)
That is five-figure personal exposure built from a decision not to open the file properly while daily rates compounded. The FTT dismissed the appeals in September 2024. The UT, Judges Aleksander and Dean, heard the matter on 19 May 2026 and released on 7 August 2026.
The legal test the UT locked in
Paragraph 45 of Schedule 36 is the reasonable-excuse gate. Paragraph 45(2)(b) is the one CFOs should pin to the compliance wall: where a person relies on another person to do anything, that is not a reasonable excuse unless the person took reasonable care to avoid the failure. HMRC’s own manual at CH160700 draws the same line between an agent acting as functionary (your problem stays yours) and a professional giving genuine advice (reliance can work — if you chose carefully, gave full facts, and had no reason to think the advice was wrong, unreliable or heavily caveated).
The UT applied the structured approach from Perrin: establish the facts asserted as the excuse; decide which are proven; ask whether those facts are an objectively reasonable excuse for this person in these circumstances; then check whether the failure was remedied without unreasonable delay once any excuse ended.
The appellants argued, in substance, that the FTT should have asked whether they knew or ought to have known the advice was “obviously wrong.” The UT rejected that narrowing. The statute requires scrutiny of the level of care shown in relying on advice — not only in picking the adviser, but in how the advice was received, tested and acted on. On the findings open to the FTT, the conduct looked closer to reliance on an unchecked assumption than to objectively reasonable reliance. The reasonable-excuse appeal failed.
Why this is a board and CFO controls issue, not a pensions curiosity
Information notices under Schedule 36 are HMRC’s workhorse power to obtain information and documents reasonably required to check a tax position (or collect a tax debt). They land on companies, directors, scheme administrators, trustees, advisers and third parties. Daily penalties are designed to hurt. The Hill/McCracken fact pattern maps straight onto structures every PE-backed and mid-market group already runs:
- Named office-holders. Scheme administrators, company secretaries, trustees, MLRO equivalents, responsible individuals — the notice names a person. Winding up the vehicle does not automatically delete that person’s residual duty to answer HMRC about the period of office.
- Intermediated advice chains. Operator → tax boutique → short email to the named individual. If the individual never sees the underlying HMRC letters, never asks for the full notice pack, and never tests the “wound up = no duty” slogan against HMRC’s written contradiction, the care standard fails.
- Red flags ignored. Escalating £300 → £30/day → £60/day assessments, plus HMRC correspondence saying the wound-up argument is wrong, are not background noise. A prudent recipient treats each penalty notice as a fresh prompt to reopen the file, demand the advice in writing with authorities, and either comply, appeal the notice, or get counsel-level sign-off for continued non-response.
- Personal cash, not group cash. These penalties sat on the individuals. Directors’ and officers’ insurance, indemnities and side letters need a hard look: does the policy cover Schedule 36 daily penalties for deliberate non-response after advice? Many do not.
The quantum half-win — and why it does not rescue the control failure
The UT did not leave the appellants empty-handed on numbers. The FTT had leaned on paragraph 49A of Schedule 36 when framing seriousness and the £60/day rate. Paragraph 49A is the enhanced daily-penalty regime for certain person-unknown notices under paragraph 5. It did not apply to these paragraph 1 taxpayer notices. That was an error of law that may have affected how seriousness and proportionality were weighed. The UT allowed the quantum ground and directed submissions within 21 days on whether quantum should be remitted to the FTT or remade by the UT.
Read that carefully. Liability for non-compliance and the failure of the reasonable-excuse defence stand. Only the calibration of daily amounts is back in play. Nobody should brief a board that “Hill & McCracken means the penalties go away.” They do not.
CFO checklist — lock this week
1. Inventory live and historic Schedule 36 exposure. Who in the group (and which personal office-holders in pensions, ESOTs, EBTs, SIPPs, SSASs, JV boards) holds or held a role that can attract a personal notice? Include exited directors still in the residual window.
2. No “advice by summary email” protocol. If the recommendation is not to comply with a statutory notice, require: full HMRC pack attached; written advice naming the statutory gateway, appeal rights and penalty exposure; a second pair of eyes where the advice contradicts HMRC’s own letter; and a dated decision minute by the named recipient.
3. Separate notice challenge from silence. Disagreeing with scope is normal — appeal or seek variation. Silence while daily penalties run is a different product. Hill & McCracken is about the second product.
4. Wind-up and dissolution playbooks. Add a hard stop: “Has every open HMRC information notice, Sch 36, Sch 23 or equivalent been cleared, varied or appealed in the name of the right person?” Dissolution, strike-off and pension wind-up checklists that ignore personal notices are incomplete. (Related dissolution risk also sits in recent UT thinking on final accounts and DLAs — different case, same discipline.)
5. Penalty and D&O map. Confirm who pays if daily penalties land personally. Update onboarding packs for scheme administrators and trustee directors so they know a notice addressed to them is their problem until closed.
6. Evidence of care. Tribunals now read the care file: what questions were asked, what HMRC said next, whether advice was updated when facts moved. Build that file in real time, not in the three weeks before an FTT hearing.
Bottom line
Hill & McCracken is not a technical pensions footnote. It is the Upper Tribunal restating, with five-figure daily-penalty facts, that Schedule 36 puts the duty on the named person, that adviser reliance is conditional on reasonable care, and that “the vehicle is gone” is not a magic word against a personal information notice. The quantum point may shave some daily rates; it does not rewrite paragraph 45.
If you sit as CFO, GC, pensions trustee or PE operating partner: pull open notices, test any “no need to reply” advice against the actual HMRC letters, and put a controls minute on the file. Hope is not a reasonable excuse.
Tanous Limited advises CFOs and boards on tax, controls and deal execution. This article is general information, not advice on any specific notice, penalty or scheme.