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United KingdomCase Law

Unchecked tax advice fails reasonable-excuse defence

The Upper Tribunal dismissed the reasonable-excuse grounds but allowed the penalty-amount appeal because the First-tier Tribunal relied on an inapplicable statutory provision.

By Taxxa AI OyPublished 8 August 2026

Tax

Industry: Across industries

Taxpayers relying on professional advice to ignore an information notice must take reasonable care in receiving and acting on that advice. In David Hill & Anor v HMRC, the Upper Tribunal upheld the rejection of a reasonable-excuse defenceNationalarchives but allowed the appeal on penalty amounts because the First-tier Tribunal had relied on an inapplicable power to increase daily penalties.Nationalarchives

The judgment, released on 7 August 2026Nationalarchives, concerned two pension scheme administrators who received information notices in January 2018. Their advisers repeatedly said that winding up the schemes meant they did not need to comply. HMRC maintained that the notices bound the individuals, and imposed initial £300 penalties followed by several tranches of daily penalties.

The Upper Tribunal rejected the argument that reasonable reliance should turn only on whether a lay taxpayer knew, or should have known, that the technical advice was obviously wrong.Nationalarchives At paragraph 50, the tribunal said the legislation considers care “not only in selecting the adviser but also their conduct in receiving that advice”. It asks whether reliance was reasonable in all the circumstances, taking account of the particular taxpayer’s knowledge and experience.

That does not require taxpayers to second-guess technical advice or obtain multiple opinions. But the First-tier Tribunal was entitled to consider failures to check the facts, seek explanations for changes in advice, and clarify whether proposed appeals concerned the information notices or the penalties. It could also consider the administrators’ failure to check which group of pension schemes their advisers had placed them in. At paragraph 44, the Upper Tribunal said the test concerns reasonable reliance rather than whether the advice is correct, adding that this applies equally to HMRC’s view.

The penalty-amount appeal succeeded on a different point. The First-tier Tribunal had rejected an argument about the seriousness of the defaults by referring to paragraph 49A, which permits increased daily penalties of up to £1,000 in specified circumstances involving notices under paragraph 5. At paragraph 96, the Upper Tribunal held that paragraph 49A “was not applicable to the facts of this appeal”.Nationalarchives The Upper Tribunal held that this error in approaching seriousness may have affected the result.

The decision therefore did not cancel the penalties or determine replacement amounts. It directed the parties to make submissions within 21 daysNationalarchives on whether the amount issue should return to the First-tier Tribunal or be remade by the Upper Tribunal. For advisers reviewing similar appeals, the judgment separates the evidence needed to establish reasonable reliance from the correct statutory framework for assessing penalty amounts.

The legal basis is Finance Act 2008, Schedule 36, paragraph 45 on reasonable excuse, with paragraph 49A held inapplicable in David Hill & Anor v HMRCNationalarchives [2026] UKUT 306 (TCC).Nationalarchives

Check the factual basis and clarity of advice relied on in information-notice penalty appeals, and assess penalty amounts under the provisions applicable to the notice.

Sources