David Hill & Anor v The Commissioners for HMRC

A taxpayer’s reliance on professional advice does not automatically provide a reasonable excuse for failing to comply with an information notice. The tribunal must assess the taxpayer’s reliance objectively and in all relevant circumstances. Although a taxpayer need not second-guess technical legal advice or obtain multiple opinions, reasonable care may require independent judgment about the advice received, its factual basis and surrounding communications.

An error in assessing penalty seriousness warrants appellate intervention where it may have affected the result. The appeal was allowed in part because the FTT relied on a provision that did not apply to the penalties in issue.

David Hill and David McCracken were scheme administrators for separate pension schemes. After receiving information notices, they relied on advice from Liddell Dunbar Ltd and Independent Tax that they need not respond because their schemes had been wound up. HMRC imposed penalties for non-compliance.

The First-tier Tribunal dismissed their appeals and upheld the penalties, finding that they had not taken reasonable care in relying on the advice. The Upper Tribunal heard an appeal concerning that finding and the quantum of the penalties. The central questions were whether the FTT had applied the correct test for reasonable reliance on an adviser and whether its assessment of penalty seriousness involved an error of law.

The appeal was allowed in part.

1. Reasonable excuse. The Perrin v HMRC [2018] UKUT 156 TCC framework required the tribunal to identify the facts said to constitute an excuse, determine which facts were proved, and assess objectively whether those facts were sufficient, having regard to all relevant circumstances.
2. Reliance on advice. Under paragraph 45(2)(b) of the Finance Act 2008, reliance on another person is not a reasonable excuse unless the taxpayer took reasonable care to avoid the failure. That inquiry covers the taxpayer’s conduct in receiving and assessing the advice, as well as the choice of adviser. A taxpayer need not second-guess technical legal advice or seek multiple opinions, and reasonableness is not judged by a counsel of perfection. But obtaining advice alone is insufficient. The tribunal may consider whether the taxpayer checked known facts, sought clarification of unclear advice, or responded to evident problems in the surrounding communications. The reasoning in FCA v Forster [2023] EWHC 1973 (Ch), Jacob v Vockrodt [2007] EWHC 2403 (QB) and Regent Leisuretime Ltd and others v Skerrett and another [2005] EWHC 2255 (QB) supported that approach.
3. Application to the facts. The FTT was entitled to find that the appellants had relied on brief or unclear communications without checking them or asking questions, despite receiving penalties and correspondence indicating that HMRC rejected the advisers’ position. The FTT applied the correct legal test, and its conclusion that neither appellant had a reasonable excuse was within the range open to it. The appeal on that issue was dismissed.
4. Penalty quantum. An error that may have made a difference to the outcome is material and will normally justify appellate intervention, consistently with HMRC v Currell [2026] EWCA Civ 445. The FTT relied on paragraph 49A of Schedule 36 to the Finance Act 2008 when assessing seriousness, although that provision did not apply to the facts of this appeal. The error may have affected the quantum decision, so the appeal on that ground was allowed. The parties were directed to provide submissions within 21 days on whether the quantum issue should be remitted to the FTT or remade by the Upper Tribunal.

1. Upper Tribunal (Tax and Chancery Chamber): Allowed the appeal in part, dismissing the reasonable-excuse grounds and allowing the quantum ground. It directed submissions on remittal or remaking.
2. First-tier Tribunal (Tax Chamber): On 16 September 2024, dismissed the appellants’ appeals against the penalties and upheld them in full.