The receipt or threat of an information notice from HMRC under Schedule 36 FA 2008 is commonly the point many tax departments reach for the disputes lawyers. Often used – indeed, seemingly some HMRC case teams feel the need to issue information notices to demonstrate internally that a ‘proper’ investigation has been undertaken even when the facts are or should be straightforward – many notices are very broadly drafted and come across more like ‘fishing expeditions’. 

The decision in Lifeplus is therefore a helpful reminder that HMRC’s Schedule 36 powers are not unlimited and that taxpayers should be prepared to test their boundaries. 

Lifeplus – the facts 

Lifeplus Europe Ltd (“Lifeplus”) a wholly-owned subsidiary of a (privately owned) US parent company (the “US Parent”) acted as EU distributor of health products manufactured and developed by the US Parent.  HMRC challenged Lifeplus’ transfer pricing policy under which it applied the Transactional Net Margin Method (“TNMM”), arguing instead that the Comparable Uncontrolled Price (“CUP”) method was more appropriate (which would mean attributing more profit to Lifeplus).

Over a period of more than five years, HMRC sought the US Parent’s consolidated financial statements. This included a request to the IRS under the UK/USA Double Tax Treaty, which was rejected by the IRS on grounds of relevance in 2020, and Lifeplus providing extensive further documentation and allowing executives to be interviewed. Nonetheless, in 2023 HMRC issued a formal information notice  requesting (among other things) the US Parent’s consolidated group financial statements and entity-level financial statements.

In May 2026, revealing the time procedural issues can take, the FTT allowed Lifeplus’ appeal (Lifeplus Europe Ltd v HMRC [2026] UKFTT 797 (TC)).

What powers does HMRC have? 

For a Schedule 36 request to be valid, HMRC may only require documents that are:

1. ‘reasonably required’ to check the taxpayer’s tax position; and
2. within the taxpayer’s ‘possession or power’.

These are both points that HMRC must establish and the taxpayer(s) can challenge.

When is something ‘reasonably required’?

The FTT confirmed that it is for HMRC to establish a ‘rational connection’ between the documents sought and the underlying enquiry. This is a factual, case-specific point requiring HMRC to answer the essential question ‘why is this needed’. In this instance, HMRC failed to do so. 

HMRC’s enquiry was focused on whether Lifeplus should have utilised the CUP transfer pricing method over the TNMM. The FTT analysed Lifeplus’ transfer pricing report and found that (i) Lifeplus followed an OECD-compliant approach (and indeed HMRC had not suggested otherwise); (ii) that approach did not rely upon the US Parent accounts; (iii) the requested financial statements would not assist HMRC in understanding the functional profile or analysis of the business. 

In this particular context, the FTT also placed weight on the OECD Transfer Pricing Guidelines, which note (at para 3.22) that where ‘a particular one‑sided method [(such an TNMM)] is chosen as the most appropriate method and the tested party is the domestic taxpayer, the tax administration generally have no reason to further ask for financial data of the foreign associated enterprise’. 

Further relevant points are that:

• HMRC had not explained why the information in fact being sought was not contained in the extensive amount of material already provided by Lifeplus;
• The IRS’s refusal to provide the information was relevant, notwithstanding that this predated the correspondence surrounding the CUP analysis adjustments; and
• The FTT did not accept HMRC’s position that narrowing its original (much broader) requests meant that the request for the US Parent’s financial data was somehow now reasonable.

When is something in your ‘power or possession’? 

The test of ‘power or possession’ is again one of fact, albeit often relying more on the legal relationship between the taxpayer and relevant third party. In this case HMRC argued that, given some financial information from the US Parent had been used during settlement discussions, and given the overlap in senior personnel, Lifeplus must have the ‘power’ to obtain the requested financial statements from its parent.

The FTT rejected this argument and held that:

• Lifeplus had no legal right to access the financial statements without the consent of the US Parent (who declined);
• There was no standing or continuing practical arrangement allowing access to the financial statements (such as might evidence a de facto ‘power’ for Lifeplus to obtain this information); and
• Limited, purpose-specific provision of information to Lifeplus’ advisors during settlement discussions did not create a broader right of access.

Importantly, the overlap in management did not alter the analysis: directors/officers owe duties to each company separately and cannot be compelled to use their influence in a way that would create conflicts of interest. This will be of some relief to groups where there are common directors across entities.

It is worth noting that, in the context of transfer pricing enquiries, the introduction of Paragraph 37C in 2023 qualifies the ‘possession or power’ restriction for certain transfer pricing documentation, allowing HMRC to compel a UK group company to produce  such documents that are in the possession or power of another company within the same MNE group. 

Key takeaways and practical pointers 

This decision will no doubt be cited in many enquiries as a reminder that HMRC’s information powers are not unlimited and that the burden lies on HMRC to justify the scope of its requests.

This is particularly the case in terms of relevance. At all stages of an enquiry, taxpayers will feel emboldened to push back on broadly drafted requests or where documents are sought simply because they could provide ‘useful context’. Even more so where extensive information has already been provided, the Schedule 36 notice comes late in the day and HMRC fail to articulate why the information is reasonably required beyond what has already been provided. 

On possession or power, taxpayer groups must still consider their intra-group arrangements carefully. This decision is helpful in showing that UK subsidiaries do not automatically have the power to obtain documents in their parent’s possession simply by virtue of the parent/subsidiary relationship, even where there is significant overlap in leadership. However, the practical reality may mean this is a difficult line to maintain in all cases – e.g. with consolidated financial systems or where new AI tools allow data to be mined from a wider set of sources across a group. In any event, taxpayers must show they have made serious attempts to obtain requested documents in line with One Call. 

More generally, there are a few practical steps worth keeping in mind when faced with a broad Schedule 36 request:

• Keep a clear record of what has already been provided. A successful challenge can turn on demonstrating the extent of information already supplied.
• Document attempts to obtain third party documents. If HMRC requests documents held by a parent or affiliate, make a formal written request and retain evidence of both the request and any refusal.
• Engage early and press HMRC to explain why the information is needed. Ask HMRC to articulate the 'rational connection' between the documents sought and the specific tax issue. In transfer pricing enquiries where a one-sided method has been chosen and the taxpayer is the tested party, point HMRC to the OECD guidance.
• Be cautious about information shared in settlement discussions. Although HMRC lost in Lifeplus, the adjustments proposed to the CUP analysis during settlement prompted the Schedule 36 request. Consider in advance what information HMRC may seek to verify data used in those discussions.

Hopefully this decision will encourage HMRC case teams to take a more reasonable (and rationally articulated approach). If not, taxpayers will continue to require litigators and the FTT will remain busy with procedural challenges. See our Tax Disputes 2025 series for more tips on handling HMRC disputes.