Schedule 36 carve-outs: the material HMRC cannot demand (UK 2026)

When HMRC opens an enquiry under Schedule 36 of the Finance Act 2008, an information notice can compel a wide range of documents and information held by the taxpayer or by a third party. But Part 4 of the Schedule (paragraphs 18 to 27) sets out the categories that fall outside the power — and three of those categories operate as outright privilege carve-outs that HMRC cannot override even with First-tier Tribunal approval.

This piece walks through what those carve-outs are, where the boundaries sit, and why the distinction matters in the SDLT compliance setting where a conveyancing firm often holds both protected and unprotected material on the same client matter.

The three privilege carve-outs at a glance

All three sit alongside the wider Part 4 restrictions on journalistic material and personal records (paragraph 19, importing the definitions from sections 12 and 13 of the Police and Criminal Evidence Act 1984), old documents over six years (paragraph 20), and notices addressed to deceased persons (paragraph 22).

Sources: Schedule 36 Finance Act 2008, checked 30 May 2026.

Paragraph 23 — legal professional privilege

Paragraph 23(1) says an information notice "does not require a person (a) to provide privileged information, or (b) to produce any part of a document that is privileged." Paragraph 23(2) defines that as material in respect of which a claim to LPP — or, in Scotland, confidentiality of communications between client and professional legal adviser — could be maintained in legal proceedings.

LPP at common law splits into two limbs:

• Legal advice privilege (LAP) — confidential communications between a client and a qualified lawyer for the purpose of giving or receiving legal advice.
• Litigation privilege — communications between client, lawyer, or third party for the dominant purpose of actual or reasonably contemplated litigation.

Both limbs are imported into the Schedule 36 carve-out by paragraph 23(2)'s "could be maintained in legal proceedings" formulation.

The Prudential limit on LAP

In R (Prudential plc) v Special Commissioner of Income Tax [2013] UKSC 1, the Supreme Court considered whether LAP could be claimed over legal advice on tax matters given by accountants (rather than qualified lawyers). The Court held by a 5–2 majority that LAP is confined to communications with members of the legal profession admitted to practise. Any extension of the privilege to other professions giving "legal" advice was a question of policy for Parliament, not the courts.

The practical consequence runs straight into the Schedule 36 carve-out: advice given by a non-lawyer professional (accountant, surveyor, tax consultant) on what the law is or how it applies to the client's tax position is not LPP. If HMRC requests it via an information notice, the paragraph 23 door does not open.

Parliament's narrower response to Prudential sits at paragraph 25.

Paragraph 25 — the statutory "tax adviser" carve-out

Paragraph 25(1) says an information notice does not require a tax adviser to provide information about, or produce documents consisting of, "relevant communications". Paragraph 25(3) defines:

• "Relevant communications" as communications between the tax adviser and (a) the client whose tax affairs the adviser has been appointed to advise on, or (b) another tax adviser of the same client.
• "Tax adviser" as a person appointed to give advice about another person's tax affairs (directly or via another adviser).

This is the so-called tax-adviser privilege. Three things to note:

1. It belongs to the adviser, not the client — paragraph 25(1) restricts what the adviser can be required to produce. The same documents in the client's hands are governed by the LPP rules in paragraph 23 (so generally would not be privileged in the client's hands unless the adviser is also a qualified lawyer).
2. It is narrower than full LPP. It only protects the advice content itself; it does not protect, for example, the underlying transactional records that the adviser holds for the client.
3. It is subject to the paragraph 26 carve-back (see next section), which strips the carve-out for material that explains tax-return preparation.

Paragraph 26 — the "tax accountant" claw-back

Paragraph 26(1) disapplies both the auditor carve-out (paragraph 24) and the tax-adviser carve-out (paragraph 25) for:

• information explaining any information or document that the recipient, "as tax accountant", assisted any client in preparing for, or delivering to, HMRC; and
• any document containing such information.

A second exception (paragraph 26(2)) applies to notices given under paragraph 5 — the unknown-identity notice route — and lets HMRC reach information identifying the persons covered by the notice.

Read together: a tax adviser cannot refuse to hand over the workings, calculations or supporting analysis that sit behind a return the adviser actually helped prepare for the client. The carve-out protects the advice; it does not protect the return-preparation paper trail. HMRC's Compliance Handbook treats this as the central practical limit on the paragraph 25 protection — see CH22260 onwards for the published interpretive position.

There is one important sub-point at paragraph 26(3): the claw-back in paragraph 26(1) or (2) does not re-engage if the information has already been provided, or the document has already been produced, to an officer of HMRC. Once handed over, it is handed over.

Paragraph 27 — partial production by redaction

Paragraph 27 handles the case where part of a document falls within a paragraph 26 exception and part does not. The notice has effect as if it required only the parts containing the material caught by paragraph 26 — i.e. the recipient produces the document with the protected sections redacted. This is the statutory analogue of the redacted-bundle practice familiar from civil litigation disclosure.

Why this matters in an SDLT enquiry

Schedule 36 is the operative information-gathering power for almost every HMRC tax enquiry, including enquiries into SDLT returns under Schedule 10 Finance Act 2003. SDLT enquiries are procedurally distinctive because the records sit, in most cases, in three different hands at the same time:

• The buyer — holds the underlying transaction record (contract, completion statement), any advice from solicitors on the SDLT treatment, and (for higher-value or structured transactions) a tax-adviser opinion on residence, additional-property treatment, mixed-use or multiple-dwellings issues.
• The conveyancing firm — typically a regulated solicitor practice. Holds the LPP-protected advice on the legal treatment of the transaction and the non-privileged transactional records (Land Registry filings, SDLT1 working papers, anti-money-laundering files).
• A specialist SDLT consultant, where used — typically a non-lawyer tax adviser. Holds the analysis underpinning any planning position, the return-preparation working papers, and the correspondence with the conveyancer.

The carve-out map applies differently to each holder:

The procedural takeaway is that the same advice content can be protected in one set of hands and unprotected in another. The recipient of an information notice has to map the request item-by-item against paragraphs 23 to 27, not against the document title.

How disputes get resolved

Paragraph 23(3) gives the Commissioners regulation-making power to provide for tribunal resolution of disputes about whether material is privileged. The current procedure is set out in the Information Notice: Resolution of Disputes as to Privileged Communications Regulations 2009 (SI 2009/1916), which routes a dispute to the First-tier Tribunal (Tax) with provision for custody of the disputed document pending decision. The auditor and tax-adviser carve-outs have no equivalent tribunal-resolution route built in — disputes get litigated through the standard paragraph 32 appeal route on the information notice itself, or by way of judicial review if the matter is procedural.

What this does not give you

It is worth marking out what these carve-outs do not protect, because the property-press shorthand "HMRC can't see your records if your lawyer's involved" is wrong in important ways:

1. They do not protect against discovery assessments. The 4-year (or 6-year careless / 20-year deliberate) discovery windows under FA 2003 Schedule 10 paragraph 30 operate independently of the Schedule 36 information-gathering power.
2. They do not protect statutory records. SDLT statutory records under FA 2003 Schedule 10 paragraph 9 (the return, supporting documents and underlying transactional papers) are not privileged in anyone's hands.
3. They do not give a general "commercial confidentiality" defence. Commercial sensitivity is not a paragraph 23, 24 or 25 ground, and the wider First-tier Tribunal jurisprudence under paragraph 30 makes clear that commercial confidentiality is also not an "unduly onerous" ground — see our deep-dive on the paragraph 30 unduly-onerous appeal case-law for the leading tribunal authorities.
4. They do not survive disclosure. Once a document has been produced to HMRC, paragraph 26(3) makes clear the carve-out does not re-attach. The protection is for materials not yet handed over.

Cross-references in the Homecost guides

Schedule 36 sits inside a wider compliance-check architecture. Three related guides:

• Schedule 36 information-notice penalties (UK 2026) — the £300 initial penalty and £60-per-day daily penalty for non-compliance with an information notice, plus the para 50 tax-related penalty for deliberate non-compliance.
• Paragraph 30 unduly-onerous appeal case-law (UK 2026) — the appeal route open to recipients of taxpayer or third-party notices that have not been tribunal-approved.
• Tooth v HMRC — the deliberate-inaccuracy test (UK 2026) — Supreme Court authority on "deliberate" for discovery-assessment purposes; relevant because the same factual matrix can produce a Schedule 36 information notice and a long-window discovery assessment in parallel.

For a wider walk through the HMRC factsheet series that accompanies a compliance check, see our CC/FS factsheet series explained.

Practical takeaway

The Schedule 36 carve-outs are narrower than they read on first impression:

• Paragraph 23 protects what a qualified lawyer would protect in a civil disclosure exercise — no more, no less.
• Paragraph 25 protects the advice content held by a non-lawyer tax adviser, but paragraph 26(1) cuts it back wherever the adviser helped prepare a return.
• Paragraph 27 lets the recipient redact rather than withhold entire documents.

For a recipient working out whether to comply, the right exercise is to take each item on the information notice, identify in whose hands it sits, and apply the relevant paragraph. Generic refusals fail. Selective, paragraph-by-paragraph claims to privilege, with redactions where paragraph 27 applies, are the procedurally correct response.

Disclaimer

This is general information about how Part 4 of Schedule 36 Finance Act 2008 operates. It is not legal or tax advice and should not be relied on as such. Anyone in receipt of an HMRC information notice should take advice from a regulated solicitor or qualified tax adviser before deciding what to produce, withhold or appeal. Speak to a qualified adviser before acting.

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Based on the live Schedule 36 statute text on legislation.gov.uk and the HMRC Compliance Handbook, both checked 30 May 2026.