The FTT has allowed a rare appeal against an HMRC information notice in Lifeplus Europe Ltd v The Commissioners for HMRC [2026] UKFTT 797 (TC). The decision clarifies the “reasonably required” and “possession or power” tests in Schedule 36 enquiries. It highlights the need to control enquiry scope and resist unfocused information requests.

Background and decision

The FTT decision in Lifeplus Europe Ltd v The Commissioners for HMRC [2026] UKFTT 797 (TC) concerns a long-running transfer pricing enquiry into cross-border transactions between Lifeplus Europe Ltd and its US parent company. HMRC’s focus was on whether the taxpayer’s use of the transactional net margin method (TNMM) should be replaced with a comparable uncontrolled price (CUP) methodology.

HMRC issued an information notice requiring production of the parent company’s consolidated and entity-level financial statements across multiple years. The taxpayer appealed on the basis that the documents were neither reasonably required nor within its possession or power.

The Tribunal allowed the appeal, finding that the statutory conditions for the notice were not satisfied.

A rare successful challenge to an information notice

Appeals against Schedule 36 information notices are rarely successful in practice. This decision stands out as a clear example of the Tribunal scrutinising the scope of HMRC’s requests and rejecting them where they fall outside the statutory limits.

The Tribunal emphasised that HMRC must demonstrate a rational connection between the material sought and the specific tax issue under enquiry. Requests cannot be justified on the basis that information is merely useful, informative or contextual.

Scope control in complex enquiries

A central feature of the case was the breadth and duration of the enquiry. HMRC had opened multiple enquiries covering several years and had already obtained extensive material, including transfer pricing reports, detailed functional analyses and large volumes of internal communications.

Despite this, HMRC continued to seek further information, including material from outside the UK entity. An unusual aspect of the case was that HMRC attempted to obtain the same material through an exchange of information request to the US Internal Revenue Service. That request was refused on the basis that the parent company’s financial statements were not relevant to the UK enquiry.

The Tribunal found that the enquiry had become focused on a narrow issue: the selection of transfer pricing methodology. Against that backdrop, the additional material requested did not have a sufficient connection to the issue under consideration.

The decision reinforces that even in complex and long-running enquiries, HMRC must maintain focus on identified issues and cannot use Schedule 36 powers to explore wider lines of enquiry.

Transfer pricing context

The judgment is also notable for its treatment of transfer pricing principles.

The Tribunal accepted that, where a one-sided method such as TNMM is applied, the relevant analysis is typically focused on the tested party. In such cases, the need for financial data relating to the counterparty entity is limited.

On the facts, the parent company accounts were not required to assess the appropriateness of the chosen methodology or to carry out the necessary functional and comparability analysis.

Possession or power in a cross-border group

The Tribunal also rejected HMRC’s argument that the UK subsidiary had the power to obtain its parent company’s financial statements.

It confirmed that “power” requires either a presently enforceable legal right or a clear practical arrangement giving access to documents. A parent-subsidiary relationship, even in a wholly-owned group, does not of itself establish control.

The evidence showed that the parent company had refused to provide the documents on confidentiality grounds and that access to its financial information was tightly restricted. There was no legal right or standing arrangement enabling the UK entity to obtain the material.

The Tribunal also noted that company directors cannot be required to take steps which would place them in breach of their duties or create conflicts of interest within the group.

Adverse inference on HMRC failure to call witnesses

Members of HMRC’s International Tax Specialist team had been involved in shaping the enquiry and its transfer pricing analysis. However, HMRC did not call any of those specialists to give evidence, despite their presence at the hearing. The FTT noted that the role of those specialists had also not been made clear by the HMRC witnesses giving oral evidence.

The Tribunal accepted that it was appropriate to draw adverse inferences from that omission. In particular, it took into account the absence of direct evidence from those individuals when assessing the strength and justification of HMRC’s position.

It is unusual to see the FTT drawing adverse inferences from HMRC’s witness selection. It demonstrates that where HMRC is selective in the witnesses it calls the Tribunal may scrutinise that evidential gap and draw conclusions accordingly.

Managing complex enquiries

The case also illustrates the practical challenge of managing large-scale enquiries.

Over an extended period, the taxpayer had provided significant volumes of material, including detailed transfer pricing documentation and extensive internal data. However, continued disclosure did not satisfy HMRC or narrow the scope of HMRC’s requests.

It is a reminder of the need to bring discipline to such enquiries and to resist further requests where the connection to the underlying tax issue is not clearly established.