Money Covered: The Week That Was – 14 August 2026

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The first of Season 5 of our podcast, Money Covered – The Month That Was, was released this week. David Allinson and Mel Redding discuss the FCA’s proposed section 404 consumer redress scheme for vehicle finance.

To listen to this and all previous episodes, please click here.

Headline Development

FOS publishes its Policy Statement on modernising the redress system

On 11 August 2026, the Financial Ombudsman Service (FOS) published a policy statement on modernising the redress system – this was specifically in response to the proposed changes consulted on in CP26/9. The relevant amendments will come into force on 1 October 2026.

The FOS will introduce a registration stage within its complaints handling process. The purpose of this is to act as a checkpoint for assessing whether a complaint is appropriate to proceed to the investigation stage. However, implementation of this proposal will be postponed so that it can be considered alongside the FOS' consultation on case fees, which will be published later this year.

The FOS will also proceed with proposals for an expanded set of grounds for dismissal. The changes are intended to provide clearer routes to resolution and to improve the overall management of complaints.

DISP 3.6.4R will be amended to clarify that the FOS' decisions are based on the standards applicable at the time of the act or omission complained about. This change will apply to all current and future complaints, on the basis that the change is clarificatory only. The reference to “good industry practice” in DISP 3.6.4R will remain at this stage, although the position will be kept under review.

To read the policy statement, please click here.

Relevant case law updates

Upper Tribunal finds that taxpayers cannot rely on advisers as a reasonable excuse for non-compliance with HMRC information notices

In Hill v HMRC [2026] UKUT 00306 (TCC), the Upper Tribunal (UT) upheld the decision of the First-Tier Tribunal (FTT) that individual pension scheme administrators' (PSAs) reliance on advisers in respect of HMRC notices was not a reasonable excuse for non-compliance with the notices. The UT allowed the PSAs appeal regarding quantum.

The operator of the pension schemes retained a tax advisory firm (the "Firm") to advise on tax issues and correspond with HMRC. Pursuant to Schedule 36 of the Finance Act 2008 (Sch 36, FA 2008), HMRC issued notices to the PSAs requiring taxpayers and third parties to provide information or documents reasonably required to consider the tax position. The Firm consistently advised the pension scheme operator (and the PSAs indirectly) not to comply with the notices as the pension schemes had been wound up. HMRC issued penalties to the PSAs for the non-compliance.

The UT found that the FTT had not erred in law in concluding the PSAs did not have a reasonable excuse where they relied on adviser assurances that no compliance was required because the schemes were wound up. There is no liability if a taxpayer or third party can demonstrate a reasonable excuse as to non-compliance with information notices, and where reliance is placed on another person, it is not a reasonable excuse unless reasonable care was taken to avoid the failure. The UT confirmed that the question is not whether the advice was right, but whether it was reasonable for the taxpayer to rely on it, and whether they took reasonable care in doing so. The UT accepted that lay recipients are not expected to evaluate legal analysis, but reliance is not “responsibility-free”, and the law expressly requires reasonable care when relying on others. It was open to the FTT to find (on the evidence) that the PSAs conduct amounted to “blind reliance” / “unchecked assumption” rather than reasonable care, given (among other points) they (1) did not seek copies of key correspondence to check what was being said on their behalf, (2) did not ask for clarification when advice/emails were short, lacking detail, or confusing, and (3) did not sufficiently engage with repeated HMRC letters/penalties signalling HMRC rejected the wind-up position and that appeals had not been lodged.

The UT found the FTT committed an error of law in its seriousness/quantum analysis by referring to Sch 36, FA 2008 which allows daily penalties up to £1,000/day, as there remained room for worse cases. The UT agreed the relevant provision did not apply on these facts, and held the error may have made a difference, so the quantum decision could not stand. The UT directed the parties to file submissions within 21 days on whether quantum should be remitted to the FTT or remade by the UT.

Even where taxpayers act on professional advice, Sch 36, FA 2008 can require some active, reasonable-care engagement (especially where HMRC communications and escalating penalties give clear warnings), but the tribunal must apply the correct statutory framework when considering penalty seriousness/quantum.

To read the judgment, please click here.

DOTAS setback for HMRC: FTT overturns SRNs for Property 118 incorporation arrangements

The First-tier Tribunal (Tax Chamber) has allowed appeals by Property 118 Limited and Cotswold Barristers Limited against HMRC’s allocation of scheme reference numbers (SRNs) under section 311 of the Finance Act 2004. The dispute concerned two sets of arrangements for incorporating property investment businesses, described as the “substantial incorporation structure” and the “capital account restructure”, which HMRC had treated as notifiable under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, and relevant Descriptions therein.

References in the decision to “Description 3”, “Description 5” and “Description 9” are to specific numbered “hallmark” descriptions in the DOTAS regulations. In each case, the Tribunal is assessing whether the arrangements meet the conditions in that particular regulatory description (and are therefore notifiable).

In relation to Description 5, the Tribunal held that the arrangements were not caught because an informed observer could not reasonably be expected to conclude that the main purpose of the arrangements was to enable persons to obtain a tax advantage. Whilst the Tribunal accepted that enabling persons to obtain incorporation relief in full and avoiding the effect of section 24 of the Finance (No. 2) Act 2015, were main purposes, it concluded (on the evidence) that these were not the main purpose, given there were numerous other non-tax and tax reasons for incorporating.

The Tribunal also found that Description 3 did not apply because the fees charged were not “premium fees” attributable to any tax advantage, and that Description 9 did not apply because the steps involving bridging finance were not contrived or abnormal. The Tribunal therefore cancelled HMRC’s decision to allocate the SRNs pursuant to section 311B(7) of the Finance Act 2004.

To read more, please click here.

With thanks to this week's contributors: Lauren Butler, Daniel Parkin, Sourav Shinagare, Damien O'Malley and Dorian Nunzek.

If you have any queries please do get in contact with a member of the team, or your usual RPC contact.