RK Hosking v The Commissioners for HMRC
[2023] UKFTT 943 (TC)
Paul Baxendale-Walker v The Commissioners for HMRC
3 June 2024
[2024] UKUT 154 (TCC)
Upper Tribunal
HMRC tried to get a big penalty against someone for not giving them tax information. The judge said HMRC messed up the paperwork, so they couldn't get the penalty. The judge looked at various laws about how to give out these types of penalties, making sure things were fair to the taxpayer.
Key Facts
- •HMRC sought a £14,031,851.01 tax-related penalty against Mr. Baxendale-Walker (PBW) under paragraph 50, Schedule 36, Finance Act 2008.
- •PBW applied to strike out HMRC's application, arguing the statutory pre-conditions weren't met and there was no reasonable prospect of success.
- •The FTT approved an information notice with a compliance deadline; PBW sought and received extensions.
- •HMRC issued paragraph 39 and 40 penalty notices, later withdrew them, and issued a new paragraph 39 penalty.
- •PBW appealed the paragraph 39 penalty; HMRC applied for the paragraph 50 penalty.
- •The central dispute revolved around whether a paragraph 50 penalty application could proceed while an appeal against a paragraph 39 penalty was ongoing.
- •A key question was whether HMRC could unilaterally change the information notice compliance deadline.
Legal Principles
Strike-out applications are determined based on whether there is a reasonable prospect of success, using the summary judgment approach of Part 24 of the Civil Procedure Rules.
Tribunal Procedure (Upper Tribunal) Rules 2008, Rule 8(3)(c); Easyair Limited v Opal Telecom Limited, [2009] EWHC 339 (Ch); The First De Sales Limited Partnership v HMRC, [2018] UKUT 396 (TCC)
Schedule 36, Finance Act 2008, outlines escalating penalties for non-compliance with information notices: fixed (paragraph 39), daily (paragraph 40), and tax-related (paragraph 50).
Schedule 36, Finance Act 2008
Paragraph 50 penalty requires: liability to a paragraph 39 penalty, continued failure after penalty imposition, HMRC's belief of significant tax underpayment, timely application to the Upper Tribunal, and the Tribunal finding it appropriate.
Paragraph 50, Schedule 36, Finance Act 2008
The principle against doubtful penalisation dictates that penalties should be avoided if there are reasonable alternative interpretations.
R(OAO the Good Law Project) v Electoral Commission & Ors [2018] EWHC 2414 (Admin)
Article 6 ECHR protects the presumption of innocence; a court should not prejudge guilt and doubt should benefit the accused.
Article 6, European Convention on Human Rights; Jussila v Finland [2006] ECHR 996
HMRC's powers are governed by section 9 of the Commissioners for Revenue and Customs Act 2005, which allows them to do what's necessary or expedient in exercising their functions.
Section 9, Commissioners for Revenue and Customs Act 2005
Outcomes
PBW's application to strike out HMRC's paragraph 50 penalty application was allowed.
HMRC's paragraph 39 penalty was either invalidly imposed (if HMRC could change the compliance date) or the application for the paragraph 50 penalty was out of time (if HMRC could not change the compliance date). Either way, a necessary condition for the paragraph 50 penalty was not met.