Key Facts
- •Mr. Marano failed to file a self-assessment tax return for the 2012-13 tax year.
- •HMRC issued a discovery assessment of £5,744,219 and penalties totaling £574,422.
- •The penalties were tax-geared, based on percentages of the tax liability, and did not account for prepayments.
- •The notices were issued via automated systems, raising questions about proper authorization and service.
- •Mr. Marano argued that the penalties should account for voluntary prepayments and that special circumstances justified a reduction.
Legal Principles
A valid notice to file a tax return must be issued by an officer of HMRC, though s.103 FA 2020 allows HMRC to do so via automated means with retrospective effect.
s.8 TMA 1970, s.103 FA 2020, Rogers and Shaw v HMRC [2019] UKUT 406 (TCC)
Service provisions in s.115 TMA 1970 are not the only means of giving notice; actual notice or knowledge suffices if the statutory purpose is achieved.
Sched 55 FA 2009, para 18(1)(b), Albert House Property Finance PCC Ltd v HMRC [2019] UKFTT
Tax-geared penalties under Sched 55 paras 5 and 6 are based on the liability shown in the return, not the amount outstanding after prepayments.
Sched 55 FA 2009, paras 5, 6, 24
Special circumstances under Sched 55 para 16 for penalty reduction may include early payment of tax, HMRC's prior knowledge of liability, and the size of the penalty.
Sched 55 FA 2009, para 16, Barry Edwards v HMRC [2019] UKUT 0131 (TCC)
Outcomes
Appeal allowed in part.
The FTT erred in law by not considering the relevance of early tax payment, HMRC's prior knowledge, and the penalty's size when determining "special circumstances".
Grounds 1, 2, and 3 dismissed.
Sufficient evidence existed under s.103 FA 2020 for the automated notices. Proper notification occurred despite not using s.115 TMA methods. The tax-geared penalties correctly excluded prepayments.
Case remitted to the FTT for reconsideration of special circumstances.
The FTT's decision on special circumstances was flawed due to the omission of relevant factors. A new FTT panel will re-evaluate the penalty reduction based on all relevant facts.