£1M Penalties for Unrepresented Taxpayer for Not Providing Evidence

HMRC had asked a taxpayer to provide information so that it could calculate his tax liabilities. He failed to produce the relevant information, so HMRC issued penalty notices for that failure. Penalties are based on an estimate of the “tax at risk”, which HMRC judged to be about £1million.  The taxpayer appealed against the penalty notices. But the Upper Tier Tribunal determined the penalties.  He now has to pay £1.075 million.  Even though HMRC now accept the tax bill is actually more like £62,000.  HMRC are pursuing that tax.

HMRC had made enquiries into the tax affairs of the estate of Mr Tager’s late father.  Mr Tager decided to deal with these matters himself: rather than engaging professional assistance.  The taxman asked him to provide information: which he failed to do. Ultimately HMRC issued him with three formal “information notices”.  Again, he failed to comply.

In cases of failure to provide information, HMRC can charge penalties.  These can be a maximum of 100% of the estimated amount of “tax at risk”. That is, in the absence of the full information HM Revenue and Customs have to use the best of their judgement to decide how much tax would be payable if the information had been supplied.  HMRC estimated that the tax payable is likely to be in region of £1 million: and so they charged that the amount in penalties.

The taxpayer appealed to the Tax Tribunal. In the absence of any better evidence the Tax Tribunal judges agreed that the amount of tax at risk was around £1 million, and determined the penalties in those figures. Those penalties are now payable.

Additionally, HMRC will still want to collect the tax itself. Apparently, the taxpayer has now engaged professional assistance, and evidence is now be made available that suggests that the tax liabilities are actually closer to £62,000.  Once the figure of tax has been finally determined and agreed Mr Tager will have to pay it (plus interest, and possibly plus a further penalty based on a percentage of £62,000). But whatever the final figure of tax is he will still have to pay the penalty of £1 million for failure to respond to the earlier information notices.

What does this mean for me?
If you are in a dispute with HMRC and the case is likely to be heard at the Tax Tribunal it is essential that you have specialist tax advisers to fight your corner. The Tribunal can only make decisions based on the information and facts put in front of it, and in accordance with the law as put to them. If your case is not properly presented, the Tribunal judges will not be able to take into account potentially relevant information: if it has not been made available to them.  In this case, it looks as if the taxpayer may end up paying almost £1 million in penalties; in excess of what may have been the appropriate figure if he had been properly represented from the outset.

How can Lynam Tax Dispute Specialists help me?
Lynam Tax Dispute Experts have prepared for many Tribunal hearings and the process has usually meant HMRC conceding before the formal meeting.  We have also presented cases successfully at formal contentious hearings; and we are currently assisting a number of clients through the appeal processes. We will fight your corner tenaciously, but also with the subtlety and skill honed from 80 years’ real experience.

Call today for a free initial consultation:

Paul Lynam: 0845 643 9997

Andrew Nutbrown: 0771 877 8710