In Patel v HMRC [2015] TC04617, the first tier tribunal (FTT) ordered HMRC to suspend penalties for careless inaccuracy on condition that he engaged a qualified accountant or adviser.


Mr Patel was a self-employed locum pharmacist and he also owned a company. He proposed to transfer his locum pharmacist trade to the company in the future.

  • He was responsible for making errors in both his personal and his company tax returns.
  • HMRC raised penalties at 15% for careless inaccuracy.
  • They agreed during Alternative Dispute Resolution to suspend the company's penalties.
  • They refused to suspend penalties relating to his self-employed trade because he was ceasing trading.

Conditions for suspension

Under Schedule 24 FA 2007 para 14(3) HMRC are able to suspend penalties for careless inaccuracy if compliance with a condition of suspension would help the taxpayer to avoid becoming liable to further penalties for careless inaccuracy.

The decision

The tribunal considered HMRC's view regarding suspension of the penalties to be flawed.  Following the incorporation of his business Mr Patel would be deriving his personal income from the company he would still be required to submit self-assessment tax returns.  It would therefore be possible to impose conditions on him to ensure his future compliance.

The FTT ordered HMRC to suspend the penalties for two years, on condition that Mr Patel engage a professionally qualified accountant or tax adviser (a chartered member of: (a) the Institute of Chartered Accountants in 10 England and Wales (or the corresponding Institutes in Scotland or Ireland), (b) the Association of Chartered Certified Accountants or (c) the Chartered Institute of Taxation) for himself and his company, and that his own and the company’s returns were accurate, filed on time with any tax due also paid on time.

Whilst noting that FTT decisions do not set any legal precident, this decision shows the suspension conditions work in the way in which we all thought that they should: i.e. acting as a "nudge" to help make a confused taxpayer compliant.

Also good publicity for certain tax bodies.

Useful references

Practical Tax guide  Penalties: errors in returns and documents (subscriber version) for recent developments and guidance on how to appeal.

Case link Bharat Patel v HMRC [2015] UKFTT TC04617


Penalties for errors in returns and documents are found in S97 and Schedule 24 of the 2007 Finance Act, as modified by s35 and Schedule 10 FA 2010.