In Eric Eastman V HMRC [2016] TC05276, the First Tier Tribunal (FTT) allowed suspension of a penalty for a one-off capital gains tax (CGT) error. The taxpayer’s accountant made the mistake and he created to new systems to prevent re-occurrence.

Schedule 24 FA 2007 sets out tax geared penalties for an error or mistake in a tax return: penalties for carelessness may be suspended, provided that HMRC can set conditions to improve the taxpayer’s behaviour.

  • Mr Eastman sold his business and 17 months later the business premises. His accountant had prepared a CGT computation at the time.
  • Another partner in the firm completed his SA return later and omitted the gain on the premises.
  • The taxpayer signed off his return without spotting the error.
  • HMRC spotted the error and assessed a penalty under schedule 24 FA 2007 of £21,547.
  • HMRC refused to suspend the penalty arguing that it was as a result of carelessness, as the error related to a one off event, it was impossible to set any conditions of suspension.
  • The taxpayer appealed HMRC’s decision.

The FTT decided that:

  • HMRC had wrongly addressed the question of the underlying cause of the error: the accountant had caused it and should have checked the client file.
  • HMRC’s decision not to suspend the penalty was flawed.

It concluded that:

  • The acid test in considering suspension is what the taxpayer could reasonably have done differently that would have avoided the original inaccuracy. It can be argued that the purpose of the suspension conditions is to bring the standard of compliance up to the level of a prudent taxpayer.
  • It was possible to create a condition for suspension.
  • What was required was an effective means of double-checking that taxpayer’s tax file represents all relevant material for the purpose of ensuring that he makes an accurate return.


Although this case sets no legal precedent, it adds a further dimension to the growing number of cases on suspended penalties. Bearing in mind that Sch 24 was supposed to simplify penalties and make a “tick the box” system for HMRC; it seems that this is a very difficult area for HMRC’s officers and more training would be useful. This is a very difficult topic for an unrepresented taxpayer.

Useful links to our subscriber guides

Appeal: grounds for appeal
What grounds are there to appeal a tax penalty? How can you word a tax appeal?Can you appeal HMRC errors? What is a reasonable excuse?

How to appeal a tax penalty 
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Penalties for errors in returns 
What penalties apply if you make an error or mistake? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

External links

Eric Eastman V HMRC [2016] TC05276