In R&J Birkett T/A The Orchards Residential Home & Others v HMRC [2017] UK UT 0089 the Upper Tribunal upheld daily penalties for failure to comply with information notices where initial fixed penalties were under appeal.

  • The taxpayers were partners in several partnerships each of which operates a residential care home.
  • In 2009 they entered into a scheme designed to reduce the taxable profits of the partnerships by transferring funds to a ‘remuneration trust’.
  • HMRC opened enquiries into the partnership tax returns and issued Schedule 36 information notices to the taxpayers.
  • As the taxpayers failed to respond to the information notices HMRC charged initial penalties of £300.
  • The taxpayers appealed these initial penalties, but the First-tier Tribunal (FTT) misplaced the appeal papers and failed to notify HMRC.
  • HMRC went on to issue daily penalties of £20 per day for continued failure to comply.

The taxpayers appealed the daily penalties to the FTT on the grounds that they had a legitimate expectation that HMRC would defer them pending their appeal against the initial fixed penalties.  The FTT rejected this appeal.

The UT upheld the decision, finding that:

  • The FTT had no jurisdiction to decide the question of legitimate expectation.
  • The penalties were compliant with the taxpayers’ human rights.


Our subscriber guides:

Sch 36 information notices

Penalties: Sch 36 information notices

Case reference: R&J Birkett T/A The Orchards Residential Home & Others v HMRC [2017] UK UT 0089

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