A case on interpreting penalty notices can be found in Spring Capital Limited v HMRC [2017] UKUT 0215 (TCC) where the Upper Tribunal (UT) had to decide whether a penalty notice extended the time limit for supplying information.

  • HMRC issued an Information Notice to the taxpayer (under Sch 36 FA 2008)
  • The taxpayer did not respond
  • In February 2015 HMRC started issuing daily penalties.
  • Under the heading “what to do now”, the Penalty Notice stated
    • “To avoid any of further penalties, the company should let me have what we have asked for by 22 March 2015. If the company does not do this we may charge further penalties of up to £60 a day.”
  • The taxpayer failed to comply in full by this date.
  • HMRC charged daily penalties on the period from the date of penalty notice to 22 March.
  • The taxpayer appealed on the basis that the Penalty Notice extended the deadline for the Information notice so no penalty should be due for this period.
  • The FTT denied the appeal.

The UT held that the taxpayer’s position was not a reasonable interpretation of the penalty notice. HMRC had the right, under their management powers, to choose not to apply penalties (as the legislation says HMRC “may” charge daily penalties), and the statement was simply an offer to exercise this power. Accordingly, no reasonable person would consider this to grant additional time to provide the documents.

A second interesting point is that the FTT denied the taxpayer the option to appeal on these grounds, as this was a decision of fact rather than law. The UT disagreed, considering the wording of the Notice to be a matter of fact, but its interpretation was a matter of law.

Case link: Spring Capital Limited v HMRC [2017] UKUT 0215 (TCC)

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