In Tager & Anor v HMRC [2018] EWCA Civ 1727 the Court of Appeal reduced tax-related penalties imposed by the Upper Tribunal for failure to provide information from £1,075,210 to £220,000.

Schedule 36 Finance Act 2008 permits HMRC to make a written request ("an information notice") to a taxpayer to provide information or produce a document provided that:

  • The information or document is "reasonably required" by the officer for the purpose of checking the taxpayer's tax position (Paragraph 1 of Schedule 36 of FA 2008).

Where a person fails to respond to a Schedule 36 Information notice they may become liable to penalties, as determined by HMRC. In cases of extreme default the Upper Tribunal (UT) may also impose tax geared penalties under paragraph 50 of Schedule 36.

Mr Tager, a QC, was the executor for his late fathers estate.

  • He failed to comply with undertakings made to the tribunal in respect of making tax returns for income tax (for himself) and IHT in his capacity as executor, dating back to 2006.
  • The UT imposed penalties under paragraph 50 of £1.2 million; they did not know the full amount of potential tax lost however it was indicated that this was over £1 million. It decided in view of Mr Tager's lack of cooperation and given the nature of his profession, to impose penalties of 100% which were reduced slightly when the taxpayer provided further evidence of asset values.

The Court of appeal, ruling for the first time on the powers of the Upper Tribunal to impose tax-related penalties and agreeing with them about Mr Tager’s conduct, set aside the UT decision:

  • Instead of remitting the case back to the UT they chose to re-make the decision, reducing the penalties to £220,000.
    • There was uncertainty as to the amounts of tax due and they were only an acceptable starting point upon which to calculate para 50 tax-related penalties if appropriate discounts were applied, and they were not.
    • In comparing paragraph 50 penalties to Schedule 55 FA 2009 penalties for deliberate concealment and starting at 100% of the unpaid tax, the UT judge had misdirected himself; unlike schedule 55, paragraph 50 (which was enacted first) is not prescriptive and only requires the UT to’ have regard’ to the amount of unpaid tax, there was no requirement to start the penalties at 100%.

The final penalty figures were round sum amounts which the court did not seek to justify as being based on the amounts of unpaid tax. As a result the penalties at £220,000 were still in excess of the unpaid IHT and income tax which totalled £196,721 but was about 12 years overdue.


Penalties: Errors in returns and documents

Schedule 36 information notices

Appeals: grounds for appeal toolkit

External link:

Tager & Anor v HMRC [2018] EWCA Civ 1727 


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