First-tier Tribunal (Tax)

Neutral Citation: [2025] UKFTT 370 (TC)

Case Number: TC09464

FIRST-TIER TRIBUNAL

TAX CHAMBER

Location: Decided on the papers

 

Appeal reference: TC/2023/10959

 

DOTAS - penalties - company in liquidation - whether assessments raised in time - yes - whether statutory maximum penalty inappropriately low - no - appeal dismissed

 

 

Judgment date: 21 February 2025

 

 

Decided by:

 

TRIBUNAL JUDGE ANNE FAIRPO

 

 

Between

 

THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS

Applicant

and

 

SAXONSIDE LIMITED

(in liquidation)

Respondent

 

 

 

The Tribunal determined the appeal on 22 January 2025 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (default paper cases) having first read the bundle of documents and the bundle of authorities, each provided by HMRC, and HMRC's written submissions. The respondent company is in liquidation; the liquidators stated that they did not oppose the application and no submissions were made by or on behalf of the respondent company.

DECISION AND DIRECTIONS

 

1.             HMRC have applied for penalties to be imposed on the respondent company for failure to comply with the requirement under s308(3) of the Finance Act 2004 to notify HMRC of arrangements which are notifiable under the Disclosure of Tax Avoidance Schemes regime.

2.             Having read the written submissions of HMRC together with the bundles of papers and authorities filed, and noting that the liquidators of the respondent company do not oppose this application, I find that:

(1)          the arrangements were notifiable. Although the respondent company initially appealed the allocation of a Scheme Reference Number (SRN) to the arrangements, that appeal was withdrawn by the liquidators and it is no longer disputed that the arrangements were notifiable;

(2)          the respondent company was the promoter in respect of the arrangements. The SRN was served on the respondent company on the basis that it was the promoter. Given the withdrawal of the appeal referred to in (1) above, it is no longer disputed that the respondent company was the promoter of the arrangements;

(3)          the respondent company did not notify HMRC of the arrangements. This was not disputed;

(4)          the penalty was raised within the six year time limit set out in statute as the arrangements appear to have first been used in February 2021 and were still newly being entered into by users in 2022;

(5)          no reasonable excuse has been asserted by the respondent company.

3.             Accordingly, I find that the respondent company is liable to a penalty in accordance with section 98(1)(a)(i) and (2)(a) of the Taxes Management Act 1970.

4.             I note that the director of the respondent company was served with a Joint Liability Notice and advised that he was entitled to be a party to the penalty proceedings. The director submitted an appeal in respect of the Joint Liability Notice but did not provide any grounds of appeal. As the director did not respond to a request to provide grounds of appeal, his appeal was struck out.

5.             The statutory maximum penalty for the initial period of 395 days is £237,000. It is noted that the Tribunal has power to increase this penalty to an amount not exceeding £1,000,000 if the Tribunal considers that the maximum is inappropriately low.

6.             In the context of quantum, HMRC made reference to the respondent company having generated the economic equivalent of fees of over £2.16m. That figure appears to be derived from the VAT turnover of the respondent company rather than profit amounts. No current financial information for the respondent company is available.

7.             In their application, HMRC stated that they would set out their contentions on the amount of the penalty once they had had the benefit of the respondent company's statement of case. No such statement of case has been filed. No further submissions as to the amount of the penalty were provided in HMRC's written submissions.

8.             Having read the papers, and noting the comments in Tager & Ors [2018[ EWCA Civ 1727, I do not consider that it is possible to establish that the statutory maximum is inappropriately low as a penalty amount.  

9.             Accordingly, IT IS DIRECTED THAT:

(1)          The application of HMRC dated 26 September 2023 is allowed.

(2)          The respondent company shall pay to HMRC a penalty in the sum of £237,000.

(3)          The respondent company shall pay HMRC's costs of and occasioned by this application in a sum to be agreed, or summarily assessed, in default of agreement.

Right to apply for permission to appeal

10.         This document contains full findings of fact and reasons for the decision.  Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.  The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice.

 

 

Release date: 21^st FEBRUARY 2025