© 2026 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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V5: Other penalties
Failure to notify​
"A penalty is payable by a person (P) where P fails to comply with an obligation specified in the Table below (a “relevant obligation”)." (FA 2008, Sch 41, para 1)
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Penalties for special returns
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See TMA 1970, s.98
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PAYE and CIS penalties
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See TMA 1970, s.98A
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DOTAS penalties (failure to notify etc.)
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See TMA 1970, s.98C
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HMRC must commence penalty proceedings before the FTT
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"[148] The relevant legislation is to be found in Sections 98C, 100C and 118 TMA. The first sets out the penalty provisions. The effect of Section 100 TMA is that an HMRC officer is not permitted to make a determination to impose a penalty for non compliance with a promoter’s obligations under Section 308(3) FA 2004. The officer must commence penalty proceedings before the FTT. Section 118 is the reasonable excuse provision." (HMRC v. Hyrax Resourcing Limited [2022] UKFTT 218 (TC), Judge Anne Scott)
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Whether scheme is substantially the same as a previously disclosed scheme
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"[177] Like the Court in Walapu at paragraph 168 we find, as did Judge Mosedale in the DOTAS Decision, that the two schemes and, in the case of the DOTAS Decision, the previous schemes also, were very similar economically and financially but they are fundamentally different in both their factual and legal consequences.
[178] Patently, the sole point of the Hyrax arrangements, as Judge Mosedale, and we, have found, was to render the ineffective K2 arrangements effective.
[179] As Sir Duncan Ouseley pointed out, and Judge Mosedale and we have found, the whole purpose of the Hyrax arrangements was to obtain a tax advantage. The very obvious purpose of the legislation is to prevent that.
[180] We find that, for all of these reasons, K2 and the Hyrax arrangements are not “substantially the same” and therefore Hyrax’s argument on deemed disclosure by no later than 2 June 2017 fails." (HMRC v. Hyrax Resourcing Limited [2022] UKFTT 218 (TC), Judge Anne Scott)
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- Consider all relevant circumstances including likely fees, period of non-compliance, any attempt to remedy
"[132] Therefore, in considering the amount of the penalty, I am required to take account of all "relevant considerations" including the amount of the fees likely to have been received by Moir, and the "desirability of [the penalty] being set at a level" which deters Moir or other persons from engaging in similar failures in the future.
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[135] For a penalty to deter others, it must be set at an appropriately high level. However, this does not necessarily mean the penalty should be set at the maximum possible (discussed below). I consider other relevant considerations include the period of time over which there was non-compliance (this is also be taken into account by the nature of the calculation of the maximum permissible), whether the non-compliance was remedied, any reasons for the non-compliance, the level of co-operation shown by Moir once HMRC began investigating and the extent to which HMRC can recover the tax which was not deducted." (HMRC v. Moir Management Services Limited [2025] UKFTT 1333 (TC), Judge Bailey)
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- VAT turnover used to estimated fees
"[133] It is not possible to know precisely the amount of fees received by Moir in connection with the notifiable arrangements. In estimating this amount, HMRC have had regard to the turnover declared in Moir's VAT returns for the periods 09/18 to 03/20 inclusive, which totals £13,547,551. On the basis that Moir invoiced organisations for the gross fee payable for each individual's work, and a percentage of this gross fee was deducted by Jarvis before payment was made to individuals using the annuity model, HMRC have suggested that an amount equal to 12% of Moir's turnover would be an acceptable estimate of the fees earned by Moir in connection with the Jarvis annuity model. I agree with HMRC that the turnover declared in Moir's VAT returns for the periods 09/18 to 03/20 inclusive, amounts to £13,547,551. 12% of this figure is £1,625,706.12.
[134] In the absence of more accurate information from Moir, I agree with HMRC that this is an acceptable way to estimate the likely fees earned by Moir. I have considered whether 13.75% of turnover would be a more accurate figure, increasing the estimate of fees earned to £1,862,788.26. However, I have also borne in mind that a small amount of the turnover declared by Moir would include amounts invoiced to end-clients but paid to individuals under the traditional PAYE model with tax, NICs and a £26 fixed fee deducted. In order not to over-estimate Moir's income from only the notifiable arrangements, I agree with HMRC that 12% is the appropriate percentage." (HMRC v. Moir Management Services Limited [2025] UKFTT 1333 (TC), Judge Bailey)
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- Consider seriousness, likely fees and need to deter
"[132] Therefore, in considering the amount of the penalty, I am required to take account of all "relevant considerations" including the amount of the fees likely to have been received by Moir, and the "desirability of [the penalty] being set at a level" which deters Moir or other persons from engaging in similar failures in the future." (HMRC v. Moir Management Services Limited [2025] UKFTT 1333 (TC), Judge Bailey)
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"[303] We accept HMRC’s argument that the penalty imposed should act as a deterrent. It should certainly do so to deter others from deliberately setting up a company with a sole director who can at best be described as displaying Nelsonian acuity in regard to the company’s affairs. It should also act to deter those who rely only on the advice of the promoter of the tax avoidance scheme and a promoter who makes large sums of money from it.
[304] We do not accept that the question as to whether the Hyrax arrangements were notifiable was extremely complex and therefore that was a reason for non-compliance. Sir Duncan Ouseley rightly described it as being a “rigmarole”.
[305] The Hyrax arrangements had ceased to operate before the matter reached the Tribunal so no remedial action was possible.
[306] We have considered all of the factors identified in Tager and weighed all relevant circumstances in the balance. We are particularly mindful of the fact that David Gill sought to hide behind Joanne Macnamara whilst at all times being actively involved.
[307] We find that this was a very serious matter and the statutory maximum penalty is appropriate. The statutory maximum penalty for the period 9 April 2014 to 5 March 2019, being 1,791 days at £600 per day totals £1,074,600." (HMRC v. Hyrax Resourcing Limited [2022] UKFTT 218 (TC), Judge Anne Scott)
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- Must not exceed statutory limit
"[142] HMRC's position in respect of Moir's failure to comply with Subsection 308(3) is that Moir's non-compliance commenced on 26 April 2018. I agree that is the relevant start date. Thus, the initial period runs from 26 April 2018 to 31 July 2025, which is 2,653 days. Therefore, the penalty to be imposed must not exceed £1,591,800 (being £600 for each of these 2,653 days)." (HMRC v. Moir Management Services Limited [2025] UKFTT 1333 (TC), Judge Bailey)
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- FTT imposing maximum penalty for long period of failures and failure to co-operate
"[145] While a penalty does not have to be imposed at the maximum level possible, I have concluded that in this case, the long period over which Moir's failures continued, the absence of a reasonable excuse and Moir's failure to co-operate once the Jarvis annuity model was identified by HMRC, all make it appropriate for the penalty to be set at the maximum so that others are deterred from behaving as Moir has done.
[146] I have decided that, in respect of Moir's failure to comply with its obligations under Section 308, the penalty to be imposed under Section 98C(1)(a)(i) is £1,591,800.
[147] Finally, I turn to Moir's failure to comply with Section 313A. Failure to comply with an obligation under Section 313A is noted at Section 98C(2)(e). As this is not a penalty caught by Section 98C(1)(a)(i), the relevant penalty should not exceed the amount specified in Section 98C(1)(a)(ii), which is £5,000.
[148] I have decided that, in respect of Moir's failure to comply with its obligations under 313A, the penalty to be imposed under Section 98C(1)(a)(ii) is £5,000. There are no mitigating factors for Moir's failure in this regard and it is right that the penalty should be appropriately high to deter others." (HMRC v. Moir Management Services Limited [2025] UKFTT 1333 (TC), Judge Bailey)
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- FTT increasing daily rate penalty to £1m to reflect large fees
"[75] Step 7 requires the Tribunal to consider the option, provided by s 98(2ZC) TMA, of increasing the penalty to an amount not exceeding £1 million if the amount based on the daily rate is inappropriately low.
[76] Having carefully considered HMRC's submissions, given that the fees (or an amount economically equivalent to fees) obtained by PNO through the arrangements equate to at least £3.2 million, I consider it appropriate to increase the penalty to £1 million. Moreover, I consider that such a penalty would be a warning to other promoters of similar schemes and encourage them to notify HMRC in a timely manner in accordance with the relevant statutory provisions, thus protecting both users and the public purse." ​(HMRC v. PNO Group Ltd [2025] UKFTT 1539 (TC), Judge Brooks)
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- FTT increasing daily rate penalty to £1m to reflect disapproval of targeting unsophisticated taxpayers
"[89] ​I intend to increase the penalty above the statutory maximum, and I impose it in the sum of £1 million. I do so for all the reasons given by HMRC. But also, for a reason which was not suggested by HMRC.
[90] By failing to disclose, a promoter avoids the obligation to provide a scheme user with a scheme reference number. The provision of an SRN to a user or, more importantly a potential user of a scheme is one which is likely to put that person either on notice that something untoward is going on, or it might put them off using the scheme altogether. It is a very negative marketing indicator and is bad news for a promoter or introducer.
[91] This also means that, given there is no regulation of the promotion of the sort of schemes by, for example, the Financial Conduct Authority, that promoters and introducers can involve unsophisticated individuals in these sorts of schemes to their detriment. And those individuals will find it very difficult to bring any form of negligence or other claim against the promoters or introducers who may (as in this case) no longer exist, or who are not worth powder and shot given the amount at stake. I take judicial notice of the number of cases that I have come across professionally where individuals who have a modest risk profile were "persuaded" to become involved in schemes (to their detriment) such as the one under consideration in this appeal, in circumstances where I strongly suspect that had an SRN been provided, the individual would not have participated." ​(HMRC v. WS Vision Ltd [2025] UKFTT 1535 (TC), Judge Popplewell)
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Penalty for inaccurate certificate of non-liability to income tax (deduction of tax at source)
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See TMA 1970, s.99A
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Refusing to allow a deduction of income tax
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"(1) A person who refuses to allow a deduction of income tax authorised by the Taxes Acts to be made out of any payment shall incur a penalty of £50.
(2) Every agreement for payment of interest, rent or other annual payment in full without allowing any such deduction shall be void." (TMA 1970, s.106)
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Penalties for failing to give notice etc. of a company ceasing to be UK resident​
See TMA 1970 s.109C - 109D
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SDLT: failing to keep and preserve records
"(1) A person who fails to comply with paragraph 9 in relation to a transaction is liable to a penalty not exceeding £3,000, subject to the following exception.
(2) No penalty is incurred if the Inland Revenue are satisfied that any facts that they reasonably require to be proved, and that would have been proved by the records, are proved by other documentary evidence provided to them." (FA 2003, Sch 10, para 11)
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VAT
- VAT return not filed electronically
"(15) Subject to paragraph (15A) in relation to returns made for prescribed accounting periods which end on or after 31 March 2011, a person who fails to comply with paragraph (2A) or (3) above is liable to a penalty.
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(16) But a person who has a reasonable excuse for so failing to comply is not liable to a penalty.
(17) The table below sets out the penalties depending on the level of turnover.
Annual VAT exclusive turnover Penalty
£22,800,001 and above £400
£5,600,001 to £22,800,000 £300
£100,001 to £5,600,000 £200
£100,000 and under £100
(18) A person may appeal against the Commissioners' decision to impose a penalty only on the ground that—
(a) that person is not a person required to make a return required by regulation 25 using an electronic return system or a compatible software return system,
(b) the amount of the penalty is incorrect,
(c) paragraph (3) above was complied with, or
(d) paragraph (16) above applies.
(19) In calculating a person's annual VAT exclusive turnover for the purposes of the table in paragraph (17) above, the Commissioners shall use any available figures which they determine to be fair and reasonable in the circumstances and such figures shall be taken to be the correct figures for the purposes of the calculation." (SI 1995/2518, r.25A(15) - (19))
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- incorrect zero-rating certificate
VATA 1994, s.62
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- breaches of regulatory provisions
VATA 1994, s.69
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Must receive prior written warning
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"(2) Where a person is liable to a penalty under section 69 for any failure to comply with such a requirement as is referred to in subsection (1)(c) to (f) of that section, no assessment shall be made under this section of the amount due from him by way of such penalty unless, within the period of 2 years preceding the assessment, the Commissioners have issued him with a written warning of the consequences of a continuing failure to comply with that requirement." (VATA 1994, s.76(2))
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- breaches of record keeping requirements
VATA 1994, s.69A and 69B
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- transactions connected with fraud
VATA 1994, s.69C -69E
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- issue of invoice showing VAT by unauthorised person
"(1) A penalty is payable by a person (P) where P makes an unauthorised issue of an invoice showing VAT.
(2) P makes an unauthorised issue of an invoice showing VAT if P—
(a) is an unauthorised person, and
(b) issues an invoice showing an amount as being value added tax or as including an amount attributable to value added tax.
(3) In sub-paragraph (2)(a) “an unauthorised person” means anyone other than—
(a) a person registered under VATA 1994,
(b) a body corporate treated for the purposes of section 43 of that Act as a member of a group,
(c) a person treated as a taxable person under regulations under section 46(4) of that Act,
(d) a person authorised to issue an invoice under regulations under paragraph 2(12) of Schedule 11 to that Act, or
(e) a person acting on behalf of the Crown.
(4) This paragraph has effect in relation to any invoice which—
(a) for the purposes of any provision made under subsection (3) of section 54 of VATA 1994 shows an amount as included in the consideration for any supply, and
(b) either fails to comply with the requirements of any regulations under that section or is issued by a person who is not for the time being authorised to do so for the purposes of that section,
as if the person issuing the invoice were an unauthorised person and that amount were shown on the invoice as an amount attributable to value added tax." (FA 2008, Sch 41, para 2)
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Excise duty
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- Putting product to use that attracts higher duty
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"(1) A penalty is payable by a person (“P”) where P does an act which enables HMRC to assess an amount as duty due from P under any of the provisions in the Table below (a “relevant excise provision”)." (FA 2008, Sch 41, para 3)
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"(2) A penalty is payable by a person (“P”) where P supplies a product knowing that it will be used in a way which enables HMRC to assess an amount as duty due from another person under a relevant excise provision." (FA 2008, Sch 41, para 3)
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- Handling goods subject to unpaid excise duty
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"(1) A penalty is payable by a person (P) where—
(a) after the excise duty point for any goods which are chargeable with a duty of excise, P acquires possession of the goods or is concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods, and
(b) at the time when P acquires possession of the goods or is so concerned, a payment of duty on the goods is outstanding and has not been deferred.
(1A) A penalty is payable by a person (P) where—
(a) after a charge to soft drinks industry levy has arisen in respect of chargeable soft drinks, P acquires possession of them or is concerned with carrying, removing, depositing, keeping or otherwise dealing with them, and
(b) at the time when P acquires possession of the chargeable soft drinks or is so concerned, a payment of soft drinks industry levy in respect of the chargeable soft drinks is due or payable and has not been paid.
(2) In this paragraph—
“excise duty point” has the meaning given by section 1 of F(No 2)A 1992 (and includes any excise duty point created or deemed to be created as a result of provision in regulations under section 45 of the Taxation (Cross-border Trade) Act 2018 (general regulation making power for excise duty purposes etc)), and
“goods” has the meaning given by section 1(1) of CEMA 1979.
“chargeable soft drinks” has the same meaning as in Part 2 of FA 2017." (FA 2008, Sch 41, para 4)
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Subject to reasonable excuse
"(1) Liability to a penalty under any of paragraphs 1, 2, 3(1) and 4 does not arise in relation to an act or failure which is not deliberate if P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the act or failure.
(2) For the purposes of sub-paragraph (1)—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside P's control,
(b) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the relevant act or failure, and
(c) where P had a reasonable excuse for the relevant act or failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the relevant act or failure is remedied without unreasonable delay after the excuse ceased." (FA 2008, Sch 41, para 20)
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- No need to prove that penalised conduct would not have occurred if reasonable care taken
"[51] The essence of B&M's submission was that there must be a causal connection between the taking of any further due diligence and the acquisition of the goods: unless the further due diligence would (or at least could) have caused B&M not to acquire the goods, then there is no causal link that is required to establish a penalty under paragraph 4 of Schedule 41 to FA 2008. In B&M's submission, there was no reason to consider that, on the facts of this case, any of the suggested steps would (or could) have made any difference. Even if it was assumed that further due diligence could have been taken, it would not have revealed that there was a deregistered or missing trader earlier in the supply chain and there was no indication that B&M would have obtained any further information that would have indicated that the goods were not duty paid.
[52] We do not accept that submission. We agree with HMRC that it is clear that paragraph 20 of Schedule 41 to FA 2008, when applied to a penalty issued under paragraph 4 of that Schedule in a case where goods have been acquired, is concerned with the reasonableness or otherwise of acquiring the goods in circumstances where the duty payable on the goods is outstanding. There is nothing in the statutory test to require the taking of particular steps that, if the taxpayer had taken them, would (or might) have caused it not to acquire the goods." (B&M Retail Limited v. HMRC [2024] UKUT 409 (TCC), Judge Andrew Scott and Judge Tilakapala)
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