Spring Capital Limited v The Commissioners for HMRC

A penalty notice must be construed objectively, in its full factual and statutory context, from the standpoint of a reasonable intended recipient. A date stated for providing outstanding information does not itself amount to further time for compliance under paragraph 44 of Schedule 36 to the Finance Act 2008.

Where the notice makes clear that an existing penalty remains payable and says only that additional penalties will be avoided if information is supplied by a stated date, it indicates how HMRC will exercise its discretion to assess further penalties. It does not extend the original compliance period.

Spring Capital Limited appealed against the First-tier Tribunal’s dismissal of its appeals from three assessments of daily penalties for failure to comply with an information notice issued by HMRC under Schedule 36 to the Finance Act 2008.

The information notice required specified information and documents. After a £300 penalty, HMRC issued penalty notices assessing daily penalties. Each notice stated that, to avoid further penalties, the outstanding information should be supplied by a stated date.

The First-tier Tribunal held that this wording did not allow further time for compliance within paragraph 44 of Schedule 36. The sole issue before the Upper Tribunal was whether the penalty notices had that effect.

1. Appeal dismissed. The First-tier Tribunal made no error of law in holding that the penalty notices did not allow further time to comply with the information notice under paragraph 44 of Schedule 36 to the Finance Act 2008.
2. The construction of a penalty notice is a mixed question of fact and law. The words used and their relevant surrounding circumstances are ascertained as facts; their legal effect is then a question of law.
3. The notices had to be read objectively, in their proper context, from the standpoint of a reasonable recipient with Spring Capital’s relevant knowledge. Their wording imposed two obligations by the stated date: payment of the penalty already assessed and provision of the outstanding information. The repeated reference to further penalties meant penalties additional to those already charged.
4. The notices therefore did not extend the time for complying with the information notice. They said that HMRC would not assess additional daily penalties for the intervening period if the outstanding information was provided by the stated date. The invitation to contact the officer about difficulties was an offer to consider extending that deadline, not an extension already granted.
5. Paragraph 46 conferred a discretion, through the word “may”, whether to assess and notify a penalty. HMRC could indicate prospectively how it would exercise that discretion. The clear earlier letter which had expressly allowed further time to comply confirmed the contrast: the penalty notices used no equivalent language.
6. Principles directed to construing penal legislation or ambiguous contractual wording did not alter the result. A penalty notice is not to be construed as a statute, and the notices were not ambiguous.

• Upper Tribunal (Tax and Chancery Chamber): Spring Capital Limited v The Commissioners for HMRC, [2017] UKUT 215 (TCC). Appeal dismissed.
• First-tier Tribunal (Tax Chamber): [2016] UKFTT 0232 (TC). The tribunal dismissed the appeals and confirmed daily-penalty assessments totalling £19,170.