Tager & Anor v Revenue And Customs

Paragraph 50 of Schedule 36 to the Finance Act 2008 creates an exceptional penal jurisdiction for serious failure to comply with an information notice. The Upper Tribunal must itself assess, on HMRC’s evidence, the tax unpaid or likely to be unpaid and have regard to that amount. The penalty is not a proxy for tax and is not subject to a fixed percentage. Quantum depends on the circumstances, including the reasons, duration and gravity of the default, remedial steps, aggravating and mitigating factors, alternative recovery methods and proportionality. A tribunal must not equate prolonged non-compliance with deliberate concealment, which ordinarily connotes dishonesty, without an allegation and proof of such conduct. The penalties were set aside and substituted with penalties of £20,000 and £200,000.

HMRC served three information notices on Romie Tager concerning his personal income tax affairs and the inheritance-tax position of his late father’s estate. Following prolonged non-compliance, the Upper Tribunal imposed tax-related penalties under paragraph 50 of Schedule 36 to the Finance Act 2008. Its decisions were reported at [2015] UKUT 40 (TCC), [2015] UKUT 663 (TCC) and [2017] UKUT 84 (TCC).

On appeal, the Court of Appeal considered the proper construction of paragraph 50, the assessment of tax unpaid or at risk, the relevance of tax-geared penalty regimes under the Finance Act 2009, and the appropriate penalty in light of subsequently agreed tax figures.

Henderson LJ delivered the judgment, with which King LJ and McCombe LJ agreed.

1. The appeal was allowed. The Upper Tribunal’s penalties were set aside and the Court of Appeal remade the decision, imposing £20,000 for failure to comply with the income-tax notices and £200,000 for failure to comply with the inheritance-tax notice.
2. Paragraph 50 of Schedule 36 to the Finance Act 2008 is a penal and exceptional jurisdiction, ordinarily reserved for serious non-compliance after fixed and daily penalties have failed to secure compliance. The officer’s gateway belief under paragraph 50(1)(c) requires a rational subjective belief in a causal link between the failure and a significant tax shortfall.
3. The Upper Tribunal must decide whether an additional penalty is appropriate, having regard to the reasons for non-compliance, its gravity and duration, the extent of remediation, aggravating and mitigating features, alternative means of recovering tax and the need for a fair and proportionate result.
4. Under paragraph 50(3), the Upper Tribunal itself must form a view, on the evidence, of the tax unpaid or likely to be unpaid. HMRC bears the burden of satisfying the Tribunal. The requirement to have regard to that amount does not create a tax-geared penalty or a fixed relationship between tax and penalty. The amount of tax, together with all relevant circumstances, must inform the assessment.
5. The Upper Tribunal misdirected itself by treating the case as comparable to deliberate concealment under Schedule 55 to the Finance Act 2009 and by taking 100% of the estimated tax at risk as its starting point. Deliberate concealment ordinarily involves dishonesty. Mr Tager’s conduct, although grossly or recklessly negligent, had not been alleged or found to be dishonest.
6. The Court was entitled under section 14 of the Tribunals, Courts and Enforcement Act 2007 to remake the decision and to consider the subsequently agreed tax figures. The agreed unpaid tax, the approximately twelve-year delay in paying inheritance tax, Mr Tager’s serious conduct and the absence of dishonesty were all relevant to the substituted penalties.

1. Court of Appeal (Civil Division) allowed Mr Tager’s appeal and substituted penalties of £20,000 for the income-tax notices and £200,000 for the inheritance-tax notice.
2. Upper Tribunal (Tax and Chancery Chamber) imposed and subsequently adjusted tax-related penalties in decisions reported at [2015] UKUT 40 (TCC), [2015] UKUT 663 (TCC) and [2017] UKUT 84 (TCC).