The Commissioners for HM Revenue and Customs v AML Tax (UK) Limited [2022] UKUT 00081 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Judge Thomas Scott,Judge Jonathan Cannan |
| Neutral Citation | [2022] UKUT 00081 (TCC) |
| Subject Matter | 14 March 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 17 March 2022 |
[2022] UKUT 00081 (TCC)
UPPER TRIBUNAL
(TAX AND CHANCERY
CHAMBER)
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS
Applicants
-and-
AML TAX (UK) LIMITED
Respondent
TRIBUNAL:
JUDGE THOMAS SCOTT
JUDGE JONATHAN CANNAN
Sitting in public by way of video hearing treated as taking place at the Royal Courts of
Justice, Strand, London WC2A 2LL on 13 and 14 September 2021 with further written
submissions from the Applicants on 21 October 2021 and the Respondent on 25 October
2021.
Howard Watkinson, instructed by HM Revenue & Customs Solicitor’s Office and Legal
Services, for the Applicants
Conrad McDonnell, instructed by RPC Solicitors, for the Respondent
© CROWN COPYRIGHT 2022
Appeal number: UT/2019/0045
CORPORATION TAX – continuing failure to comply with information notice – HMRC
application for tax-related penalty under paragraph 50 Schedule 36 Finance Act 2008 –
statutory conditions – application granted – penalty imposed
1
DECISION
INTRODUCTION
1. This is an application by HM Revenue & Customs (“HMRC”) pursuant to paragraph 50
Schedule 36 Finance Act 2008 (“Schedule 36”) for an additional penalty to be imposed on
AML Tax (UK) Limited (“AML”). HMRC allege that AML has failed to comply with an
information notice under Schedule 36 issued to AML and that the conditions for the imposition
of an additional penalty are satisfied.
2. AML is a UK limited company which was incorporated on 9 December 2009. The
director is Mr Arthur Lancaster, a chartered accountant and chartered tax adviser specialising
in trusts and private client matters. An issue arises as to the activities of AML. At this stage we
shall simply say that it has acted in relation to certain tax avoidance schemes utilised by UK
contractors and sub-contractors. It is part of an informal group of companies based in the Isle
of Man known as the Knox Group.
3. HMRC have opened enquiries into the company tax returns of AML for accounting
periods ending 31 December 2014 and 31 December 2015 pursuant to paragraph 24(1)
Schedule 18 Finance Act 1998 (“FA 1998”). Mr James Preston was the HMRC officer with
conduct of the enquiries until his retirement in September 2020. The enquiry into the 2015
return commenced on 5 December 2017 and included a request for AML to provide certain
company records. AML did not produce those records and on 28 February 2018 HMRC issued
an information notice under Schedule 36 requiring production of the records (“the Information
Notice”). Again, AML failed to produce the records.
4. In April 2018, Mr Preston became aware that a notice for the compulsory striking off of
AML had been published in the London Gazette. We understand that this was because of the
late submission of accounts by AML. In the circumstances, HMRC notified what are known
as “jeopardy amendments” to AML. Jeopardy amendments are notified to a taxpayer prior to
the conclusion of an enquiry when HMRC consider that otherwise there is likely to be a loss
of tax to the Crown.
5. The jeopardy amendments notified by HMRC to AML were in the sums of £1,661,772.39
for 2014 and £1,620,425.55 for 2015. AML has appealed the jeopardy amendments. It also
applied for the tax due to be postponed and eventually HMRC agreed that the tax should be
postponed in full.
6. On 30 April 2018 HMRC notified a £300 penalty to AML pursuant to paragraph 39
Schedule 36 for failing to comply with the Information Notice. Paragraph 39 Schedule 36
provides as follows:
39(1) This paragraph applies to a person who –
(a) fails to comply with an information notice, or
(b) deliberately obstructs an officer of Revenue and Customs in the course of an
inspection under Part 2 of this Schedule that has been approved by the tribunal.
(2) The person is liable to a penalty of £300.
(3) The reference in this paragraph to a person who fails to comply with an information notice
includes a person who conceals, destroys or otherwise disposes of, or arranges for the
concealment, destruction or disposal of, a document in breach of paragraph 42 or 43.
2
7. Paragraph 40 Schedule 36 makes provisions for daily penalties of up to £60 per day for
continuing non-compliance with an information notice. Daily penalties for non-compliance
were subsequently notified to AML.
8. The fixed penalty of £300 was appealed by AML to HMRC but that appeal was refused.
None of the daily penalties were appealed.
9. Paragraph 50 Schedule 36 makes provision for HMRC to apply to the Upper Tribunal
for an additional penalty to be imposed on persons who fail to comply with an information
notice. It provides as follows:
50(1) This paragraph applies where–
(a) a person becomes liable to a penalty under paragraph 39,
(b) the failure or obstruction continues after a penalty is imposed under that paragraph,
(c) an officer of Revenue and Customs has reason to believe that, as a result of the
failure or obstruction, the amount of tax that the person has paid, or is likely to pay, is
significantly less than it would otherwise have been,
(d) before the end of the period of 12 months beginning with the relevant date, an
officer of Revenue and Customs makes an application to the Upper Tribunal for an
additional penalty to be imposed on the person, and
(e) the Upper Tribunal decides that it is appropriate for an additional penalty to be
imposed.
(2) The person is liable to a penalty of an amount decided by the Upper Tribunal.
(3) In deciding the amount of the penalty, the Upper Tribunal must have regard to the amount
of tax which has not been, or is not likely to be, paid by the person.
10. Mr Preston provided a witness statement in support of the application, stating his belief
that the potential “tax at risk” as a result of AML’s non-compliance with the Information Notice
was £1.34m. HMRC invite us to impose an additional penalty by reference to that amount of
tax, with some discount to reflect uncertainty in the amount of tax said to be at risk, and taking
into account various other factors which we consider in detail below.
11. The application has a long procedural history during which AML failed to engage with
the proceedings. The result is that AML is barred from making any case to the effect that the
requirements of paragraph 50(1)(a), (b) and (d) have not been met. The issues before us are
therefore confined to paragraph 50(1)(c) and (e) and paragraph 50(2) and (3). In broad terms,
AML contends as follows:
(1) Mr Preston did not have reason to believe that, as a result of the failure of AML to
comply with the Information Notice, the amount of tax that AML has paid, or is likely to
pay, is significantly less than it would otherwise have been. As a result, no penalty can
be imposed under paragraph 50 because paragraph 50(1)(c) is not satisfied.
(2) Alternatively, no penalty is appropriate under paragraph 50(1)(e).
(3) There is no tax at risk.
(4) In any event, the amount of penalty being sought by HMRC is excessive and
disproportionate to any tax properly considered to be at risk.
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