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Ground 3 – penalties for deliberate conduct
Ground 3 – penalties for deliberate conduct
Mr Quinn noted that penalties were assessed as a percentage of the tax found to be owing. On the basis that there had been no discovery, no tax was owing – and there could therefore be no penalties.
Mr Quinn accepted that if the decision of the FTT was upheld in relation to the closure notice and discovery assessments, penalties would follow.
Again, it is unfortunate that the FTT did not expressly address the law relating to the meaning of “deliberate”, although it did refer to Schedule 24, Finance Act 2007 at [236].
As Mr Quinn had accepted that if the discovery assessments were upheld, then the penalty assessments (determined as percentages of the tax assessed) would also stand good, it follows that he had accepted that Mr Rafferty’s behaviour was deliberate. However, we have taken the same approach as mandated by the Court of Appeal in English to the issue of deliberate conduct on the part of Mr Rafferty.
HMRC’s statement of case at 11.21 refers to the extended time limit that applies in the case of deliberate behaviour. What constitutes deliberate behaviour was addressed in more detail in HMRC’s skeleton argument, and in particular the skeleton refers to the decision of the FTT in Clyne [2016] UKFTT 0369 (TC):
HMRC would refer to the case of Anthony Clynes v The Commissioners for HMRC [2016] UKFTT 0369 (TC). At point 82 the Tribunal consider deliberate behaviour and explain this as:
On its normal meaning, therefore, the use of the term indicates that for there to be a deliberate inaccuracy on a person’s part, the person must to some extent have acted consciously, with full intention or set purpose or in a considered way.
The Tribunal goes on to say at point 83:
The fact that the deliberate conduct is tied to the inaccuracy, indicates that for this penalty to apply the person must have, in a subjective sense, acted with some level of knowledge or consciousness as regards the inaccuracy.
Additionally at point 86 the Tribunal states:
Our view is that, depending on the precise circumstances, an inaccuracy may also be held to be deliberate where it is found that the person consciously or intentionally chose not to find out the correct position, in particular, where the circumstances are such that the person knew that he should do so.
It is clear from the FTT’s decision that it had accepted HMRC’s submissions on the issues of fact and law relating to deliberate behaviour. At [236] the FTT states:
The Tribunal also held that the penalties for failure to notify under section 7 TMA for the years 2001/2 to 2008/09, on 6 June 2020 and under Schedule 41 Finance Act 2008 for the years 2009/10 to 2011/12, on 05 June 2020, and for the submission of inaccurate documents under Schedule 24 Finance Act 2007 for the years 2012/13 to 2016/17, also on 05 June 2020, were valid on the facts and submissions put forward by HMRC.
We therefore read back paragraph 11.21 of HMRC’s statement of case and paragraph 124 of its skeleton argument into the FTT’s decision. Having done so, we are satisfied that the FTT made no error of law by misapplying and/or misinterpreting the (statute and case) law in upholding the penalty assessments and allowing the extended time limits for assessments. We are satisfied, and find, that the FTT:
identified and applied the correct test of what constitutes deliberate conduct; and
identified and applied the correct burden of proof (being upon HMRC) to establish whether there had been such deliberate conduct.