Penalties: A force for good or not?
A case at the First-Tier Tribunal for Scotland (Tax Chamber) caught my eye as it was reported both in “Taxation” magazine and by Croner-I concerning daily penalties.
Now, it has been a view held by HMRC that penalties were a legitimate and important way to improve taxpayer compliance. The mantra continues with their soft stated view that penalties were most certainly not a revenue gathering exercise.
Well, in this case a taxpayer in Scotland should have filed a land and buildings transaction return by 8 January but didn’t until July under the mistaken belief that if no tax was due no return was necessary, a misinterpretation that was to cost her dearly.
The taxpayer said she would have accepted the £100 fine but as the notice was not issued by Revenue Scotland for 3 months resulting in the £10 daily fines rising to £790 she duly appealed.
The appeal was lost but what struck me was the comments made by the tribunal which were “It seems to us that the legislative existence of the power to impose daily penalties is intended to improve compliance. It is not evident that the power to impose a daily penalty will necessarily achieve that perfectly appropriate goal where a buyer genuinely believes that he or she is not required to make a return, however wrong that belief actually is. We say no more than that.”
To me, all that was missing was something about the fact that if no tax was actually do on the transaction or the case being brought such penalty imposition will the is all probability turn an inherently compliant taxpayer into the exact opposite and in cases like this who can blame them.Back