Do Late Payment Penalties Need to be Proportional?

A recent case at the Upper Tribunal considered this question with regard to late payment penalties charged on self-assessment tax returns (B Edwards v CRC, Upper Tribunal (Tax and Chancery Chamber).

The taxpayer incurred  penalties in relation to his 2010-11, 2012-13 and 2013-14 self-assessment tax returns of £3,880 despite there being no tax due.

The taxpayer had already been unsuccessful at the First-Tier Tribunal and so appealed to the Upper Tribunal on the grounds that the notices to file returns had not been issued correctly and with the argument that the penalties were disproportionate to the tax due.

The taxpayer’s appeal was dismissed again.  The Upper Tribunal found that there had been no error in law in the First-Tier Tribunal’s decision regarding the notices to file returns.

On the issue of proportionality, they found that in terms of the European Convention on Human Rights, the penalties were ‘harsh’ but not ‘plainly unfair’ and was therefore not a relevant ‘special circumstance’ which HMRC should have taken into account.

The moral of the story is therefore to file tax returns on time – even where there is no tax to pay!  It is a requirement to file a return where a notice to file has been issued.  Eaves and Co would be very happy to assist if you have a tax return that needs filing.