Performing the impossible: penalties on taxpayer notices

“The impossible we do at once: miracles take a little longer” is a slogan seen in offices everywhere. But making it a part of the UK’s tax code is troubling.

Dr Hughes was (and presumably still is) a dentist. He got involved in a tax avoidance scheme and HMRC served a “taxpayer notice” requiring the delivery of certain documents. Dr Hughes said that he couldn’t provide them because they didn’t exist. HMRC demurred; the Tribunal agreed with HMRC and confirmed initial and daily penalties on Dr Hughes for failing to comply with the notice.

Let us for a moment assume that Dr Hughes is telling the truth. Astute readers will immediately perceive the difficulty that arises. Dr Hughes is now obliged by law to do something which is physically impossible. And for every day that he continues to fail to do something which is physically impossible he is exposed to a penalty of up to £60. Presumably the penalties terminate on his death (that, at least, must be a reasonable excuse in the eyes of the law) but there is no provision for their ending before that date. Furthermore, should the failure continue long enough, HMRC are able to apply to the Upper Tribunal for the award of a penalty of unlimited size. All for failing to do the impossible.

We do not envy Dr Hughes the position in which he now finds himself.

David Whiscombe


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