Penalties: make your voice heard

Reading Mike Thexton’s Move the penalty spot in last week’s issue reminded me that the 11 May deadline for responses to HMRC’s discussion document on the future of penalties in the tax system is getting close.

As I read the tribunal reports in penalty appeals, I am increasingly convinced of the need for reform, particularly in the area of fixed penalties for late returns and payments. A strict application of the law all too often results in outcomes that an outside observer might regard as unfair or even outrageous.

Look, for example, at a couple of recent cases: Garland Hoff, where the taxpayer was penalised for trying to achieve symmetry between payments owed and owing to HMRC; or Dyson, where a member of a two-person partnership found himself with a penalty larger than his tax liability and no right of appeal.

I don’t blame HMRC or the tribunals for these outcomes; they flow from the application of the law and, in particular, the lack of discretion built into the system. So, it is entirely right that the government wants to look at the whole structure of the penalty system.

Take ten minutes to read the consultative document. It is short and easy to follow. But go further than that: let your voice be heard. Respond directly or via your professional body.

Or approach Taxation. If we get enough comments, we are happy to respond to the consultation on behalf of our readers.

HMRC have opened the door to some new thinking, so let’s not miss the opportunity before it shuts.