Build-up of penalties

Penalties for late construction industry scheme returns were not disproportionate

The taxpayer was a builder. He used subcontractors but was unaware that he should make monthly returns under the construction industry scheme. As the result of an enquiry HMRC issued determinations and penalties for the years 2009/10 to 2012/13. The TMA 1970 s 98A penalties amounted to £88 800 while those under FA 2009 Sch 55 were £3 043.50. HMRC offered to mitigate the s 98A penalties to £3 370.63 and confirmed they would reduce them regardless of the outcome of the appeal.

At the First-tier Tribunal the taxpayer said even after mitigation the penalties were more than 100% of the tax “lost”. This was more than a deliberate tax wrongdoer would suffer the penalties being at most 70% while non-deliberate faults would be penalised at 10% to 15%. The tribunal judge...