“Before any question of reasonable excuse comes into play, it is important to remember that the initial burden lies on HMRC to establish that events have occurred as a result of which a penalty is, prima facie, due. A mere assertion of the occurrence of the relevant events in a statement of case is not sufficient. Evidence is required and unless sufficient evidence is provided to prove the relevant facts on a balance of probabilities, the penalty must be cancelled without any question of “reasonable excuse” becoming relevant.”
“For the purposes of this Act, a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the board or the tribunal or officer concerned may have allowed, and where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and, after the excuse ceased, he shall be deemed not to havefailed to do it if he did it without unreasonable delay after the excuse had ceased.”
“... In agreement with the Upper Tribunal, I consider that this condition makes it clear that the Upper Tribunal should have regard to the usual considerations which apply when the imposition of a tax penalty is in question, including such matters as the reasons for non-compliance, the extent to which the position has been remedied, the gravity and duration of the non-compliance, the presence of aggravating or mitigating factors, the availability of other methods for HMRC to recover the tax at risk (most obviously by making an assessment, if necessary on a best of judgment basis), and generally the need to achieve a fair and proportionate outcome, having regard to the interests of the public purse and the general body of taxpayers as well as the circumstances of the non-compliant taxpayer himself.”
“It seems to me that the principal effect of the respondent’s failure to rely on any evidence is that where HMRC can establish a prima facie case on the balance of probabilities then that case is proved.”
“handle all payments and deductions”
“11. The Disclosure of Tax Avoidance Schemes (“DOTAS”) regime was introduced by Part 7 of theFinance Act 2004 entitled “Disclosure of Tax Avoidance Schemes”
“(a) fall within any description prescribed by the Treasury by regulations, (b) enable, or might be expected to enable, any person to obtain an advantage in relation to any tax that is so prescribed in relation to arrangements of that description, and (c) are such that the main benefit, or one of the main benefits, that might be expected to arise from the arrangements is the obtaining of that advantage.”
“(1) The promoter must, within the prescribed period after the relevant date, provide the Board with prescribed information relating to any notifiable proposal.”
“(3) The promoter must, within the prescribed period after the date on which he first becomes aware of any transaction forming part of any notifiable arrangements, provide the Board with prescribed information relating to those arrangements, unless those arrangements implement a proposal in respect of which notice has been given under subsection (1).”
“(3) Section 308 does not apply to a promoter in the case of— " (a) any notifiable proposal as respects which the relevant date, as defined by subsection (2) of that section, fell before18th March 2004 , (b) any notifiable arrangements which implement such a proposal, or (c) any notifiable arrangements which include any transaction entered into before18th March 2004 .” (a) any notifiable proposal as respects which the relevant date, as defined by subsection (2) of that section, fell before18th March 2004 , (b) any notifiable arrangements which implement such a proposal, or (c) any notifiable arrangements which include any transaction entered into before18th March 2004 .”
“…it is clearly correct to apply the test of “notifiability” as it stood at the time when the duty to notify the Arrangements specified in the application would have first arisen, if they were notifiable.”
“…whether or not arrangements…are, or are to be treated as, notifiable should be determined by reference to the legislation as it stood in March 2009, when the first set of arrangements arising pursuant to the implementation…were implemented, whilst whether or not arrangements arising pursuant to the implementation…are, or are to be treated as, notifiable should be determined by reference to the legislation as it stood …, when the first set of arrangements…were implemented.”
“a relief or increased relief from, or repayment or increased repayment of, income tax, or the avoidance or reduction of an assessment to income tax or the avoidance of a possible assessment thereto, whether the avoidance or reduction is effected by receipts accruing in such a way that the recipient does not pay or bear tax on them, or by a deduction in computing profits or gains.”
“The paragraph, as I understand it, presupposes a situation in which an assessment to tax, or increased tax, either is made or may possibly be made, that the taxpayer is in a position to resist the assessment by saying that the way in which he received what it is sought to tax prevents him from being taxed on it; and that the Revenue is in a position to reply that if he had received what it is sought to tax in another way he would have had to bear tax. In other words, there must be a contrast as regards the "receipts" between the actual case where these accrue in a non-taxable way with a possible accruer in a taxable way, and unless this contrast exists, the existence of the advantage is not established.”
“I do not read [IRC v Parker] as limiting the comparison which is required to be made to one involving a transaction in a similar legal form or even one giving rise to similar economic effects... Instead, as is made clear by the extract from Jonathan Parker LJ’s decision in Sema ... It is perfectly possible for a taxpayer to obtain a tax advantage from entering into a transaction where the taxpayer’s tax position as a result of so doing is more favourable than that in which it would have been had the taxpayer done nothing.”
“the words “tax advantage” ... presuppose that a better position has been achieved. However, I respectfully differ from him when he goes on to answer the question “An advantage over whom or what?” by saying: “advantage over persons of a similar class” ... In my judgement, the simple answer to that question is that a better position has been achieved vis a vis the Revenue.”
“It seems to me that this question must be considered in the light of the policy behind the provisions in general, and that policy would be stultified if a detailed examination had to be carried out into the robustness of any scheme in order to form a view as to whether, from the point of view of some notional observer with particular attributes, it “might be expected to enable” a tax advantage to be obtained; the better view in a case such as the present is, I think, that if the arrangements are presented in such a way as to claim that a tax advantage will (or may) flow from using them, then unless the claim is clearly ridiculous, it can fairly be said that the arrangements “might be expected to enable” the advantage to be obtained.”
“37. ... (2) As regards s 306(1)(b), for the reasons already set out at (1) thearrangements ‘enable, or might be expected to enable, any person to obtain an advantage in relation to’ income tax (being a tax which is prescribed in relation to arrangements falling within reg 10). (3) As regards s 306(1)(c), it is plain that the tax advantage was the main benefit which was expected to arise from the arrangements. There is no discernible benefit for a participant in entering into arrangements of this type other than the expected generation of the tax advantage.”
“82. As regards the first of these points, I would observe that the mere fact that arrangements may have a commercial purpose as one of their purposes does not mean that the arrangements cannot also have the securing of a tax advantage as one of their main purposes – see Lightman J in IRC v Trustees of the Sema Group Pension Scheme[2002] EWHC 94 (Ch) ,[2002] STC 276 , (2002) 74 TC 593 (‘Sema HC’) at para [48] and Rimer LJ in Lloyds TSB Equipment Leasing (No 1) Ltd v Revenue and Customs Comrs[2014] EWCA Civ 1062 ,[2014] STC 2770 (at [65]). In each case, if there is more than one purpose, it is a question of weighing up the relative significance of the various purposes to determine which of them amount to a main purpose …”
“52. On the points set out at [51]: … (2) For the purposes of determining whether there are notifiable proposals or arrangements, the question is not whether the arrangements involve tax avoidance but whether an informed observer (having studied the arrangements) would conclude that the main purpose of the arrangements was to enable a participant to obtain a tax advantage which specifically includes an advantage in the form of the deferral of any payment of income tax. As already set out, in my view, there can be no doubt that such an observer would conclude from the design and effect of the arrangements that their main purpose was to enable the participants to defer paying income tax on the sums received for their work (if not to avoid tax altogether). There is no other discernible commercial reason for the use of the deferral mechanism under the services contract and the loan.”
“(3) As regards s 306(1)(c), it is plain that the tax advantage was the main benefit which was expected to arise from the arrangements. There is no discernible benefit for a participant in entering into arrangements of this type other than the expected generation of the tax advantage.”
“83. So there are essentially three routes to becoming a promoter in relation to “arrangements” (the relevant issue in these proceedings), all contained in section 307(1)(b), which could be summarised as follows: (1) By making, in the course of a “relevant business”, a “firm approach” to another person in relation to the notifiable proposal which is implemented by the arrangements, with a view to making the notifiable proposal available for implementation by the person so approached, or by any other person. (2) By making, in the course of a “relevant business”, the notifiable proposal which is implemented by the arrangements available for implementation by other persons. (3) By being responsible to any extent, in the course of a “relevant business”, for the design, organisation or management of the arrangements.”
“307 Meaning of “promoter” (1) For the purposes of this Part a person is a promoter— (a) in relation to a notifiable proposal, if, in the course of a relevant business, the person (“P”)— (i) is to any extent responsible for the design of the proposed arrangements, (ii) makes a firm approach to another person (“C”) in relation to the notifiable proposal with a view to P making the notifiable proposal available for implementation by C or any other person, or (iii) makes the notifiable proposal available for implementation by other persons, and (b) in relation to notifiable arrangements, if he is by virtue of paragraph (a)(ii) or (iii) a promoter in relation to a notifiable proposal which is implemented by those arrangements or if, in the course of a relevant business, he is to any extent responsible for— (i) the design of the arrangements, or (ii) the organisation or management of the arrangements. (2) In this section "relevant business" means any trade, profession or business which— (a) involves the provision to other persons of services relating to taxation.” (a) in relation to a notifiable proposal, if, in the course of a relevant business, the person (“P”)— (i) is to any extent responsible for the design of the proposed arrangements, (ii) makes a firm approach to another person (“C”) in relation to the notifiable proposal with a view to P making the notifiable proposal available for implementation by C or any other person, or (iii) makes the notifiable proposal available for implementation by other persons, and (b) in relation to notifiable arrangements, if he is by virtue of paragraph (a)(ii) or (iii) a promoter in relation to a notifiable proposal which is implemented by those arrangements or if, in the course of a relevant business, he is to any extent responsible for— (i) the design of the arrangements, or (ii) the organisation or management of the arrangements. (a) involves the provision to other persons of services relating to taxation.”
“To my mind ‘makes available’, in this context, means to ‘be able to be used’ or ‘to put at someone’s disposal’. There is no requirement, in my mind, to ensure that a scheme user, if s/he wants to, is able to use it”
“[a] tax advantage arose as the loan element was not ‘earnings’ and therefore not subject to PAYE or NIC.”
“8 Description 3: Premium Fee (1) …such that it might reasonably be expected that a promoter or a person connected with a promoter of arrangements that are the same as, or substantially similar to, the arrangements in question, would, but for the requirements of the Regulations, be able to obtain a premium fee from a person experienced in receiving services of the type being provided. But arrangements are not prescribed by this regulation if— (a) no person is a promoter in relation to them; and (b) the tax advantage which may be obtained under the arrangements is intended to be obtained by an individual or a business which is a small or medium-sized enterprise. (2) For the purposes of paragraph (1), and in relation to any arrangements, a “premium fee” is a fee chargeable by virtue of any element of the arrangements (including the way in which they are structured) from which the tax advantage expected to be obtained arises, and which is— (a) to a significant extent attributable to that tax advantage, or (b) to any extent contingent upon the obtaining of that tax advantage as a matter of law.” (a) no person is a promoter in relation to them; and (b) the tax advantage which may be obtained under the arrangements is intended to be obtained by an individual or a business which is a small or medium-sized enterprise. (a) to a significant extent attributable to that tax advantage, or (b) to any extent contingent upon the obtaining of that tax advantage as a matter of law.”
“214. It seems to me to be obvious that Hyrax was able to take a cut from the gross fee paid for the scheme user’s services; its ability to take a percentage of the gross payment is evidence that, instead of a cut, it would have been able to take a fee. Whether paid the same amount as a % of the gross earnings or as a fee, the cut or fee are economically the same to a middleman, as Hyrax was; the fact it was actually able to earn an amount economically the same as a fee is good evidence that it might reasonably be expected that a promoter of substantially similar arrangements would be able to obtain a fee from the arrangements. ... 221. Hyrax’ cut was a % of the gross contract value of the contract for the scheme user’s services. The greater the contract value, the greater the expected tax saving (as tax is a % of earnings), and therefore Hyrax’ cut increased in line with the expected tax saving. It was clearly charged as a % of the contract value (and therefore the expected tax saving) and did not reflect the amount of work involved: the evidence indicated that the work carried out by Hyrax would be roughly equivalent for all scheme users. But the charges would depend on the contract value. 222. It seems fair to say that the charge was to a significant extent attributable to the expected tax advantage as there is no other way of explaining why it would be charged as a % of the contract value; Hyrax was in effect splitting the expected tax saving with its scheme user. In conclusion, I find that a promoter of substantially similar arrangements would be able to obtain a premium fee.”
“58. Of course, the question to be answered is not whether there was a premium fee actually paid in respect of the Arrangements, it is whether ‘it might reasonably be expected that a promoter ... would be able to obtain a premium fee ...’; however, the fact that a large number of individuals did infact pay what I consider to be premium fees for the use of the Arrangements is clearly a strong indicator that a notional promoter of these (or substantially similar) arrangements ‘might reasonably be expected ... [to] be able to obtain a premium fee’ from a notional ‘person experienced in receiving services of the type being provided’. Of course, there was no evidence before me as to whether the participants in the Arrangements were in fact ‘experienced in receiving services of the type being provided’, so this cannot be regarded as definitive. 59... The general presentation of the Arrangements, including the level of detail provided and their fulsome endorsement by specialist leading counsel, is clearly directed to the serious potential scheme user and, as such, it would be reasonable to expect that a premium fee would be obtainable from a person experienced in receiving services of the type being provided.”
“In the absence of evidence to the contrary from the Respondent, we find based on the nature of the product and the values of the Transactions, that the users of Volatility would qualify as sophisticated purchasers for the purposes of the test in paragraph 8 and that the fee they paid is a useful comparator (Curzon Capital at [58]- [59]). Accordingly, we find that the promoter would in the hypothetical circumstances described in paragraph 8 be able to charge between 4 and 5.5% of the notional sum. Further, that fee is a premium fee as it is attributable to the tax advantage that might be obtained.”
“... it appeared as if the same amount of work was done by EDF in all four the sample cases; they all received substantially the same letters and executed substantially the same deeds. It appeared to have been an ‘off-the-shelf’ product with minimum individual tailoring. Therefore, if the fee was chargeable by virtue of the amount of work undertaken, the users would have been all asked for a similar absolute amount of fees. Instead, the fees differed radically...”
“103. ... it is clear that the hallmark does not require that a premium fee is paid; only that it might reasonably be expected that a promoter of the same or substantially similar arrangements would be able to obtain such a fee from a person experienced in receiving services of the type being provided. 104. In this case a fee was paid. Generally speaking the evidence shows a fee of 8% of the Premium which was equivalent to the amount of the loan in each case where the Annuity... 105. The fee was paid for the Annuity Arrangements to be put in place. It has not been suggested that it was paid for anything else and, as we have concluded above, the Annuity Arrangements are arrangements from which a tax advantage is expected to be obtained. 106. The fee was chargeable by virtue of an element of the Annuity Arrangements from which the tax advantage expected to be obtained arose. The fees were generally described as 8% of “the amount to be extracted from the company”, except in the case of EMM when it was stated to be£25,250 of what was described as “the remuneration payment”
“... the phrase has been inserted to avoid a tautological get out of jail card for a promoter ... The expression “but for the requirements of these Regulations” is tantamount to saying, “but for the obligation to disclose under the DOTAS regime”
“...though I welcomed the opportunity to maximise my income I would never want to be in a position of acting illegally to avoid taxation.”
“(1) Subject to regulation 11, arrangements are prescribed if a promoter makes the arrangements available for implementation by more than one person and the conditions in paragraph (2) are met. (2) The conditions are that an informed observer (having studied the arrangements and having regard to all relevant circumstances) could reasonably be expected to conclude that – (a) the arrangements have standardised, or substantially standardised, documentation— (i) the purpose of which is to enable a person to implement the arrangements; (ii) the form of which is determined by the promoter; and (iii) the substance of which does not need to be tailored, to any material extent, to enable a person to implement the arrangements; (b) a person implementing the arrangements must enter into a specific transaction or series of specific transactions; (c) the transaction or series of transactions is standardised, or substantially standardised, in form; and (d) either the main purpose of the arrangements is to enable a person to obtain a tax advantage or the arrangements would be unlikely to be entered into but for the expectation of obtaining a tax advantage.” (a) the arrangements have standardised, or substantially standardised, documentation— (i) the purpose of which is to enable a person to implement the arrangements; (ii) the form of which is determined by the promoter; and (iii) the substance of which does not need to be tailored, to any material extent, to enable a person to implement the arrangements; (b) a person implementing the arrangements must enter into a specific transaction or series of specific transactions; (c) the transaction or series of transactions is standardised, or substantially standardised, in form; and (d) either the main purpose of the arrangements is to enable a person to obtain a tax advantage or the arrangements would be unlikely to be entered into but for the expectation of obtaining a tax advantage.”
“37. I am satisfied that the evidence set out above establishes that the conditions for the tribunal to make an order under s 314A are met: (1) The requirements of s 306(1)(a) are met on the basis that the arrangements fall within reg 10 as a standardised tax product: (a) The arrangements are a product on the basis that (i) WCL, as thepromoter (see (4) below), determined the form of a series of standardised documents the purpose of which was to enable the participants to implement the arrangements, (ii) the documents were not tailored to any material extent to reflect the circumstances of the participants, and (iii) the participants entered into a specific transaction in a standardised form given WCL made the arrangements available for implementation by more than one person (see (c) below). As set out in the correspondence in the bundles, WCL explained the effect of the arrangements to the participants face to face and, it appears, gave the participants access to an online gateway which enabled them to enter into the arrangements under standardised documents as the participants in fact did. (b) It would be reasonable for an informed observer (having studied the arrangements) to conclude that the main purpose of the arrangements was to enable a participant to obtain a tax advantage: (i) The tax advantage constituted the receipt of up to 85% of the monies relating to the provision of the participants’ services in the form of a ‘loan’ which the participants did not expect to repay and which was not expected to attract income tax (or national insurance contributions) on the basis that the monies did not comprise taxable earnings for those purposes (at least at the time of receipt). (ii) There is no discernible purpose of the arrangements other than to enable participants who entered into them thereby to obtain an absolute income tax saving or at least an income tax deferral. (c) WCL plainly made the arrangements available for implementation by more than one person. (2) As regards s 306(1)(b), for the reasons already set out at (1) the arrangements ‘enable, or might be expected to enable, any person to obtain an advantage in relation to’ income tax (being a tax which is prescribed in relation to arrangements falling within reg 10). (3) As regards s 306(1)(c), it is plain that the tax advantage was the main benefit which was expected to arise from the arrangements. There is no discernible benefit for a participant in entering into arrangements of this type other than the expected generation of the tax advantage. (4) WCL was a ‘promoter’ in relation to the relevant arrangements within the meaning of s 307 on the basis that: (a) It was a promoter in relation to a notifiable proposal on the basis that it made a proposal for arrangements (which, if entered into, would be notifiable arrangements) available for implementation by the participants in the course of its business which involved providing services relating to tax to those persons (for the purposes of s 307(1)(a)). (b) It was a promoter in relation to notifiable arrangements, as it was a promoter in relation to a notifiable proposal which was implemented by those arrangements (for the purposes of s 307(1)(b)). (c) I note that the evidence indicates that the participants were sold the tax planning structure by WCL in person at their offices and received the standardised documents from WCL online and that WCL operated a referral scheme whereby it paid existing clients who referred new clients to WCL a fee of£500 for each referral.” (a) The arrangements are a product on the basis that (i) WCL, as thepromoter (see (4) below), determined the form of a series of standardised documents the purpose of which was to enable the participants to implement the arrangements, (ii) the documents were not tailored to any material extent to reflect the circumstances of the participants, and (iii) the participants entered into a specific transaction in a standardised form given WCL made the arrangements available for implementation by more than one person (see (c) below). As set out in the correspondence in the bundles, WCL explained the effect of the arrangements to the participants face to face and, it appears, gave the participants access to an online gateway which enabled them to enter into the arrangements under standardised documents as the participants in fact did. (b) It would be reasonable for an informed observer (having studied the arrangements) to conclude that the main purpose of the arrangements was to enable a participant to obtain a tax advantage: (i) The tax advantage constituted the receipt of up to 85% of the monies relating to the provision of the participants’ services in the form of a ‘loan’ which the participants did not expect to repay and which was not expected to attract income tax (or national insurance contributions) on the basis that the monies did not comprise taxable earnings for those purposes (at least at the time of receipt). (ii) There is no discernible purpose of the arrangements other than to enable participants who entered into them thereby to obtain an absolute income tax saving or at least an income tax deferral. (c) WCL plainly made the arrangements available for implementation by more than one person. (a) It was a promoter in relation to a notifiable proposal on the basis that it made a proposal for arrangements (which, if entered into, would be notifiable arrangements) available for implementation by the participants in the course of its business which involved providing services relating to tax to those persons (for the purposes of s 307(1)(a)). (b) It was a promoter in relation to notifiable arrangements, as it was a promoter in relation to a notifiable proposal which was implemented by those arrangements (for the purposes of s 307(1)(b)). (c) I note that the evidence indicates that the participants were sold the tax planning structure by WCL in person at their offices and received the standardised documents from WCL online and that WCL operated a referral scheme whereby it paid existing clients who referred new clients to WCL a fee of£500 for each referral.”
“It is clear… that the relevant notifiable arrangements were those relating to the specific partnership. The promoter had a duty to notify when he first became aware of any transaction forming part of the particular arrangements for each specific partnership but not on each occasion that an individual joined the specific partnership. The “notifiable arrangements” were the specific partnership structure and not each individual’s use of it…”
“141. I note in passing that Whipple J in R (on the application of Root2 Tax Ltd)v First-Tier Tribunal (Tax Chamber)[2018] EWHC 1254 (Admin) said at [14] that the arrangements to be considered included everything up to the final stage, which in that case included the receipt of winnings. In this application, the arrangements included not only the payment of the loans but the passing of the right to repayment to the EFRBS, and the expectation that neither Hyrax j nor the EFRBS would ask for the loans to be repaid. These were all part of the arrangements as they must have all been part of the scheme user’s expectations. If they were not, no rational person would have entered into the scheme. In any event, it was the basis on which the scheme was promoted (in the colloquial sense) (see [78]).”
“...The legislation clearly contemplates that any given set of arrangements can have more than one promoter, and it would be odd indeed (and contrary to the underlying policy of the legislation) if that fact precluded reg. 10 from applying because of the reference to ‘the promoter’ in reg 10(2)(a)(ii). If it is the case, that some person has been responsible, in the course of a relevant business, for the design of the arrangements then that person is clearly a promoter of the arrangements and if that person has determined the form of the documents (as I am satisfied is the case here) then reg 10(2)(a)(ii) is satisfied.”
“36. As recorded in Root2Tax at [35], the first of the disputed issues did not detain the Tribunal for long: ‘Although, in his skeleton argument, Mr Way [counsel for the Respondent] disputed HMRC’s claim that the Alchemy scheme is a standardised tax product he did not pursue the argument orally with any vigour. It will be apparent from what I have already said that I agree with Ms Nathan [counsel for HMRC] on this point. Even a cursory perusal of the documentsshows a recurring pattern with little variation, apart from dates, names, amounts and similar details, from one iteration to another. It is also apparent that the documentation required minimal tailoring to each user.’” ‘Although, in his skeleton argument, Mr Way [counsel for the Respondent] disputed HMRC’s claim that the Alchemy scheme is a standardised tax product he did not pursue the argument orally with any vigour. It will be apparent from what I have already said that I agree with Ms Nathan [counsel for HMRC] on this point. Even a cursory perusal of the documentsshows a recurring pattern with little variation, apart from dates, names, amounts and similar details, from one iteration to another. It is also apparent that the documentation required minimal tailoring to each user.’”
“My motivation for using this Umbrella was to maximise my take home pay within HMRC guidelines.”
“(1) Arrangements are prescribed if— (a) Conditions 1 and 2 are met and Condition 3 is not met; or (b) Conditions 1, 2 and 3 are met and at least one of Conditions 4 and 5 is met.” (a) Conditions 1 and 2 are met and Condition 3 is not met; or (b) Conditions 1, 2 and 3 are met and at least one of Conditions 4 and 5 is met.”
“97…It requires the main benefit, or one of the main benefits, of the arrangements is that an amount that would otherwise count as employment income is reduced or eliminated.”
“(2) Condition 1 is that the arrangements include at least one financial product specified in reg. 20(1) (a “specified financial product”). (3) Condition 2 is that the main benefit, or one of the main benefits, of including a specified financial product in the arrangements is to give rise to a tax advantage ... (5) Condition 4 is that the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained.”
“70. Assuming that hurdle to have been overcome by HMRC, the task facing the FTT when considering a reasonable excuse defence is to determine whether facts exist which, when judged objectively, amount to a reasonable excuse for the default and accordingly give rise to a valid defence. The burden of establishing the existence of those facts, on a balance of probabilities, lies on the taxpayer... 71. In deciding whether the excuse put forward is, viewed objectively, sufficient to amount to a reasonable excuse, the tribunal should bear in mind all relevant circumstances; because the issue is whether the particular taxpayer has a reasonable excuse, the experience, knowledge and other attributes of the particular taxpayer should be taken into account, as well as the situation in which that taxpayer was at the relevant time or times (in accordance with the decisions in The Clean Car Co and Coales). … 73. Once it has made its findings of all the relevant facts, then the FTT must assess whether those facts (including, where relevant, the state of mind of any relevant witness) are sufficient to amount to a reasonable excuse, judged objectively. ... 75. It follows from the above that we consider the FTT was correct to say (at [88] of the 2014 Decision) that “to be a reasonable excuse, the excuse must not only be genuine, but also objectively reasonable when the circumstances and attributes of the actual taxpayer are taken into account.”
“81. When considering a ‘reasonable excuse’ defence, therefore, in our view the FTT can usefully approach matters in the following way: (1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayerʼs own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question ‘was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?’ (4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situationin which the taxpayer found himself at the relevant time or times.” (1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayerʼs own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question ‘was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?’ (4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situationin which the taxpayer found himself at the relevant time or times.”
“76. In determining the amount of the penalty, the Tribunal must take account of all relevant considerations (s 98C(2ZB) TMA). (1)” [The] usual considerations which apply when the imposition of a tax penalty is in question, include[e] such matters as the reasons for non-compliance, the extent to which the position has been remedied, the gravity and duration of the non-compliance, the presence of aggravating or mitigating factors, the availability of other methods for HMRC to recover the tax at risk (most obviously by making an assessment, if necessary on a best of judgment basis), and generally the need to achieve a fair and proportionate outcome, having regard to the interests of the public purse and the general body of taxpayers as well as the circumstances of the non-compliant taxpayer himself” (Revenue and Customs Commissioners v Tager[2018] EWCA Civ 1727 ,[2018] STC 1755 (“Tager”) at [88], [111], [112]). (2) When determining a penalty for non-compliance with s 308(3) FA 2004, the Tribunal is required by s 98C(2ZB) TMA to have regard also to “the desirability of its being set at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions”
“300. Mr McDonnell argued that the quantum of penalty should be relatively modest and that the penalty sought by HMRC was excessive not least because Hyrax was a relatively small company with a low income. That did not sit well with his arguments on the scale of the business in HRT. In our view the two must be considered conjunctly when looking at the question of penalty. It was those involved in Hyrax who decided to put almost all the income and expenditure through HRT. 301. As we have explained at paragraph 25, Judge Mosedale found that Hyrax retained 18.5% which was effectively them splitting the tax saving with the scheme user. HMRC have calculated that the gross receipts in the period were£37,608,000 which is approximately 18.26% which is broadly consistent with that finding. That means that the tax saving was a very significant figure. 302. We are not persuaded by Mr McDonnell’s unsupported assertion that HMRC should have been able to recover the tax that was at risk. Yes, they might be able to impose loan charges assessments etc on individual taxpayers but that would be time consuming, labour intensive and expensive. Although HMRC were aware, in very general terms, from the end of 2014 that Hyrax were involved in what they suspected was a tax avoidance scheme, because it was not notified and because HMRC had to have recourse to the Tribunal there was a considerable elapse of time. It would be disproportionate to have to pursue more than a thousand taxpayers (We note that at one point Joanne Macnamara misled HMRC by suggesting that there were only hundreds of taxpayers involved (see paragraph 161 above)). 303. We accept HMRC’s argument that the penalty imposed should act as a deterrent. It should certainly do so to deter others from deliberately setting up a company with a sole director who can at best be described as displaying Nelsonian acuity in regard to the company’s affairs. It should also act to deter those who rely only on the advice of the promoter of the tax avoidance scheme and a promoter who makes large sums of money from it. 304. We do not accept that the question as to whether the Hyrax arrangements were notifiable was extremely complex and therefore that was a reason for non-compliance. Sir Duncan Ouseley rightly described it as being a “rigmarole”. 305. The Hyrax arrangements had ceased to operate before the matter reached the Tribunal so no remedial action was possible. 306. We have considered all of the factors identified in Tager and weighed all relevant circumstances in the balance. We are particularly mindful of the fact that David Gill sought to hide behind Joanne Macnamara whilst at all times being actively involved. 307. We find that this was a very serious matter and the statutory maximum penalty is appropriate. The statutory maximum penalty for the period9 April 2014 to5 March 2019 , being 1,791 days at£600 per day totals£1,074,600 .”
“Industria did not make anything close to£2.6m in profit over the course of its life”