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Taxpayer learns the hard way for unreasonable behaviour

An unrepresented taxpayer has received increased daily penalties at tax tribunal after appealing those penalties for non-compliance with an information notice. He was also landed with a bill for costs.

6th Dec 2019
Tax Writer
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Businessman with head stuck in sand

HMRC issued an information notice to Paul Wheeler on 30 November 2016, with the requested information to be provided by 9 January 2017.

The taxpayer was also warned that failure to produce the information may result in a £300 penalty and that he could appeal against the information notice within 30 days from the date of receipt.

He did not appeal against the information notice.

On 20 January 2017, after failing to receive the documents requested, HMRC issued a £300 penalty notice and advised that further penalties of up to £60 per day could be charged if Wheeler continued to fail to comply.

In June 2017, HMRC issued Wheeler daily penalties totalling £1,600 for failure to comply with the information notice, calculated at £10 per day for 160 days.

Fixed penalty appeal dismissed

The taxpayer lodged the appeal against the £300 penalty at first tier tribunal (FTT) [case TC06154].

Wheeler did not appear at the FTT, but in his grounds for appeal he put forward several arguments, including assertions that the information requested had already been provided, or was personal and not relevant to HMRC.

The tribunal noted that some of the taxpayer’s arguments appeared to challenge the validity of the information notice itself, even though the taxpayer was not entitled to appeal the issue of the information notice.

What’s more, as the FTT found that Wheeler had not demonstrated a reasonable excuse for failing to comply with the notice, his appeal was dismissed.

Despite the FTT’s decision, Wheeler sought to appeal to the upper tribunal (UT) against the decision, also raising a new argument that he was “entitled under the European Convention on Human Rights (ECHR) to remain silent”. The UT dismissed this application and held the new argument to be “unarguable”.

Daily penalties increased

Wheeler lodged a separate appeal against the £1,600 in daily penalties on 13 March 2018, with the appeal heard on 10 August 2018 [case TC06746].

Despite the outcome of the taxpayer’s first appeal, Wheeler adopted similar lines of argument in his second appeal, including assertions such as:

  • “He had no taxable income, and any income he did have came from the sale of his main home”
  • “If HMRC thinks he owes any income tax they should assess him.”
  • “He is entitled to a private life, and if he has no declarable income HMRC are invading his private life.”

The FTT, once again, found that the taxpayer’s grounds of appeal sought to go ‘behind the notice’ and challenge its validity. As this appeal was in relation to the daily penalties that had been levied, these arguments were dismissed. As to the taxpayer’s argument of the right to a private life, this was dismissed as the UT had deemed the position unarguable (as above).

The FTT determined that the daily penalties had been properly imposed and noted that HMRC had only levied a £10 daily penalty, despite the maximum being £60.

HMRC highlighted during the appeal that the FTT had the discretion to increase the daily penalty, and suggested a possible increase to £20 per day.

However, the FTT actually increased the penalty to £30 per day, leading to a revised total of £4,800 in daily penalties. This was because the FTT felt that the taxpayer had acted in such a way as to “cock a snook” at HMRC and, to an extent, the FTT.

Taxpayer liable for costs

In a further turn against the taxpayer, on 17 September 2018 HMRC applied for costs incurred in defending the second appeal to the tune of £4,695.15 [case TC07164].

HMRC argued that Wheeler had behaved unreasonably and had ‘not made any reasonable effort to support his position in that appeal.’

HMRC highlighted that the taxpayer should have known from the outset that his case was “hopeless” as no new arguments or testimony were presented.

The FTT agreed, finding that the taxpayer had acted unreasonably and had continued to rely on arguments relating to the validity of the information notice, rather than present a reasonable excuse for his failure to comply with the notice.

Attention was also drawn to the fact that the taxpayer had failed to attend both his first and second appeal hearings. Judge Jane Bailey noted that Wheeler knew, or should have known, that he would very likely lose his second appeal if he did not attend to make submissions about his case, and so his non-attendance also amounted to unreasonable behaviour.

An unsatisfactory decision

Although the FTT awarded costs of £4,695.15 to HMRC, it was determined that the order for costs was not to be enforced without the permission of the FTT.

This was on the basis that the taxpayer did not appear to have the financial means to pay the costs (a P60 equivalent for 2018/19 provided by the taxpayer showed a salary of just £8,125.79).

While the FTT acknowledged that such a decision can be unsatisfactory for both parties, it did note that, as HMRC has further information powers available to them, “it would appear to be time either that these were used, or action taken on the information already available.”


It’s not a good idea to waste HMRC’s or the FTT’s time, as this case plainly demonstrates.

Not only did the FTT increase the amount of daily penalties from £1,600 to £4,800, but the taxpayer was also found liable for costs due to unreasonable behaviour.

This meant that the taxpayer’s initial penalties of £1,900 (being the £300 fixed penalty and £1,600 in daily penalties) grew to £5,100, plus costs of £4,695.15.

Replies (9)

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By SteveHa
07th Dec 2019 10:51

The second decision by the Tribunal, on a reading, appears to have been made out of spite by the judge.

Whilst I'm not defending the appellant, this potentially sets a dangerous trend (even if not precedent) that appellants should be wary of.

Thanks (1)
By Roland195
07th Dec 2019 12:31

While I have limited sympathy for Mr Wheeler who would have undoubtedly benefited from some representation, professional or otherwise. Is there any question of tax actually at stake here or is it merely punitive for wasting their time (time that we could have wasted in a a far more interesting way on another fruitless IR35 debacle)

Thanks (0)
Replying to Roland195:
By hiu612
09th Dec 2019 11:39

"The Respondents asserted that the Appellant’s lifestyle could not be supported by this employment income alone. The officer asserted that the Appellant had part-funded the purchase of a house in the Caribbean in 2006 for $770,000, held in the name of his partner, and that historically he had regularly paid large credit card bills which exceeded his apparent income".

The write up also names his employer, which is a pub company which he owned half the shares in until shortly before this began and in which he was a director until the same time. At around the time HMRC started looking into his affairs he transferred his 50% to the other shareholder (his "partner"?) and resigned as a director.

A director of his own company taking an £8k salary - sounds about right. Director shareholder not filing a tax return for 15 years?

So whilst HMRC haven't got any concrete evidence of missing tax, they do seem to be exploring the right kind of avenues on a risk assessed basis.

Thanks (8)
By Justin Bryant
09th Dec 2019 09:47

Yes; but HMRC are also (more) regularly found guilty of this sort of bad behaviour.

Thanks (1)
By jvenegas16
09th Dec 2019 11:50

Is it not true that HMRC also have taken cases to the Tribunal increasing costs to taxpayers for an unreasonable reason or purpose? However, I did not believe that the FTT could award costs (that is what stuck in my head from some other readings in the past).
Certainly, this case demonstrates that the taxpayer has not taken a proper approach and valid arguments for the appeal.

Thanks (1)
By [email protected]
09th Dec 2019 12:17

It's not a good idea to waste HMRC's time. Yes, but they certainly waste mine by taking far longer than 30 days to reply to letters and then failing to address the issue that I wrote to them about in the first place. And all these time costs for HMRC unreasonable behaviour has to be paid for by the client and their accountant. HMRC should put their own house in order.

Thanks (2)
By a_q
09th Dec 2019 12:24

"It’s not a good idea to waste HMRC’s or the FTT’s time, as this case plainly demonstrates."

Yes, but it's perfectly reasonable for HMRC to waste _our_ time, for which we are not recompensed.

I wonder how much time was actually wasted here? £4,800 would be about 100 man hours? For a few letters issued by a computer and an officer to make a couple of decisions?

Thanks (1)
By johnjenkins
09th Dec 2019 14:29

Will HMRC actually get any money or indeed the information requested????????????

Thanks (0)
By Mr J Andrews
10th Dec 2019 11:13

Were the penalties and costs a small price to pay for not providing information ?
Perhaps some Wheeler Dealing going on here ?

Thanks (0)