Many tax penalties and notices are issued automatically by HMRC’s computer system, but the law which governs these processes (TMA 1970) was written before computers could do such things.
The tax law still says that an officer of the board (ie HMRC) needs to make the decision to issue the penalty, or sign the notice requiring the taxpayer to file a return. There is a growing pile of first-tier tribunal (FTT) cases in which the judge has overturned penalties issued for late returns, because the notice to deliver the return was invalid (eg Craig Shaw).
Two cases (Craig Shaw and Nigel Rogers) are due to be heard at the Upper Tribunal (UT) in the next month. If those cases were to be found in favour of the taxpayer substantial sums of penalties would be ruled as invalid, and would have to be repaid to taxpayers.
HMRC clearly doesn’t want that to happen, so it is asking Parliament to change the law such that automatic penalties are legal with retrospective effect for all open cases, including Shaw and Rogers. There are also a large number of penalty cases stuck at FTT which HMRC has been sitting on until the Shaw and Rogers decisions were overturned or confirmed at UT.
This new law has not been published, all we have is a technical note setting out HMRC’s intention to change the law. The new provisions will be included in the next Finance Bill which is due to be debated when Parliament resumes after the General Election.