Brexit VAT Implementation – a dangerous game of Brussels roulette

On 6 January 2018, The Guardian, a quality UK newspaper renowned for misprints, published an article related to the imposition of VAT on imports from the EU following Brexit.  To say this awakening was at the eleventh hour is a bit of an understatement – the relevant legislation passed through the UK Parliament on 8 January 2018.

A problem came to light – well, not really

However, it is good to see that the UK press, and so it seems the influential Parliamentary Treasury Committee, has caught up with what just about every VAT specialist in Europe has been pointing out since before the referendum in 2016.  Cross border VAT law is changing.  I said “just about every VAT specialist” because the newspaper quoted “experts” who seemed unaware of the full position at present with imported goods, were clearly unaware that VAT changes for services are indeed far from simple, and that there are problems for UK exporters to the rest of the EU and of course for EU importers from, and exporters to, the UK following Brexit unless something is resolved both in the UK and in the rest of the EU.

What has since become clear is that ministers have either spoken off the cuff on the subject or that their briefings have been incomplete at best.

So, I am setting out here what we know so far.  And I will be parochial and address goods imported into the UK from the rest of the EU.

That does not mean that exporting goods from the UK to customers in other EU member states will not be a problem.  It could well be.  Indeed, some UK business may find that they need to change the way they trade (holding stocks in France or Holland, for example), and others may find their margins squeezed as customers seek to share the burden of their added costs of importation form the UK.


In theory the change will happen on 29 March 2019.

I say “in theory” because the implication of the Brexit Phase I agreement on 8 December 2017 was that we would have a transitional period on broadly similar rules to what we have now (I celebrated – briefly).

Sadly, the UK Government then made it clear that it would renege on that agreement if it suited them, creating big issues at the time.  Things have been smoothed over since, barring the occasional sabre rattle, and so we are now to believe that all will be OK on 29 March 2019, and there will be no change for VAT on imports into the UK from 29 March 2019.

That is until 31 December 2020, according to the EU negotiators, when they expect the transition to be completed.

Of course, none of that has been agreed between the UK and the EU27, the contradictory messages from the UK Government have not been helpful for anybody considering international trade, and an influential cabal within the Conservative Party (the political party forming a minority Governing in the UK) seems determined for the UK to fall out of the EU and all EU mechanisms from 29 March 2017.  No, I don’t understand why.

In the meantime, Mrs May, the UK Prime Minister has suggested recently that we may need a longer transitional period – no surprise there for those of us living in the real world, but this of course contradicts what is wanted by her colleagues who wish to cut the ties as soon as possible.  And then the UK Government is yet to tell us what it wants out of Brexit.  We are promised something “concrete” shortly.

Why all of this background?  Just to highlight that it is difficult if not impossible to second guess what will happen from 29 March 2019 onwards.

So once again I can only advise that we plan for the worst and hope for the best.  As far as international trade is concerned, dropping out of the EU on 29 March 2019 with no transitional arrangements is the worst scenario, whilst allowing a reasonable period to put the new mechanisms in place (an extended transitional period) is what I’d hope for.

Right now, the UK reversing the Brexit decision is but a dream or a nightmare dependent upon which side of the UK fence you sit.

A step back in time

At this stage, for those who remember the completion of the Single Market in 1992, I would remind you that the solution Europe came to then on VAT is the one we have now.  So, it is those far reaching measures that are being reversed for trade between the UK and the rest of the EU.

And as you will also recall there was a five-year transition period lasting until 1997 to finalise the completion of the Single Market for VAT.  And you will know that deadline was eventually abandoned, which is how we get to where we are today.  The 1992 transitional period has either lasted for 25 years or else the transitional rules were adopted as the final rules in 1997, dependent upon your point of view.  I subscribe to the latter.

There are many things I could extrapolate from this set of facts, but I will stick to one – the transitional period cannot be finalised on 31 December 2010.  It cannot be done.  So, provided Mrs May’s cabal are kept under control and the EU27 also take a sensible approach, common sense suggests an extended transitional period.  Probably not one which goes on for ever, as with what happened in 1992, but maybe one for five years.

Brussels Roulette – where will you place your bets?

But that is a sideshow of reality within a difficult technical scenario.

According to the UK judiciary, “Beyond the everyday world… lies the world of VAT, a kind of fiscal theme park in which factual and legal realities are suspended or inverted”.  I think that it is more akin to a “game” of Russian Roulette, but with the life of businesses at risk – Brussels Roulette.

So, let us look at the facts from a worst-case scenario, based on planning for the worst and hoping for the best.

These are the loaded chambers of the gun if the UK just falls out of the EU on 29 March 2019.

Do Nothing

Goods imported from the remaining EU member states will bear UK VAT at importation at the prevailing rate (let’s assume 20%).

If you do NOTHING, then the VAT must be paid to Customs at importation and payment will be by cash or bankers draft and you will reclaim the VAT on your current VAT return.  That is a cash flow hit, an administrative hit and, if you delay payment you don’t get your goods, thus putting your business at risk.

Freight Forwarder

But you can ask your freight forwarder to pay the VAT for you, which they will do, generally for a fee of up to 2%.  You then pay the freight forwarder according to your commercial terms, and then reclaim the VAT on your current VAT return.  This is still a cash flow hit but does at least provide some certainty which may well make the 2% cost worthwhile.

Duty Deferment

If you are a regular importer you can apply for “duty deferment”.  An important part of the process is to obtain a bond from a UK bank or insurer equal to twice the maximum VAT (and customs duty) you expect to pay each month.

Typically, a bank will try to charge you 1% of the value of the bond each year.  Also, typically, the bank will take the value of the bond out of your overall facility – you could find your overdraft reduced substantially if you are not careful.

If approved, your goods will move “smoothly” off the port and the VAT and Duty will be collected by direct debit two weeks into the following month.  The VAT can then be reclaimed on your VAT return for the month of importation.

Sorry for the “smoothly”.  As a rule, goods do move smoothly now.  However, there are doubts as to how prepared UK Customs will be for Brexit, so “smoothly” is not a word I expect UK importers (or exporters) to use for at least a period of time following Brexit (and “frictionless” seems even less likely).

For that cynicism, I will atone by dropping in a planning tip – model your VAT as if you will no longer use acquisition tax, but instead just reclaim the VAT on imports as you do now.  If the result is that you look like you will be in a regular repayment position, apply for monthly VAT returns from March 2019 onwards.

But I digress.  This is still a cash flow hit, but as a rule not as bad as paying by cash or bankers draft or using a freight forwarder to pay the import VAT for you.

Simplified Import VAT Accounting (SIVA)

Not to be confused with the Hindu God Lord Shiva, sometimes spelt Siva.  Shiva is the quintessential destroyer. His duty is to destroy all the worlds at the end of creation and dissolve them into nothingness.  SIVA, however, should be good news, and something businesses currently paying VAT on imports should consider applying for in any event.  But not as potent as Lord Shiva.

You must apply to be SIVA authorised.  You will need a very good compliance record to be accepted.  However, once accepted, the impact is that, whilst you will still have a duty deferment guarantee for Customs Duty, it could well be much reduced or even nil for imported goods that do not attract any Duty.  The scheme lets you defer the VAT on imports so that you account for the VAT very much as you already do with goods acquired from other EU member states.

My recommendation would be to start preparing for your application immediately and to try to get it in early.  There could be a mad rush come 1 January 2019 – maybe not the January sales, but still too much for HMRC to cope with.

Postponed Accounting System (PAS)

You need to be quite old to remember PAS, scrapped in 1985 by the then Chancellor Nigel Lawson as he needed a cash flow boost and so took £200m out of the cash flow of UK importers.  PAS works very similarly to SIVA.  Except that everyone could use it – even if you had a bad compliance record.

During the last UK Budget a suggestion was made as to the return of PAS, although all has gone quiet on this since.  And it was this suggestion from the Treasury that the many “experts”, ministers and politicians omitted to mention during the hysteria in January.  At a stroke, a return to PAS could eradicate the import VAT issue for UK VAT registered businesses, cut down the need for Customs staffing and resources, and help “frictionless” trade between the UK and the EU27.

But of course, this is right at the “hope for the best” end of the scale.

Suspensive regimes

Pretty much standard reliefs can also be looked at for specific circumstances such as Customs Warehousing (it can even be on a computer for some goods), temporary importation, inward processing relief and outward processing relief.

More businesses will need to look at these, especially those that for the time being will retain their current manufacturing process with goods moving backwards and forwards between the UK and the EU27.

Once again, my view, because of the limited staff available in HMRC, is that businesses should start considering and applying for these processes now.  Leaving it too late could mean that you are not “approved” come the day (whenever that is).

Brussels Roulette

The name of the game is very unfair, but that is the nature of British politics.

You’ll see I’ve come up with six alternatives, much like the six chambers in a revolver used in a game of Russian Roulette.  You’ll note that there are no empty chambers!  You’re going to catch something.  You’re aim, though, is simple – identify your risk and manage it.  Yes, we can all hope for a return to PAS, but even then, Customs Duty will be payable on imports from the EU27, so you will need to get duty deferment in place for goods coming from the EU27 or, if you can, apply for one of the suspensive regimes.

If you fail to manage it, then you risk going out of business – it is that stark.  I’d like to think that the UK Government would set up some form of safety net but given how far on the politicians seem to be with the high level strategic thinking, that is more likely to be thought about on April Fool’s Day 2019, rather than before.

Steve Botham

HMRC Penalties and the “Answer to the Ultimate Question of Life, the Universe, and Everything”

In this article I will disclose to you the similarity to the way in which HMRC applies penalties and the Answer to the Ultimate Question of Life, the Universe, and Everything.  This disclosure you will find is as important to you as the output of Deep Thought in The Hitchhiker’s Guide to the Galaxy (Douglas Adams).  But, a bit like The Hitchhiker’s Guide, where we follow the journey of Arthur Dent and Ford Prefect, there is a story to follow here.  I’m not sure I would describe HMRC as The Vogons (I’ve never been quoted poetry by a tax inspector), but this tale is not fiction, so I’ll leave you to make up your mind.

 What underpins the tax penalty regime?

On 17 September 2015 HMRC published a Summary of Responses to document called “HMRC Penalties: A Discussion Document”.

In the introduction to that document, at paragraph 1.2 on Page 3, HMRC stated: –

“1.2. The Discussion document proposed five broad principles that HMRC consider should underpin any new penalty regime. These principles are:

  1. The penalty regime should be designed from the customer perspective, primarily to encourage compliance and prevent noncompliance. Penalties are not to be applied with the objective of raising revenues.
  2. Penalties should be proportionate to the offence and may take into account past behaviour.
  3. Penalties must be applied fairly, ensuring that compliant customers are (and are seen to be) in a better position than the non-compliant.
  4. Penalties must provide a credible threat. If there is a penalty, we must have the operational capability and capacity to raise it accurately, and if we raise it, we must be able to collect it in a cost-efficient manner.
  5. Customers should see a consistent and standardised approach. Variations will be those necessary to take into account customer behaviours and particular taxes. “

I am not aware of any legal changes to this approach.  Neither am I aware of any published change of policy.  This leads me to believe that this must still be the policy of HMRC and vicariously enacting the Intention of Parliament.

I think any right-minded taxpayer (and that includes advisers!) would not quibble with these aims.

But are these aims being met, or is something else happening?

However, it has long been my view that this is not how the tax civil penalty regime acts in practice in the UK.  And evidence is now starting to accrue which indicates that my view is more likely to be consistent with the reality than what HMRC had to say on 17 September 2015.

There are a number of issues with the civil penalty regime in the UK.  In theory such issues should not exist, but they do.


As a rule, the “carelessness” penalties – the frontline tax geared penalties – are not supposed to be applied for a simple mistake.  Yet it seems that the norm is for a penalty to be sought, leaving the taxpayer to fight that decision.

In direct taxation a carelessness penalty means that HMRC can assess the tax back six years instead of four (there is no such measure for VAT).  There is no doubt in my mind that penalties have been sought with the view to assessing tax back six years.  And of course, maximising the revenue from the penalty.  That is certainly an abuse of process, and probably an abuse of power.


Similarly, when it came to the deliberate penalties, when these were to be imposed the expectation, we heard from HMRC, was that for such a penalty to be applied the admission of deliberate behaviour would come from the mouth of the taxpayer.  We were assured that it would not be taken lightly and that HMRC would apply the penalty responsibly.  And HMRC’s guidance even now still appears to adhere to these principles.  For example, there is a definition of “Deliberate”: –

This is where you knew that a return or document was inaccurate when you sent it to us. Examples of deliberate inaccuracies include deliberately:

  • overstating your business expenses
  • understating your income
  • paying wages without accounting for Pay As You Earn and National Insurance contributions”

[Source: HMRC Compliance checks series – CC/FS7a]

I am not sure just how effective this guidance is as to the term” deliberate” since it uses the term to define itself, but if I am being fair, in normal usage I think we would all say we’d know this when we saw it.  Except of course that relies upon a subjective judgment, and you and I may have greatly differing views as to what is and what is not done “deliberately”.  The point is, however, that the term cannot be used subjectively – it must be used objectively if the penalty principles published on 15 September 2015 are to be abided by.  Why?

Use of penalties other than as Parliament intended?

Well, apart from the deliberate, and deliberate and concealed penalties having a tariff of up to 100%, they also open the door to HMRC to seek collect tax from up to twenty years ago.

And there is evidence that HMRC have increasingly used the deliberate category in a quite startling trend.

And there is now a case decision that makes it quite clear that the rule of thumb of being able to know it when you see it is not a reliable yardstick in the hands of HM Revenue & Customs.


However, there is something HMRC skips over.

A deliberate act is committed knowingly.  The perpetrator knows that he or she is doing it.  And in my view admission to that effect must come from the mouth of the person concerned.  It is not something to be assumed.  It is not something where an assertion could be relied upon.

There is no “should have known” test.

And frequently HMRC omits any work whatsoever in this respect and jumps straight into “deliberate”.  In the example of one case on a transfer of a going concern, the taxpayer was accused of a deliberate and concealed action because the transfer of a going concern treatment had not been disclosed separately to HMRC – there is no legal requirement or even guidance from HMRC that this is required to be done.

“Special knowledge”

And elsewhere you will also find a concept of what I call “special knowledge”.  This asserts that certain taxable persons, whether individuals or companies with internal advisers, know more about the taxation matter than Joe Public.

One such example we have dealt with is a physics teacher who HMRC is determined had special knowledge of taxation because of his professional qualification.  This particular taxpayer  took the advice of someone holding himself out to be an expert who missed out an important piece of advice, resulting in HMRC treating the case as “deliberate”.  Now, I would say that a physics teacher is likely to be a pretty bright person.  I would also say that a toolmaker, for example, is on a level with a physics teacher, but I suspect that a toolmaker may not have received such a challenge.

It is a bit like the Frost Report Sketch including John Cleese, Ronnie Barker and Ronnie Corbett; I look down on him etc.  HMRC won’t have it as they clearly look up to the physics teacher.  This may be because he speaks in a language that they do not understand.  But what they do not recognise is that the physics teacher does not speak their language either.

So, apart from a very useful piece of case law, we were tempted to send the inspector a Quantum Physics paper from the University of Southampton and ask him, without help or any other guidance, to answer all nine questions completely and correctly in two hours.  For this is no less than HMRC expects of a taxpayer, it would seem, in that unrealistically, and unreasonably, HMRC expects a taxpayer to know all about every tax, something I will illustrate that not even someone advising on tax is expected to be able to do.  Which then puts this “special person” status firmly at risk, or even completely debunked.


The commentary in the decision of Cannon TC6354 is, in my opinion, and excellent dissection of the relevant law for not only “reasonable care”, but also the meaning of “deliberate”.  It also looks at the concept of special knowledge and just how far that can be taken.  This is very relevant as Mr Cannon is a barrister who advises on Stamp Duty Land Tax.  He though sought and followed advice on his tax affairs from an adviser he believed knew what he was doing (we come back to that).  And let me make something very clear – Cannon breaks new ground.  It looks at the law as it stands.

In respect of “reasonable care” it argues that you have to look at each of the words – “reasonable” and “care”.  In tax law, certainly amongst VAT specialists, the separation of the elements of a phrase including “reasonable” is not at all a strange concept.  There the analysis fell upon the phrase “fair and reasonable”, mainly in the context of a partial exemption method.  Each element must be examined to determine that the test has been passed.

So it is, argues Judge Geraint Jones QC with “reasonable care”.

No room for subjective judgments by HMRC

And here it is also pertinent that the judge considered whether such an assessment was subjective or objective.  It is not sufficient for HMRC to assert subjectively that reasonable care has not been taken.  Nor indeed, that an act was deliberate. The judgement must be objective.  That should set alarm bells ringing in many penalty cases, whether appealed or not.  It also helps explain why we take the approach we have and will continue to do on penalties.

What is reasonable for a taxpayer to do?

In respect of what is “reasonable” for an ordinary taxpayer, like our physics teacher, to do – it is to take and implement advice received from a professional person acting as an adviser, and that will normally lead to the conclusion that the taxpayer has acted reasonably.

Negligent adviser

This is so even if the professional adviser has acted negligently, provided that the taxpayer has no reason to believe that the adviser did not know what he or she was doing.  This set of facts is not unusual in my opinion.  But HMRC argues, and indeed argued in Cannon, that a taxpayer is careless even if the negligence or carelessness is that, and only that, of the professional adviser even where that advisor is acting in a truly professional capacity.  The judge was of the opinion that this approach is wrong in law.

And once again, this is something we see and have fought on the same grounds.

What is “care”?

Having addressed “reasonable”, the judge in Cannon then examined “care”.

Now this is remarkable in that it goes back to precisely the training HMRC provided to accountants and advisers, which we were told was the same training officers and inspectors received, upon the introduction of the penalty regime.  I know, because I took that training.  More than once.  And I worked through the online packages provided by HMRC at the time.

The penalty regime is not there to penalise simple mistakes.  Indeed, I would argue that this is no more and no less than the intention of Parliament.

To quote from Cannon: –

We should also mention that the very phrase “reasonable care” indicates that the test will be satisfied, provided that the care taken is reasonable. It carries with it the implication that perfection need not be reached, and it necessarily recognises that errors might occur even when a reasonably prudent taxpayer has taken that degree of care which is requisite when dealing with the respondents. A taxpayer might genuinely and honestly misconstrue legislation; a taxpayer might inadvertently make an arithmetic error or press an inappropriate key on a computer keyboard (and fail to notice having done so); or genuinely mis-remember a salient fact. The test is not to ask whether any such error or failure would have occurred in a perfect world, because that would be to elevate the test beyond that which is applicable. The test is not to ask whether the taxpayer could have done something else which, if done, might have revealed the error unless the doing of that other task is itself something which a reasonable taxpayer ought to have done, and which, if done, would have revealed the initial error.”

Good law

Now dragging this back into the VAT world and indeed mainstream law, we already have the concept of what a reasonable taxpayer would reasonably have done, within a decision which called upon Lord Denning’s “man on the Clapham Omnibus”.

My point is simple, Judge Jones was not breaking new ground here.  This is good law and it is old law and it has already been applied in respect of the previous VAT penalty regime.

As such, as a basis of arguing cases, it is a sound footing and taxpayers and advisers should not be put off by the usual refrains from HMRC: –

  • “a Tribunal decision does not create law”. Correct, but it is persuasive as it help us to understand the law: and
  • each case turns on its own merits”. True, each case does indeed turn on its own facts, but each case will also address the law.  The facts will change, but the law does not.  This argument is also a double edged sword for HMRC.

Is HMRC “policy” a good enough reason?

Too often now we are told that something has been done because it is policy, or because that is what the officer or inspector has been told to do.

An example, here is penalties issued for failing to produce records where now officers are issuing the penalty warning at the first application for information, whereas , at least until quite recently, the application of the power relied upon a process which involved contacting the taxpayer first.  The penalty regime would only be applied in a case of lack of co-operation.  But if each case turns on its own merits, there cannot be a one size fits all approach by HMRC and the first step just cannot be a threat to impose a penalty.  As an example, we have a case where repeated penalties have been issued to a dyslexic taxpayer who was just issued the detailed letter and rights paperwork by HMRC with no attempt to establish the facts and, quite frankly, the taxpayer could not deal with it.  There is no doubt in our mind that the taxpayer’s human rights have been violated in this case – which again the Judge in Cannon has something to say about.

How the law on penalties should be interpreted

My point here is that HMRC will have difficulty is walking away from the law as interpreted in the Cannon case.  To summarise, the Judge in Cannon says

“it seems to us to be counter-intuitive to speak about a taxpayer being negligent when he has placed his affairs in the hands of an accountant or sought specific advice on a specific matter and the professional adviser has then been negligent in providing that advice.“

The Judge then looked at “deliberate” –

By contrast, a deliberate error in a tax return requires that the taxpayer knew about the error and intended to misrepresent the true position to the respondents. Nothing short of that will do, save in circumstances where a taxpayer has deliberately shut his eyes to the true factual position, sometimes referred to as “Nelsonian blindness.””.

So that is not subjective either; it requires knowledge to be proven – i.e. from the mouth of the taxpayer, and in my view does not include a “must have known” test.

The judge is clear that where such a serious allegation of deliberate conduct is made by HMRC, then the Tribunal will undertake more assiduous fact finding to ensure that the allegation being made by HMRC is sufficiently credible, relevant and cogent to warrant such an adverse finding.

Minimum standard of evidence of HMRC’s decision

I would argue that this standard of evidence is the one which HMRC must also rely upon when making such an allegation, and a mere assertion, perhaps related to the amount of the tax, or the continuity of an error is not sufficient.

The Judge in Cannon reminds us not only of the legal basis (once again the Judge does not break new ground), but also that the principle is not only well recognised, but also necessary to render a decision where such a serious allegation is made compatible with Article 6 of the European Convention on Human Rights.

Failed tax avoidance schemes – penalties

In this respect, you may also wish to have another look at what HMRC says in respect of penalties for failed tax avoidance schemes, where they seek to apply the dishonesty test, but where in reality the taxpayer is acting upon professional advice (setting aside the emotionally furore surrounding the phrase “tax avoidance”.

Correct deliberate approach

I would contend, therefore, that the approach I suggest in respect of the “deliberate” penalties is the correct one, and it is not the approach often taken by HMRC, and one which is resisted by HMRC when challenged.

Putting HMRC to Proof

Well the key to it all is that objective tests must be applied by HMRC when coming to their decisions, they must look at each element firstly, in my view, beginning at the “reasonable care” end of the spectrum, and then working up the scale toward “deliberate” or “deliberate and concealed”.  I have not tried to go into “concealed” here, as that too is contentious although suffice to say my view is clear in that following professional advice is not concealment.

HMRC must also be prepared to evidence their contention.  HMRC starting with an assertion, or an assumption, is just not good enough.  But many advisers would say that this is exactly what we see from HMRC.  For example, I personally have seen the physics teacher alleged to have “special knowledge”, which is patently incorrect, and a taxpayer appointing an accountant having carried out due diligence on that accountant who turned out to be both incompetent and a liar as to his professional qualifications being dismissed by HMRC as taking “reasonable care”.  It is clear that HMRC must be put to proof.

Grounds for complaint

And certainly in cases where HMRC say that a challenge to their decision would be seen as lack of co-operation, or else any concession given to date would be withdrawn, they should be put immediately into the HMRC complaints procedure as such coercion has no place in the penalty system and indeed may well be an abuse of power and contrary to Article 6 of the Human Rights Convention.

Vulnerable customers

Finally, whilst not part of the Cannon case, it is our view that HMRC must have proper regard to vulnerable customers before starting the penalty process.  For example, it is no good issuing pages of complicated paperwork to a dyslexic person, and expecting that person to deal with it in the same was as a director of a multinational company.

Number 42

To put what I argue in another way, the number 42 is, in The Hitchhiker’s Guide to the Galaxy by Douglas Adams, the “Answer to the Ultimate Question of Life, the Universe, and Everything”, calculated by an enormous supercomputer named Deep Thought over a period of 7.5 million years.

Unfortunately, no one knows what the question is.

Thus, to calculate the Ultimate Question, a special computer the size of a small planet was built from organic components and named “Earth”.

The similarity is that we are often asked by HMRC to have more faith in their penalty decisions than we place in the number 42.  I would contend that the Hitchhiker’s Guide contains more evidence than HMRC uses in many of the cases we see.

Penalty decisions need to be challenged to ensure that they have been properly made.

Quantum Physics

The quantum physics?  Well I do have the answer paper as well as the question paper.  Sadly, I understand the answers about as much as the average taxpayer understands the intricacies of tax law.  And that, of course, is at the heart of reasonable care as examined in the Cannon case.

As for the quote from 17 September 2015?

Analysis has been made of the number of “deliberate” penalties issued by HMRC.  It keeps increasing year on year at rates which cannot, in my view, be put down to better training, more fraudulent taxpayers, or chance.

I have heard from the mouth of an officer how HMRC looks towards penalties being issued at the outset.

I am not alone in thinking that penalties are being used as a revenue raiser by HMRC.  It may not be a diktat from the Treasury, nor even from senior management in HMRC, but many advisers feel that there are targets to be met and that meeting the targets has become the be all and end all.

One much maligned former Prime Minister talked about “outcomes” rather than “targets”.  And my suspicion is that the civil penalty system has become corrupted by targets and does not aim itself at outcomes, as indicated by the declaration by HMRC on 17 September 2015.

The system does not need reform.  It needs to be put back on track.  Perhaps this is one for The Public Accounts Committee?

Steve Botham