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HMRC internal manual

Specialist Investigations Operational Guidance

Settlement by agreement: consideration of penalties: penalties - delay and the Human Rights Act

The case of King v UK has shown that delays caused by the authorities in bringing penalty proceedings can amount to a breach of the taxpayer’s human rights. All SI Investigators should be aware of EM1360, EM1361 and EM1362 which deal with this point in detail.

Note that HMRC policy is that penalties will be pursued despite a breach of human rights, except in very exceptional circumstances, where it is unlikely that the taxpayer can be given a fair hearing. If you consider that a case does involve:

  1. unreasonable delay by the authorities (HMRC or appellate bodies), and
  2. exceptional circumstances making a fair hearing unlikely

you should refer to the Technical Manager (Powers and Penalties) before you abandon penalties.

The implications of King v UK apply to voluntary contract settlements as well as to formal penalty proceedings.

In Code 9 cases, the period during which a relevant delay may occur begins as soon as Code 9 is issued. In other cases it will generally begin at the time the warning in EM1363 is given.

Unreasonable delay can be caused by HMRC’s failure to take forcing action to overcome delay by the taxpayer. In the context of Code 9, this can include a failure to respond adequately to delays in submitting the Disclosure Report (see TTOG11720 and TTOG4415). Although the delay may be primarily the fault of the taxpayer, there is no legal obligation to co-operate. HMRC has made the allegation of fraud, and it is our duty to bring the question of penalties to a fair and timely conclusion. Allowing the taxpayer to dictate the pace of the enquiry may cause unreasonable delay.

See also:

  • EM5202 for when to make penalty determinations.
  • EM1363 and EM1364 for taxpayer’s rights and the messages to be given. Note that it is not enough to rely on similar messages contained in Codes of Practice. These messages, suitably adapted for the circumstances, must be given to the taxpayer at the start of any enquiry under Code 9 (CIF), and in any other case as soon as it becomes clear that penalties are likely to be considered. See TTOG1130 for advice on use of the HRA factsheet CC/FS9.