This was an appeal by Khan Properties, against a late filing penalty in respect of a Corporation Tax return for the Accounting Period Ended 31 March 2016.
There is a lengthy discussion on the validity of the penalty determination which was made under s100 TMA.
S100 requires “an officer of the Board…..may make a determination… at such amount as, in his opinion, is correct or appropriate”. Judge Richard Thomas found that the requirement in s100(1) is for a “flesh and blood human being who is an officer of HMRC to make the assessment”. As the making of the assessment was done automatically by the HMRC computer, he considered that the determination did not fulfil the requirement of s100(1).
There are specific provisions in the Social Security Act regarding the use of computers, so the Judge found that the absence of these in TMA means that a determination under s100 must be made by an officer of HMRC that is a human being. Accordingly, the appeal was allowed.
There has been some speculation in the press that this could apply to Income Tax Self-Assessment. It’s worth noting that the Judge makes it clear that his decision is limited to the position of penalties under paragraph 17 of Schedule 18 Finance Act 1998 ie Corporation tax, and should not be read as applying to penalties in Schedules 55 and 56 of Finance Act 2009. The Judge may well be thinking that Schedules 55 and 56 have different charging mechanisms to those for CorporatIon Tax, and that they may not require human intervention. Perhaps this will be determined in a future case.
