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CIOT Objects To New Pre-Emptive Tax Penalty Powers

by Jason Gorringe, Tax-News.com, London

16 April 2007


The UK's Chartered Institute of Taxation (CIOT) last week published concerns regarding what it dubbed "Alice in Wonderland Tax Penalties" put in place by the recent Finance Bill.

Writing on behalf of the CIOT, Simon Goldie observed that: "In Alice in Wonderland, the Red Queen said “sentence first, verdict afterwards”. A similar approach is now being taken in tax law."

New penalties legislation was included in the 2007 Draft Finance Bill which makes a penalty payable if HMRC think that a taxpayer has done, or not done, something. This is a significant shift from the taxpayer actually doing or omitting to do something.

John Cullinane, President of The Chartered Institute of Taxation (CIOT) added:

“Where penalties are concerned, the test should always be objective rather than subjective. We believe that in the proposed legislation the words ‘HMRC think that’ are superfluous. The words come from legislation where the inspector is exercising judgement. In the case of penalties, that is not the position. Either there has been an offence giving rise to a penalty or there has not. The penalty follows from what the taxpayer did and from nothing else. These words are not needed.”

Mr Cullinane went on to state that:

“Despite objections to this subjective clause, it remains in the draft legislation. The CIOT recognises that HMRC have engaged in constructive consultation over many issues. We are doubly disappointed that in this instance they do not appear to be listening.”


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