Thornton – Identifiable HMRC officer must determine penalties

19 November 2018. Published by Michelle Sloane, Partner

In Robert, Adam and Dorothy Thornton (trading as A* Education) v HMRC [2018] UKFTT 568 (TC), the First-tier Tribunal (FTT) has held that penalties for failure to file employment intermediaries returns (EIRs) were invalidly issued, as they had not been made by an identifiable officer of HMRC under section 100, Taxes Management Act 1970 (TMA).



A* Education (the taxpayer) locates and provides supply teachers to schools. The taxpayer issues invoices to the schools for the supply of such teachers and then remunerates the teachers net of PAYE and NICs.


The taxpayer supplied two self-employed teachers to schools. Unwittingly, the taxpayer had become an employment intermediary for the relevant periods as it satisfied the statutory criteria set out in Regulation 84E of The Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2015 (the Regulations). The taxpayer should, therefore, have submitted EIRs for the relevant quarters.


In February 2017, the taxpayer, having spoken with HMRC, discovered that it should have filed EIRs in relation to the periods it supplied the self-employed teachers and subsequently made a late filing.


HMRC issued computerised late filing penalties totalling £1,750, under section 98(1)(b), TMA, for the three tax quarters ending 5 July 2016 (£250), 5 October 2016 (£500) and 5 January 2017 (£1,000).


The taxpayer's appeal to HMRC was unsuccessful and it appealed to the FTT on the ground that it had a reasonable excuse as it was ignorant of the law. 


FTT decision


The appeal was allowed.


The FTT considered that it had jurisdiction to consider the validity of the penalty notices and considered that issue first. The FTT noted that whilst the penalties were issued under section 98, TMA, they were in fact governed by section 100, TMA, which imposes a requirement that an officer of the board must authorise a penalty notice.


HMRC was unable to supply the name of the authorising officer because the process was automated. The FTT therefore found, as a fact, that no officer of the board had made the relevant determinations and accordingly it concluded that the penalty notices were invalid.


Given its conclusion in relation to the validity of the penalty notices, it was not necessary for the FTT to determine whether ignorance of the law was  a reasonable excuse but it did nevertheless confirm that ignorance of the law can constitute a reasonable excuse, however, in the circumstances of this case, it was not met as the business should have made itself aware of the law which was sufficiently published. 




The FTT's decision is consistent with Donaldson v HMRC [2016] EWCA Civ 761. Penalties issued under section 100, TMA, require a decision by an actual officer of HMRC and it is not sufficient for the process to be  automated without the involvement of an actual officer. This decision, together with the decisions in Groves v HMRC [2018] UKFTT 0311 (TC) and Rogers v HMRC [2018] UKFTT 0312 (TC), expands the situations in which penalty notices have to be issued by individual HMRC officers.


Given the wider ramifications of this decision for HMRC, it would not be surprising if HMRC sought to appeal the decision to the Upper Tribunal. 


A copy to the decision can be viewed here.

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