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Focus on Regulation

Can the Bill of Rights prevent HMRC from issuing a penalty?

In a very recent judgment, the First-Tier Tribunal Tax Chamber considered an interesting argument raised by a taxpayer that a penalty issued by HMRC was contrary to the provisions of the 1688 Bill of Rights and therefore invalid.

In Pendle v the Commissioners for Her Majesty’s Revenue & Customs [2015] UKFTT 27, Mr Pendle appealed a £100 penalty issued by the HMRC because he had repeatedly failed correctly to complete his self-assessment tax return.

One of Mr Pendle’s submissions was based on a declaration in the Bill of Rights (the “Declaration“) which provides that,

all grants and promises of fines and forfeitures of particular persons before conviction are illegal and void.

Mr Pendle argued that because HMRC is not a court, it could not “convict” someone and, therefore, the penalty issued was illegal and void.

In her judgment, Redson J first considered the context of the Bill of Rights at the time it was enacted. She pointed out that the (then) monarch, James II, had just been deposed and one of the first declarations to be made in the Bill of Rights was that “the pretended power of suspending of laws or the execution of laws by regall authority without consent of Parlyament is illegall“. This declaration had had the effect of establishing parliamentary sovereignty.

The purpose of the Declaration relied on by Mr Pendle was to prevent the recurrence of a particular abuse by James II, who had often imposed fines and forfeitures in the absence of any conviction or judgment. Redson J decided that in modern language, the Declaration was intended to mean that no penalties could be levied without due legal process. She continued, “it follows that Parliament, with the legislative sovereignty vested in it by the very same Bill of Rights, can give HMRC the power to impose and collect civil penalties, providing they are appealable to an independent judiciary“.

Referring to the judgment of Collins J in R (Herron) v Parking Adjudicator [2009] EWHC 1702, which explained that:

The Bill of Rights’ reference to fines and forfeitures before conviction or judgment means that what cannot prevail is a fine or a forfeiture in respect of which there is no right of appeal, whether ultimately to a court or through a system which is set up which is equivalent to a court”,

Redson J concluded that because Parliament had delegated to HMRC the power to impose penalties, and because there was a right of appeal – the very process by which Mr Pendle had brought the proceedings – then HMRC could not be prevented by the Bill of Rights from issuing a penalty.