FTT imposes £1m DOTAS non-disclosure penalty

In HMRC v Hyrax Resourcing Limited (13 July 2022) the FTT has granted HMRC’s application for a penalty under sections 98C of the Taxes Management Act 1970. The application related to the Disclosure of Tax Avoidance Schemes legislation in the Finance Act 2004, specifically, Hyrax’s failure to comply with the requirement in the section 308(3) FA 2004 to notify notifiable arrangements (“the Hyrax arrangements”) within the prescribed period after the date on which it first became aware of any transactions forming part of the Hyrax arrangements. 

Hyrax alleged that it had complied with its disclosure obligation on the basis that an earlier iteration of the arrangements which were substantially the same had been disclosed to HMRC. Further, Hyrax alleged that it had a reasonable excuse for not disclosing the Hyrax arrangements to HMRC because it had relied on professional advice that the arrangements were not notifiable. 

The FTT found on the facts that the arrangements were not substantially the same as the disclosed arrangements and that on the facts there was no reasonable excuse for the failure to notify HMRC. In reaching its conclusion on reasonable excuse the FTT considered the duties of a director and in particular the duty of a director to exercise independent judgement.  

The FTT determined that the statutory maximum penalty was appropriate and imposed a penalty in the sum of £1,074,600.

Click here for the Decision of the FTT.

Akash Nawbatt QC and Ishaani Shrivastava represented HMRC.

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