HMRC no longer 'thinks' about penalties

The Government has removed its controversial wording in the Finance Bill which allowed penalties to be levied according to what 'HMRC thinks...'.

The wording had been criticised by a number of professional bodies, including the Chartered Institute of Taxation (CIOT), who had campaigned against the use of such a subjective phrase. Rob Ellerby, CIOT President, said: "The CIOT objected to the use of this wording as it was subjective and not objective. We welcome the fact that HM Revenue & Customs (HMRC) listened to us and have responded appropriately.

"The removal of the phrase 'HMRC thinks' will make the legislation work better, one of the main aims of the CIOT."

The CIOT put the case in the following way when the draft legislation was published: "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."