When a penalty isn't a penalty

By Jason Piper, technical officer, ACCA

I spotted an interesting little case on HMRC penalties the other day – it's very short (barely a page or two of A4) but quite revealing, and maybe worrying too.

The important facts (which were nothing to do with the original appeal) are basically as follows:

1) 31 August 2008: Mike Christensen, area director, HMRC North West and Midlands retires

2) 3 October 2008: HMRC computer issues a penalty notice in Mike Christensen's name.

Now, to be valid, a penalty from HMRC has to be issued by an Officer of the Board – but in October 2008 Mike Christensen was no longer 'properly authorised', being an ex officer. So, the Tax Tribunal found that the penalty was unenforceable.

So far, so simple – one silly admin error, one £400 penalty overturned. But that's not all there is to it. The officer who retired was the area director - his name wasn't on the penalty because he had anything to do with it. His name was on the penalty because that was what the computer printed on all the penalties issued in his area. Which in turn means that all the penalties issued by that computer that day were invalid… in fact, from the dates in the case we can tell that all the penalties issued in the North West and Midlands area between (at the very least) 1 September 2008 and 3 October 2008 were invalid.

All of which raises quite a few issues – why wasn't the computer reprogrammed? How come no-one else spotted it? Why has publication been so late (the hearing was last autumn, but the judgment wasn't released until this July)? What is the status of all those invalid penalties (now way beyond appealable)?

I doubt we'll ever know the answers to most of those questions, but it highlights the need to check every last detail of the paperwork; you never know you may find the computer in your area is issuing penalties in the name of a long-retired area director…