Civil fines for ‘dishonest’ tax agents

4 April 2013

New legislation is now in force allowing HMRC to charge civil penalties up to GBP50,000 on tax agents whom it deems to have acted dishonestly.

The first stage of the new enforcement procedure is a ‘conduct notice’ issued by HMRC to the agent, setting out HMRC’s evidence of the agent’s dishonesty. The investigating officer will at the same time ask the agent to make a ‘voluntary’ disclosure of all relevant working papers. If the agent refuses, HMRC can seek tax tribunal approval for a notice granting it compulsory access to the agent’s files. The agent has no right of appeal against this notice, and failure to comply with it triggers an immediate penalty of GBP300, followed by extra penalties of GBP60 a day.

Where working papers are no longer in the power or possession of the tax agent, HMRC can demand these from a third party ‒ who, unlike the agent, does have a right of appeal against the notice.

Once HMRC has decided that the agent has been dishonest, it can impose a civil fine of at least GBP5,000, although penalties up to GBP50,000 are possible. The actual penalty amount charged does not appear to depend on the nature of the dishonest conduct, but only on the level of cooperation the agent subsequently provides to HMRC’s investigating officer.

HMRC says the new legislation contains many safeguards and checks. However, these safeguards do not include a right of appeal against the decision to charge a penalty. Agents can only ask to have the penalty reduced. They can also appeal against penalties for non-disclosure.

Those who are charged more than the minimum GBP5,000 penalty are likely to have their details published on HMRC’s website. HMRC will probably have notified the agent’s professional body right at the start of the investigation. Again, there is no right of appeal against these ‘name and shame’ disclosures, although agents will be given advance warning of them.

The powers are intended to be used only when HMRC cannot prosecute the agent concerned. They are based on Section 223 and Schedule 38 of the Finance Act 2012 and were brought into effect on 1 April by Statutory Instrument 2013 No.279.

 

Sources

 

HMRC

HMRC (2)

 

 


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