The conduct of a hearing of an appeal against a penalty
determination is much the same as the conduct of a hearing of an
appeal against an assessment etc except that the onus of proof in
an appeal hearing (see AH1320) in respect of a penalty
determination rests on HMRC. Section 100B(2) TMA 1970 specifically
excludes the statutory onus of proof (Sections 50(6) to 50(8)) from
applying to appeals against penalties.
When you make a penalty determination you are asserting that
an offence has been committed. In the case of a penalty relating to
a failure to do something you must adduce evidence of the alleged
failure. The appellant can either introduce evidence to rebut it or
offer their 'reasonable excuse'. The evidential burden (see AH1325)
is likely to be significant in all 'failure' penalty cases,
especially when the penalty is charged for failure to comply with
an obligation such as not making a return by a specified date.
Appeals against penalty determinations are civil proceedings
(R v Special Commissioners, ex parte Martin, 48 TC at page 8A-B) so
the standard of proof is "on the balance of probabilities" and not
the (higher) criminal standard of "beyond reasonable doubt". The
more serious the accusation the higher the standard of proof must
be. Commissioners can be expected to treat as very serious any
allegation by HMRC that a taxpayer’s conduct has rendered him
liable to a penalty and will expect therefore that there should be
strong evidence to substantiate the allegation before they are
willing to accept that it has been proved.
In presenting your case to the Commissioners you should make
a logical analysis of the constituent elements of the offence and
provide separate proof of each of them. See AH0735 regarding the
use of documentary evidence.
For a tax-geared penalty, TMA70/S101 establishes that an
assessment which can no longer be varied by any Commissioners on
appeal or by order of any court is sufficient evidence, for the
purposes of penalty action, that the amounts in respect of which
tax is charged in the assessment arose, or were received, as stated
in the assessment.
General Commissioners will not normally wish to enquire too
closely into the basis on which assessment figures have been
calculated if their attention is drawn to Section 101, but it
should be noted that the section speaks of "sufficient" evidence
and not "conclusive" evidence.
In technical/evidential terms, the effect of Section 101 is
to create a rebuttable presumption concerning the quantum of the
taxpayer's taxable income and chargeable gains (although the onus
of rebutting the presumption is not easily discharged). Although
the taxpayer cannot re- argue the quantum of the assessments at the
penalty hearing, the Commissioners would nevertheless be entitled
in an appropriate (though rare) case to consider evidence that the
assessments may be excessive and to reduce the amount of the
penalty on that ground (see the further mitigation allowed by
Scott, J, in very unusual circumstances, in Willey v East Dereham
Commissioners, 59 TC 640 at 649E-F).
Even if the figures have been agreed with the taxpayer, or
his agent, you should be well briefed as to the basis on which the
assessments were calculated in case, exceptionally, any such
question should arise.
