In HMRC v Romie Tager QC the Personal Representative of Osias Tager [2017] UKUT 161 (TCC), the Upper Tribunal (UT) refused an application that it should exercise its discretion under Rule 5(3) of the Tribunal Procedure (Upper Tribunal) Rules 2008 (the Upper Tribunal Rules) and suspend the effect of its decision to impose tax-related penalties for failing to comply with information notices, pending an appeal to the Court of Appeal.

Background

The respondent had failed to comply with certain information notices which HMRC had issued pursuant to Schedule 36, Finance Act 2008, in respect of his own income tax affairs, and the estate of his late father, for which he was the personal representative. A penalty of £75,000 was imposed by the UT in respect of the income tax notice and penalty of £1,000,210 was imposed in respect of the estate, pursuant to paragraph 50, Schedule 36, Finance Act 2008.

The respondent sought, and was granted, permission to appeal to the Court of Appeal and made an application to the UT that the penalties be suspended until determination of the appeal. The application was made on the basis that the UT should exercise its discretion under Rule 5(3)(I) of the Upper Tribunal Rules, which permits the UT to 'suspend the effect of its own decision pending an appeal or review of that decision'.

The respondent argued that the UT ought to exercise its discretion because of the real doubts about the correctness of the decision, and because the penalties were based on an over-estimation of the tax due. HMRC argued in response that the suspension of penalties was the exception rather than the rule, that any suspension would confer an advantage on the respondent as interest would not run, and that he had not shown that he was unable to pay, or would suffer hardship if compelled to pay.

UT decision

The UT dismissed the respondent's application.

In refusing to exercise its discretion under Rule 5(3)(I) to suspend the penalties pending the respondent's appeal to the Court of Appeal, the UT confirmed that it was well-established that suspension of a decision pending an appeal is the exception rather than the rule. The UT noted that even in criminal cases a defendant is obliged to begin serving his sentence immediately, notwithstanding any appeal.

Further, the UT said that an applicant must ordinarily demonstrate that without a suspension he would suffer material prejudice outweighing any prejudice which the suspension would cause to his opponent. Reluctance to pay was not sufficient. In the view of the UT, there was nothing in the present case to suggest that the respondent would suffer such prejudice. Indeed, HMRC would suffer prejudice (though not serious prejudice) from a deferment of the date from which interest would run.

Although the income tax due had been agreed at a sum considerably less than the amount that had been assumed when the penalty was imposed, the potential inheritance tax liability was yet to be determined. Accordingly, the UT did not accept that the penalties were based on 'substantially over-estimated' sums of tax due. In the view of the UT, it was not certain that the Court of Appeal would reduce the penalties and in any event it would be contrary to the general rule and the interests of justice to defer the penalty in this case.

Comment

This decision provides helpful guidance as to when the UT is likely to suspend the effect of its decision pending an appeal to the Court of Appeal. The UT has confirmed that suspension of the effect of a decision pending an appeal is the exception rather than the rule and a taxpayer seeking suspension must ordinarily demonstrate that he would suffer material prejudice if he was compelled to pay and that such prejudice would outweigh the prejudice caused to HMRC if the effect of the decision was suspended.

A copy of the decision can be found here.