In the case, the First Tier Tribunal was asked to consider whether HMRC were correct in levying penalties against a taxpayer for a failure to deliver tax returns. The powers granted to HMRC by section 8(1) of the Taxes Management Act 1970 ("TMA") allow them to issue notices requiring taxpayers to deliver tax returns "for the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment". A failure by a taxpayer to submit the required tax returns then gives rise to penalties.
However, on the facts of the case, the taxpayer's liability to tax had already been established as a result of the taxpayer being subject to income tax via the PAYE system. As a result, the First Tier Tribunal held that the notices issued by HMRC to the taxpayer requiring a tax return to be filed were not issued for the purpose set out in section 8(1) of the TMA and so were invalid. This, in turn, meant that there was no proper basis for HMRC to levy penalties against the taxpayer. The First Tier Tribunal also noted that it considered attempts by HMRC to require tax returns to be filed retrospectively which enabled interest and penalties to be levied on any underpaid tax to be an "inappropriate" use of the self-assessment rules.