Penalty conundrum

A partner in a firm of solicitors appealed against a penalty determination on the basis that there was no liability in law as no assessment had been made.

In brief the partnership had previously settled appeals in respect of the partnership self assessment tax returns by paying the total amount of tax assessable.

HMRC had accepted the offer noting that this was ‘entirely without prejudice to any penalty determination which may follow hereafter’.

HMRC subsequently made a penalty determination under TMA 1970 s 95 against the appellant in respect of his own returns for the relevant years on the ground that the returns had used the partnership income figures which had been found incorrect by the Special Commissioners by reason of negligent conduct of the representative partner.

The taxpayer appealed.

A preliminary issue of law arose as to whether HMRC were precluded from amending the appellant’s returns...