Penalty is correct

The taxpayer was the representative partner of a firm of solicitors. In an earlier decision the Special Commissioners decided the taxpayer had been guilty of negligent conduct in the making of the firm’s partnership statements.

The firm appealed the decision but in the meantime made an offer to HMRC to settle the case. HMRC agreed on the basis that their acceptance was without prejudice to any subsequent penalty determination. They later issued a penalty under TMA 1970 s 95.

The taxpayer appealed.

Before the Court of Appeal the taxpayer argued that the sum paid under the settlement was a contractual debt not tax and therefore no s 95 penalty could be imposed.

Sir Mark Waller ruled that the it was irrelevant in the context of s 95 that the settlement had created a contractual debt and...