Application for DOTAS penalty was too late

In 2017 the First-tier Tribunal held that a scheme known as ‘Alchemy’ was notifiable under the disclosure of tax avoidance schemes (DOTAS) regime and that Root2 was a promoter in relation to it.

In 2019 HMRC asked the First-tier Tribunal to determine a penalty (TMA 1970 s 98C) to be charged on Root2 for failure to notify the arrangements. The statutory time limit was ‘any time within six years after the date on which the penalty was incurred’. The company argued that the penalty was incurred the first time it became aware of any transaction taking place which formed part of the Alchemy scheme. This was in 2011 so HMRC was out of time to apply for the penalty. The First-tier Tribunal agreed and allowed the appeal.

HMRC appealed. It said the First-tier Tribunal had been wrong to construe FA 2004 s 308(3) as requiring...