Three more penalties classed as criminal for Article 6 procedure

The list of penalties that you must treat procedurally as if they are criminal for Article 6 purposes now also contains three further entries: penalties for deliberately withholding information charged under FA21/SCH25/PARA1; the penalty for failure to correct relevant offshore tax non-compliance, listed on the page as charged under FA(NO.2)A18/SCH18/PARA1; and the asset-based penalty for offshore inaccuracies and failures charged under FA16/SCH22/PARA1GOV. The existing list comprises: inaccuracy penalties charged under TMA70/S95, FA98/SCH18/PARA20, FA07/SCH24/PARA1 and PARA1A; failure-to-notify penalties under FA07/SCH24/PARA2 and under TMA70/S7(8), TMA70/S93(5) and FA08/SCH41/PARA1; civil evasion penalties under VATA94/S60 and FA94/S8; VAT-fraud-connected penalties under VATA94/S69C; VAT and Excise wrongdoing penalties under FA08/SCH41/PARA2-4; deliberate-withholding late filing penalties under FA09/SCH55/PARA6 and PARA11; follower notice penalties under FA14/S208 and FA14/SCH31/PARA4; and Electronic Sale Suppression enabler penalties under Sch 14 paras 2-4 FA22.

The classification as criminal is for European Convention on Human Rights purposes onlyGOV: the penalties remain civil penalties domestically, and the term criminal is used in that specific sense throughout this part of the Compliance Handbook. Whether a penalty counts as criminal turns on the three Engel criteria from Engel v Netherlands (No. 1) (1976) — domestic classification, nature of the offence, and nature and degree of severity of the penalty — considered together, with the second and third generally carrying more weight, so that domestic classification as civil is not determinative. Penalties primarily intended as punishment and deterrent, large penalties by rate or amount, and penalties requiring proof of qualitative misconduct such as deliberate behaviour are likely to be treated as criminal by courts and tribunals.

The practical consequence is procedural. Where an officer needs to contact the person to decide whether to charge one of these penalties or to determine its size, the officer must give the HRA message before discussing penalties, following the guidance at CH300400 and followingGOV, which applies once there is an evidence-based reason to believe the person may be liable. For any other penalty, the officer does not need to follow that guidance. This is because these other penalties are either administrative penalties that are not criminal for Article 6 purposes, or, where there is no reasonable excuse or special circumstance, they are chargeable as an automatic consequence of the person's actions or failure, so the officer does not need to consider or discuss whether to charge a penalty or its size with the person. Administrative penalties can exceptionally count as criminal where the resulting penalty is particularly large and punitive, but those notices are already fully Article 6 compliant with no need for the HRA message or other additional action. Anyone asked about human rights and penalties should be given factsheet CC/FS9.

Note on the offshore entry: the page labels it FA(NO.2)A18/SCH18/PARA1, but HMRC's Requirement to Correct guidance places that Schedule 18 penalty under the Finance (No. 2) Act 2017. The Requirement to Correct penalty sits within the offshore strategy: failure to disclose relevant offshore liabilities by 30 September 2018 attracts a failure-to-correct penalty starting at 200% of the undisclosed liability, reducible but not below 100% absent special circumstances. The asset-based penalty applies alongside a standard offshore penalty where deliberate offshore inaccuracies exceed the £25,000 threshold, charged at the lower of 10% of the asset value or ten times the offshore potential lost revenue, before reductions for disclosure and co-operation.

Legal basis: Article 6 ECHR as given effect by the Human Rights Act 1998; Engel criteria; FA21/SCH25/PARA1, FA16/SCH22/PARA1, and the Schedule 18 failure-to-correct penalty (listed in CH300200 as FA(NO.2)A18/SCH18/PARA1; the Requirement to Correct guidance cites Schedule 18 FA (No 2) 2017).