The Importance of Getting Back to Basics

By Steve McCrindle, Haines Watts

“Civil” tax fraud investigations by HM Revenue & Customs (HMRC) are categorised as Code of Practice 8, for which the punishment is a financial penalty (or penalties).

HMRC levied substantial “failure to notify” penalties against a “client” who had been storing and selling road fuel gas off-record. According to HMRCs determination, the client was subject to penalties under Schedule 41, Finance Act 2008, which introduced a penalty for a failure to notify and specifically an “Obligation to make entry of premises intended to be used for production of oil under section 21 of the Hydrocarbon Oil Duties Act 1979...”

In addition, they stated:

S21(1) of HODA 1979 relates to the regulations for Road Fuel Gas and refers to Sch 3, part 3 of HODA 1979, which states: prohibiting the production of gas, and dealing in gas on which the excise duty has not been paid...

Excise Notice 76, section 5.1 outlines the prohibitions and penalties. I’d like to direct you to the second and third prohibitions which state the following: If you fail to notify HMRC that you intend to send out, set aside or supply gas: A Failure to Notify penalty under Sch 41, FA 2008.

We argued that:

  1. Sch. 41, FA 2008 is unambiguous and that a penalty applies solely to a failure to notify an obligation to make entry of premises intended to be used for “production” of oil, nothing else. As the client does not produce oil such penalties are not relevant.
  2. Pt 3, Sch. 3, HODA 1979, merely refers to the “prohibition” of the production of and dealing in gas, and we cannot see how this is in any way relevant. The client has not been prohibited from doing anything.
  3. Sec. 5.1 of Excise Notice 76 does not state the law, whether Primary, Secondary or Tertiary Law and, therefore, must merely state HMRCs “policy”. We, therefore, believe that this Notice misrepresents the law relating to the penalties in point; items 1 and 2 above refer.

HMRC agreed with us on all three arguments, even stating that Sec. 5.1 of Excise Notice 76 would require amendment.

Client committed excise duty fraud but through our work was not subjected to any penalties, which were withdrawn (nor was interest levied).

Getting back to basics, in this case interpreting specific legislation, was very important.

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Steve McCrindle

GGI member firm
Haines Watts
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
More than 60 offices throughout the UK
T: +44 207 025 4656
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With over 60 offices around the UK, Haines Watts is a UK Top 15 firm of chartered accountants specialising in the owner-managed business sector. Assisting over 35,000 business owners around the UK, Haines Watts supports business owners’ aspirations and helps them to achieve their goals.

Steve McCrindle is a VAT partner at Haines Watts, a leading provider of business advice and accounting services to owner managers operating in the UK and abroad. He is also Global Chairperson of the GGI Indirect Taxes Practice Group.

Published: Indirect Taxes Newsletter, No. 10 Spring 2020 l Photo: LAFORET Aurélien -

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