CH300200 - The Human Rights Act and Penalties: HMRC penalties

Some HMRC penalties are ‘criminal’ in nature for the purposes of Article 6. This classification as ‘criminal’ is for the purposes of European Convention on Human Rights (ECHR) only. It does not make them criminal for domestic purposes. They remain civil penalties. The term ‘criminal’ is used in this context throughout this section of the Compliance Handbook.

Whether a penalty is considered to be ‘criminal’ or not depends on the following three criteria which are often referred to as the ‘Engel Criteria’ following the case of Engel v. Netherlands (No. 1) (1976) (App 5100/71)

  1. The domestic classification of the offence.
  2. The nature of the offence.
  3. The nature and degree of severity of the penalty that the person concerned may incur.

These criteria are considered together, with more weight generally being given to the second and third. The first is only a starting-point and the domestic classification of an offence as civil is not determinative.

Any one, or a combination of these factors, may be sufficient for the resulting penalty charge to be considered as ‘criminal’.

This means that penalties with the following characteristics are likely to be considered by Courts and tribunals as ‘criminal’ in nature for the purposes of Article 6 ECHR

  • those that are primarily intended to be a punishment and a deterrent
  • large penalties, in terms of percentage rate or total amount charged
  • those where proof of qualitative misconduct is required, for example deliberate behaviour.

When you need to contact the person in order to make a decision about whether to charge a ‘criminal’ penalty or to determine the size of the penalty, you must give the HRA message to the person before you discuss penalties. The guidance at CH300400+ explains when and how to do this.

Penalties that you must treat procedurally as if they are ‘criminal’ for Article 6 purposes

These penalties listed below include all tax geared penalties where we need to establish the person’s behaviour, this includes for example, careless and non-deliberate behaviour. In the case of all these penalties you must follow the guidance at CH300400+, which explains what you must do when you have an evidence-based reason, see CH300700, to believe that a person may be liable to one of these penalties

  • Inaccuracy penalties charged under TMA70/S95, FA98/SCH18/PARA20, and FA07/SCH24/PARA1 and FA07/SCH24/PARA1A.
  • Penalties for failure to notify HMRC of an underassessment charged under FA07/SCH24/PARA2.
  • Failure to notify penalties charged under TMA70/S7(8), TMA70/S93(5) and FA08/SCH41/PARA1.
  • Civil evasion penalties charged under VATA94/S60 and FA94/S8.
  • Penalties for transactions connected with VAT fraud charged under VATA94/S69C.
  • Penalties for VAT and Excise wrongdoings charged under FA08/SCH41/PARA2 – 4.
  • Late filing penalties for deliberate withholding of information charged under FA09/SCH55/PARA6 and PARA 11.
  • Follower notice penalties charged under FA14/S208 and FA14/SCH31/PARA4.

Other penalties that we do not need to treat procedurally as if they are ‘criminal’ for Article 6 purposes

For any other penalty, you do not need follow the guidance at CH300400+.

This is because these other penalties

  • are either ‘administrative penalties’ that are not ‘criminal’ for the purposes of Article 6, or
  • because, where there is no reasonable excuse or special circumstance, they are chargeable as an automatic consequence of the persons actions or failure and you do not need to consider or discuss whether to charge a penalty, or the size of the penalty, with the person.

Administrative penalties may exceptionally be considered as ‘criminal’ where the resulting penalty is particularly large and punitive.

Where one of these other penalties is considered to be ‘criminal’ all of the relevant procedures and penalty notices are fully compliant with the requirements of Article 6 ECHR. The nature of these penalties means, as explained above, that there is no need to issue the HRA message or take any other additional action to protect the person’s rights.

If you are asked anything about Human Rights and penalties, you should give the person a copy of factsheet CC/FS9 (GOV.UK) - The Human Rights Act and Penalties.