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Penalties charged on companies dealt with by Large Business Service from 2007-08

Freedom of Information request

I am after an update of the information given in the National Audit Office (NAO) 2007 report 'Management of Large Business Corporation Tax', paragraph 2.5. It would also be helpful if you could break down the numbers of penalties into bands of, say: 0-100,000, 100,000-1 million, 1 million-10 million and >10 million.

Response

You have referred to the NAO report published at the following link:

Management of large business Corporation Tax

I am interpreting your request as one for details of penalties for negligence in Company Tax returns following completion of enquiries. I can confirm that HM Revenue & Customs (HMRC) hold the information requested. I am unable to provide precise figures/breakdowns where figures are fewer than five. Disclosure of figures fewer than five may allow specific taxpayer companies to be identified, because of other information already in the public domain. Under s44(1)(a) of the Freedom of Information Act (FOIA), I am withholding precise figures/breakdowns in some cases. I can confirm that the penalties charged during the time period requested all fall within the range of £0-1 million.

Paragraph 2.5 of the NAO’s 2007 report ‘Management of large business Corporation Tax’ states that ‘The Department imposed penalties on large businesses for negligence in their Company Tax returns in 19 cases in 2006-07, following completion of enquiries into their returns. The total value imposed was £15 million, up from 14 cases with a penalties value of £5 million in 2005-06. The increases were due to the Department seeking penalties in more cases and the imposition of two large penalties which increased the total value imposed’.

The information which I can disclose is provided below:

  • 2007-08 – seven penalties charged for £1,655,200.60
  • 2008-09 – fewer than five penalties charged for £340,000
  • 2009-10 – six penalties charged for £442,132.27
  • 2010-11 (to date) – fewer than five penalties charged for £322,257

HMRC can only charge penalties where the law allows.

The figures for the two years mentioned in the NAO report include large penalties in two cases which increased the total value charged, and have a distorting effect when compared with earlier and more recent years. In 2003-04 seven penalties were charged for less than £1 million and in 2004-05 eight penalties were charged for £1,123,610.

Exemption – section 44(1)(a)

When another law prevents disclosure of information, it is exempt from disclosure because of section 44(1)(a) of the FOIA. Section 18(1) of the Commissioners for Revenue and Customs Act (CRCA) provides that Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs. The information you are seeking, if held, would be held in connection with HMRC functions.

Section 23(1) CRCA further provides that where information falling under section 18(1) relates to a ‘person’ who is identified or who could be identified, the exemption in section 44(1)(a) FOIA applies. ‘Person’ includes living individuals as well as legal entities such as limited companies.

I consider that disclosing figures for the number/value of penalties where the figures are fewer than five is potentially disclosive and therefore the exemption applies. Section 44 is an absolute exemption and does not require a consideration of the public interest.