(1) The fact that the power to impose a penalty was conferred exclusively on the Upper Tribunal was alone a clear indication that the power was intended by Parliament to be reserved for serious cases, which would need to receive a high level of judicial scrutiny: .
(2) The provision is a penal one, and it must be taken to be reserved for serious cases of non-compliance with information notices, typically where imposition of an initial fixed penalty of £300 and continuing daily penalties at the relatively modest rate of up to £60 per day have failed to secure compliance. Whilst it is not necessarily a last resort, it would be hard to envisage circumstances where it would be appropriate for HMRC to make an application under paragraph 50 until fixed and daily penalties have been imposed for a significant period to no avail: .
(3) In deciding whether a penalty should be imposed the Upper Tribunal should have regard to the usual considerations which apply when the imposition of a tax 86 penalty is in question, including such matters as the reasons for non-compliance, the extent to which the position has been remedied, the gravity and duration of the non-compliance, the presence of aggravating or mitigating factors, the availability of other methods for HMRC to recover the tax at risk (most obviously by making an assessment, if necessary on a best of judgment basis), and generally the need to achieve a fair and proportionate outcome, having regard to the interests of the public purse and the general body of taxpayers as well as the circumstances of the non-compliant taxpayer himself: .
(4) In determining the amount of the penalty, the obligation on the Upper Tribunal is only to “have regard to” the amount of tax shown to be at risk as a result of the failure to comply with the notice. The penalty is not intended to be a proxy for recovery of the unpaid tax, and Parliament has deliberately decided against providing for a fixed or mechanical relationship between the amount of the tax unpaid and the amount of the penalty. Indeed, a regime of tax-geared penalties would often make little sense, and could give rise to insuperable practical difficulties, in a situation where HMRC are by definition still trying to obtain the necessary information about the taxpayer’s tax position: .
(5) The “tax at risk” figure should be discounted by a substantial proportion before being used as a yardstick for the imposition of a tax-related penalty in cases where information available to HMRC is very limited: .
(6) Although there will be many cases where it is an acceptable approach to fix the amount of a penalty under paragraph 50 by applying a percentage to the “tax at risk” it is not always necessary to show a demonstrable link between the tax unpaid and the penalty imposed. It is enough if the amount of the tax unpaid, taken in conjunction with all the other relevant circumstances, informs the determination of quantum and yields a result which is proportionate to the scale and nature of the taxpayer’s default: .