Ashley Matthews T/A Coast & Country v The Commissioners for HMRC

This is an appeal against a penalty of £13,000 imposed by the respondents (“HMRC”) for non-compliance with The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“the Regulations”). The Regulations came into force on 26 June 2017 and replaced the Money Laundering Regulations 2007.

The appellant had traded as an Estate Agency Business (“EAB”) whilst not registered with HMRC or any other supervisory authority. The decision was issued on 7 May 2024 and upheld on review on 8 July 2024.

With the consent of the parties, the hearing was conducted by video link using the Tribunal's video hearing system. Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

The documents to which we were referred comprised a Documents Bundle consisting of 156 pages and an Authorities Bundle consisting of 42 pages. On 11 July 2025, HMRC had lodged an application to admit a further document, extending to six pages, which was a National Archive copy of the GOV.UK Money Laundering registration and renewal guidance which was in force as at 15 September 2022. It was admitted of consent at the outset of the hearing. After the hearing we received a copy of the generic reminder to which we refer at paragraph 27 but which had been lodged with the Tribunal on 21 August 2025. Lastly, at the close of the hearing, the Tribunal directed that HMRC lodge with the Tribunal and the appellant a copy of the section from HMRC’s internal manual “Economic Crime Supervision Handbook”- ECSH82795-Sanctions for non-compliance: financial penalties: financial penalties framework: type 2 (trading whilst unregistered)” (“the Penalties Framework”) since there had been repeated reference to it but it had not been produced. It was lodged on 27 August 2025.

We heard evidence from the appellant and from Officer Ashleigh Little. Both witnesses were straightforward and credible. Neither the relevant Regulations nor the facts are in dispute.

The appellant accepts that he should have been registered as an estate agent with HMRC in terms of Regulations 55 and 56 of the Regulations and that the period of registration is for 12 months only unless renewed.

Regulation 56(5) makes it explicit that a relevant business, such as an EAB, “must not carry on the business” unless “that person is included in the register”.

Insofar as relevant Regulation 76 reads:

“Power to impose civil penalties: fines and statements

76.

—(1) Paragraph (2) applies if a designated supervisory authority is satisfied that any person (“P”) has contravened a relevant requirement imposed on that person.

(2)

A designated supervisory authority may do one or both of the following—

(a)

impose a penalty of such amount as it considers appropriate on P;

(b)

publish a statement censuring P.

…

(4)

A designated supervisory authority must not impose a penalty on P under this regulation for contravention of a relevant requirement if the authority is satisfied that P took all reasonable steps and exercised all due diligence to ensure that the requirement would be complied with.

…

(6)

In deciding whether P has contravened a relevant requirement, the designated supervisory authority must consider whether at the time P followed—

…

(b)

any relevant guidance which was at the time—

(i)

issued by the FCA; or

(ii)

issued by any other supervisory authority or appropriate body and approved by the Treasury.

…

(8)

For the purposes of this regulation—

(a)

‘appropriate’ means (other than in references to an appropriate body) effective, proportionate and dissuasive;

(b)

‘designated supervisory authority’ means the FCA or the Commissioners.”

Insofar as relevant Regulation 83 reads:

“The Commissioners: disciplinary measures (procedure)

83.

—(1) When determining the type of sanction, and level of any penalty, to be imposed on a person (“P”) under regulation 76 or 78, the Commissioners must take into account all relevant circumstances, including where appropriate—

(a)

the gravity and the duration of the contravention or failure;

(b)

the degree of responsibility of P;

(c)

the financial strength of P;

(d)

the amount of profits gained or losses avoided by P;

(e)

the losses for third parties caused by the contravention or failure;

(f)

the level of co-operation of P with the Commissioners;

(g)

previous contraventions or failures by P; and

(h)

any potential systemic consequences of the contravention or failure.

…

(2)

Where the Commissioners decide to impose a penalty or publish a statement under regulation 76….the Commissioners must give P a notice in accordance with paragraph (3).

(3)

A notice must be given of—

(a)

the Commissioners' decision—

(i)

to impose a penalty, and the amount of the penalty;

(ii)

to publish a statement, and the terms of the statement;…”

Insofar as relevant Regulation 85 reads:

“Publication: the Commissioners

85.

—(1) Where the Commissioners give a notice under regulation 83, the Commissioners must publish on their official website such information about the matter to which the notice relates as they consider appropriate, subject to paragraphs (2) to (8)….”

Regulation 99(1)(e) provides that an appeal may be made to the Tribunal in respect of any decision in terms of “regulation 76 to impose a penalty or publish a censuring statement”.

Regulation 99(4) reads:

“(4)

The tribunal hearing an appeal under paragraph (1) has the power to—

(a)

quash or vary any decision of the Commissioners, including the power to reduce any penalty to such amount (including nil) as the tribunal thinks appropriate; and

(b)

substitute the tribunal's own decision for any decision quashed on appeal.”

HMRC’s guidance, “Register or renew your money laundering supervision with HMRC” which was in force as at 15 September 2022 contained the following sections:

The version in force as at 7 March 2024, states that “Under this framework there are three steps necessary to calculate the amount of the penalty”.

The first step, entitled “Calculate the starting penalty”, is to calculate how long the business had been trading whilst unregistered where a trading period is defined as being three months or any part thereof. It states that:

“The starting penalty will be calculated as £5,000 for each trading period, with a maximum of 20 trading periods. Therefore, the maximum starting penalty is £100,000”.

The second step, entitled “Gross Profit Cap”, commences stating:

“The next step is to look at the business’s gross profit. The figure required is the most recent annual gross profit as penalties will be capped depending upon the amount of this figure. The purpose of this step is the meet the requirements within Regulation 83(1)(c) MLR 2017 to consider the financial strength of the business.”

The gross profit up to £1million is categorised into six bands with the penalties ranging between £1,500 and £100,000. Whatever band a taxpayer falls within, the penalty cap is 10% of the upper limit of the range.

For businesses with a gross profit of in excess of £1million the maximum penalty is £100,000.

If the penalty cap from the second step is lower than the starting penalty calculated from the first step, then the lower figure should be used.

The third step, entitled “Supplementary charge”, applies where the business has been trading whilst unregistered for more than 12 months and is £200 for each trading period.

The total penalty after the three steps have been completed can be reduced by 50% where an application to register is unprompted.

Once the three steps have been completed, the decision maker is directed to consider whether the penalty is appropriate and that is explained as follows:

“In determining whether the penalty amount is appropriate the decision maker (DM) needs to take into account the remaining factors within Regulation 83. If the DM considers the penalty amount is not appropriate, then they should adjust the amount of the penalty accordingly.”

It refers to other guidance, which has not been produced to us, but which apparently contains the details of what to consider when undertaking the appropriateness review.

If the penalty is paid within 30 days of the penalty notice then an early payment reduction of 25% is applied to the penalty (but not the “penalty administration charge”).

The appellant first registered with HMRC as an EAB on 17 May 2017 and that registration expired on 31 March 2018. The appellant made a new application to register on 26 March 2019. The appellant did not renew the registration timeously in March 2020 but did so on 4 September 2020. Again, there was not a timeous renewal and the next renewal was made on 10 September 2021. No renewal was made in September 2022 and the next application to register was made on 24 November 2023 (amended on 14 December 2023). The most recent and first timeous renewal was made on 4 September 2024.

HMRC’s policy in relation to failures to renew the registration timeously changed with effect from 4 August 2022. A failure to renew the registration led to an automatic cancellation of the registration.

In the appellant’s case, as can be seen, although there had been failures to renew timeously in previous years, the first time that the registration was cancelled was on 30 September 2022 because the appellant had failed to renew the registration. HMRC allow an extra-statutory 14 day period of grace, so the unregistered period commenced on 15 October 2022 and ended on 24 November 2023, ie a period of 1 year, 1 month, 1 week and 2 days. HMRC view that as being five quarterly trading periods.

Prior to the cancellation of the registration, HMRC had issued via the Gateway account three automatically generated reminder notifications to the appellant on 1, 15 and 23 September 2022. Those reminders state that they are reminders to pay the annual fee. They point out that failure to pay in a timely manner may lead to HMRC cancelling the registration and if the business is not registered then “you and / or your business may be subject to civil sanctions, such as a fine, or criminal proceedings if you continue to trade in activities covered by the Regulations.”

At the same time as those reminders were issued three generic reminder emails to look at the Gateway account were also sent to the appellant’s registered business email address. HMRC’s records show that the latter two were opened and read on the day that they were received and the first was opened and read on 3 September 2022. Those read:

“You’ve got a new message from HMRC.

You have a new message from HMRC about your anti-money laundering supervision.

To view it, sign into your HMRC online account using the link you were given when you were invited to register online for supervision.

For security reasons, we have not included a link with this email.

Why you got this email

You gave this contact email address when you signed up for anti-money laundering supervision.

This means we send you an email to let you know you have a new message in your account.

From HMRC Anti-Money Laundering Supervision”.

On 1 October 2022, the cancellation of the registration was intimated to the Gateway account and that notice stated that the cancellation would come into effect 14 days later in order to “allow you to conclude relevant business”.

It points out that a new registration application and payment of the relevant fee was required and, in the absence of that, if the business continued to trade then it may be subject to a fine or criminal sanctions.

The appellant currently employs seven people. In the past, and currently, the appellant states that it relies on diarised reminders for matters such as renewal of registration.

In 2022, the appellant changed their computer records management system and in Mr Mathews’ words “this slipped through the net”.

When renewing or changing the contract with the appellant’s provider of anti-money laundering services (“AML”), in 2023, that provider noted that the appellant was not registered. The appellant immediately submitted a new application as an EAB on 24 November 2023.

On 8 January 2024, Officer Little, who is an Economic Crime Supervision Officer with HMRC, reviewed the application and that was approved the following day.

On 16 January 2024, Officer Little wrote to the appellant explaining that the business had previously been registered for supervision but that application had expired on 30 September 2022 and the new application had not been received until 24 November 2023. Accordingly, it appeared that the business might be liable for a financial penalty for trading whilst unregistered. She said that in order to determine whether a penalty is due and, if so, the value of that penalty, she required to have confirmation of the date when the business commenced trading and the gross profit for the most recent accounting period. She provided a link to the then current HMRC guidance on how they defined gross profit for the purpose of the penalty calculation.

On 9 February 2024, Mr Mathews confirmed that:

On 8 March 2024, Officer Little issued an “Intention to Impose a Penalty” letter in respect of the breach of the Regulations on the basis that the appellant had traded whilst unregistered. She had quantified the penalty in the sum of £13,000 and had added a penalty administration charge in terms of Regulation 102 of the Regulations. She included a penalty calculation schedule which gave further detail and explained how the amounts had been calculated (see paragraph 48 below). She stated that after taking into account all the relevant circumstances, it was considered that the penalty to be charged was appropriate in terms of Regulation 76. She included a link to the Penalties Framework. She responded to the points made by the appellant in the email of 9 February 2024.

In particular, she pointed out that it was the appellant’s responsibility to ensure that it met all legal requirements in the Regulations and that there was extensive guidance available on HMRC’s website. She provided a link to HMRC’s guidance on money laundering supervision which not only explains the civil measures but also the criminal sanctions. She confirmed that prior to the cancellation of registration, three renewal reminder messages had been issued to the Gateway account as was the cancellation notice.

Lastly, she explained that the letter was for information purposes only and to provide the business with an opportunity to make representations; no final decision had been made. She referred the appellant to the Penalties Framework. She also explained that in accordance with Regulation 85, HMRC had a duty to publish details of any penalty.

On 21 March 2024, Rupp and Fraser sent representations to HMRC and their letter is date stamped by HMRC on 25 March 2024. It would appear that it was mislaid internally as, Officer Little, believing that no representations had been received, issued a Penalty Notice in the sum of £13,350 to the appellant on 12 April 2024.

When the officer received the representations on 15 April 2024, she emailed the appellant telling them to disregard the Penalty Notice stating that she would review those representations before making a final decision.

On 7 May 2024, the officer issued an “Amended Penalty Notice” in the same sum. She narrated the representations and responded to them.

In particular she confirmed that:

During a telephone call on 3 June 2024, Mr Rupp again reiterated to the officer the arguments that communications via the Gateway account were not appropriate and that the penalty was not fair or proportionate. In particular it was not fair because it was due to an administrative oversight. The officer explained that if the penalty was paid within 30 days and her decision was not upheld on review then a refund would be made.

The reduced penalty in the sum of £10,100 was paid on 5 June 2024.

The appellant having requested a review of the decision of 7 May 2024, on 8 July 2024 HMRC issued a Review Conclusion letter upholding Officer Little’s decision. That letter recognised that the appellant’s primary argument for seeking a review was that being notified via the Gateway account was unreasonable. The other arguments previously advanced by the appellant were also addressed.

The review officer made it clear that the crux of the matter was that the appellant had traded for a significant period of time whilst it was not registered with HMRC as was required by the Regulations. Quite apart from the guidance stating that reminders would be issued via the Government Gateway account, which should be checked, the appellant should have known that renewal was required annually. The appellant had not provided any evidence that it had taken all reasonable steps and exercised all due diligence to comply with the Regulations.

The review officer confirmed that the penalty had been correctly calculated in terms of the three steps specified in the Penalties Framework. The appellant’s gross profit falls into the fourth band with a penalty of £25,000. The starting penalty for both the first and second steps was £25,000 and the third step was a penalty of £200 for each of the five periods. The total penalty was therefore £26,000 and as the late application to be registered was not prompted by HMRC, a 50% reduction was appropriate. To the resultant figure of £13,000 a non-appealable penalty administration charge of £350 fell to be added giving a total of £13,350.

On 5 August 2024, the appellant appealed to the Tribunal. The Grounds for Appeal read:

“Our client believes that the level of penalty is out of proportion to the failure to re-register for AML, and also that HMRC sent reminders by the Government Gateway which is not the way any of (sic) clients would expect to be contacted, instead of by post or email which is the normal method for businesses

They are also concerned that any publication of this will have a detrimental and financial affect (sic) on their business in the local community.”

The appellant’s argument about the use of the Gateway account, which Mr Rupp described as one of the main points in this appeal, is simply not tenable. Regulation 76(6) makes it explicit that in deciding whether there has been a contravention of a requirement in the Regulations HMRC must consider whether a taxpayer has followed any relevant guidance issued by them.

The guidance on registration and renewal issued by HMRC is relevant and is explicit in its terms (see paragraph 13 above). Had the appellant read that then he would have known about the need to check the Gateway account in the month before renewal was required. The appellant did not follow that guidance.

The fact that HMRC currently issue reminders in a different manner does not alter the fact that the appellant did not access the reminders in the prescribed manner at the relevant time.

Accordingly, we find that HMRC were right to deduce that the appellant had failed to follow the guidance referred to in Regulation 76(6) of the Regulations.

In any event, we accept Mr Gyasi’s argument that HMRC have no statutory obligation to issue reminders and only do so because of the commitment in the guidance. A prudent EAB should have known of the need to renew the registration timeously and to have done so with or without reminders.

Mr Mathews rightly said that the issue of publication would not be pursued because “that ship has sailed”. HMRC had published the details of the appellant, the amount of the penalty and the cause of the breach which was trading whilst unregistered, ie a breach of Regulation 56.

However, for the avoidance of doubt, we confirm that that decision to publish is not an appealable decision in terms of Regulation 99. Having issued a notice of penalty in terms of Regulation 83(3), HMRC do have a mandatory requirement in terms of Regulation 85(1) to publish details on their website.

In the correspondence, and indeed in HMRC’s Skeleton Argument, there is reference to whether the appellant had a reasonable excuse for the failure to re-register. As Mr Gyasi very fairly acknowledged, when we put it to him that that had no place in this penalty regime, the question is, as Regulation 76(4) specifies, whether the appellant had taken all reasonable steps and exercised all due diligence to ensure that there was compliance with the requirement to register. That is not the same as a reasonable excuse.

The appellant has always conceded that the failure was the result of an oversight. The difference between this failure to pay the renewal fee on time and the previous failures is that until 2022 such a failure did not trigger an automatic cancellation of the registration.

Mr Mathews confirmed that he did know that the appellant was required to be registered. The problem was that the appellant did not have adequate processes in place to ensure renewal. The fact is that not only was there a failure to renew by the end of September 2022 but there was a further failure at the end of September 2023. This was not one isolated omission in the period with which we are concerned.

Officer Little said that she had considered whether there should be a penalty or simply a warning letter since she was treating the matter as a first contravention of the Regulations. She explained that the long period of trading whilst unregistered was the primary reason that she had decided that a penalty should be imposed. She had decided not to issue a statement censuring the appellant. She explained how she had calculated the penalty using the Penalties Framework. As we have indicated she was a credible witness.

It was evident that she had taken into account the representations made for the appellant.

She had considered the different sub-paragraphs of Regulation 83(1) and, in fact, to the appellant’s benefit, she had ignored the previous failure to renew timeously (Regulation 83(1)(g)). She had accepted that there was no evidence that the failure to register was intentional (Regulation (83(1)(b)).

She had considered Regulation 83(1)(d), (e) and (h) to be neutral since the only profit gained by the appellant was the savings achieved in not paying the registration fees, there was no known impact on third parties and there were no known potential systemic consequences.

She explained that the supervision that HMRC undertook in relation to registered businesses included a range of internal and external system checks in order to assess the level of risk. HMRC were unable to do that in the period whilst the appellant was not on the register.

We find that:

Accordingly, we find that HMRC were correct to find that a penalty was exigible in respect of that breach of the Regulations.

We also find that the appellant did co-operate with HMRC in that the late application to register was unprompted so the 50% reduction in the penalty was appropriate. The penalty has been correctly calculated in terms of the Penalties Framework.

The remaining issue for the Tribunal, in terms of the Regulations is thus whether the amount of the penalty is “appropriate” which is to say “effective, proportionate and dissuasive” (Regulation 76(8)).

There is no dispute that the penalty is effective and dissuasive.

Although both parties had identified the issue of proportionality we heard very limited argument on the point.

In his Skeleton Argument Mr Gyasi confined himself to stating that:

“The Tribunal is not bound by HMRC’s penalty framework but should have regard to it to ensure justice between the parties, as established in N Bevan Ltd [2016] at paragraph 23. HMRC submits that the penalty is consistent with the framework and proportionate to the breach’s duration and the Appellant’s failure to act despite HMRC’s guidance.

The Respondents therefore disagree with the Appellant’s statement that the Penalty is disproportionate…”.

N Bevan Limited v HMRC [2016] UKFTT 674 (TC) (“Bevan”)dealt with a different type of breach and different Regulations so is not wholly in point. However, Bevan is correct in stating that the Tribunal should pay due regard to HMRC’s policy in the framework “when carrying out our overriding objective of doing justice between the parties”. As Bevan states at paragraph 23, where a breach has been established, the Tribunal has “full power to decide for itself afresh…what level of penalty would be appropriate in light of all of the evidence and circumstances before it” and then either accept HMRC’s figure or depart from it in any respect.

To an extent, the appellant simply argues that the penalty is just not fair. HMRC, as an arm of Government, should be helping smaller businesses and they had relied on HMRC to warn and help them. As a small business the size of the penalty is very large.

Mr Rupp conceded that his knowledge of the law in this field was limited, and we confirmed that in terms of Rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (as amended) (“the Rules”) our obligation was to enable full participation and we would assist in addressing the law. We saw no advantage in asking for written submissions on proportionality.

This is a specialist Tribunal and there is considerable jurisprudence on the subject of proportionality in terms of domestic law.

The starting point is that a penalty would only be seen as disproportionate if it interfered with the appellant’s rights under Article 1 of the First Protocol (“A1P1”) to the European Convention for the Protection of Human Rights and Fundamental Freedoms. The right to protection of property is afforded by A1P1 which provides that:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of the state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

In Edwards v HMRC [2019] UKUT 131 (TCC) (“Edwards”) the Upper Tribunal considered A1P1 and proportionality narrating at paragraphs 78 to 80 and 82 that:

“78.

A1P1 does, as it states clearly, permit the state to enforce laws to secure the payment of taxes or penalties. It is well established however that any interference with property which is justified on those grounds must satisfy the requirement of proportionality, that is that there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised.

79.

The Upper Tribunal has previously considered the question of proportionality in the context of the VAT default surcharge regime in HMRC v Total Technology (Engineering) Limited [2012] UKUT 418 (TCC). In that case the Upper Tribunal referred at [11] to what Simon Brown LJ had said in International Transport Roth GmbH v Home Secretary [2003] QB 728 at [26], setting out the test for assessing proportionality in the context of a scheme which imposed significant penalties on lorry drivers and haulage companies who intentionally or negligently allowed clandestine immigrant entry into the United Kingdom as follows:

“…. it seems to me that ultimately one single question arises for determination by the court: is the scheme not merely harsh but plainly unfair so that, however effectively that unfairness may assist in achieving the social goal, it simply cannot be permitted? In addressing this question I for my part would recognise a wide discretion in the Secretary of State in his task of devising a suitable scheme, and a high degree of deference due by the court to Parliament when it comes to determining its legality. Our law is now replete with dicta at the very highest level commending the courts to show such deference.”

80.

The Upper Tribunal made further observations on Simon Brown LJ’s judgment at [53] to [55] as follows:

“53.

It is, however, important also to read what Simon Brown LJ said about proportionality later in his judgment. He referred at [51] to the speech of Lord Steyn in R (Daly) v SoS for the Home Department [2001] 2 AC 532 at [27], referring to the three-stage test adopted by the Privy Council in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 in relation to determining whether a limitation (by an act, rule or decision) is arbitrary or excessive: “whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective”.

54.

Then, at [52] Simon Brown LJ said this:

“It is further implicit in the concept of proportionality, however, that not merely must the impairment of the individual’s rights be no more than necessary for the attainment of the public policy objective sought, but also that it must not impose an excessive burden on the individual concerned.”

55.

He went on to cite from James at [50]:

“Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim ‘in the public interest’, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised. This latter requirement was expressed in other terms in the Sporrong and Lönnroth judgment by the notion of the ‘fair balance’ that must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The requisite balance will not be found if the person concerned has had to bear ‘an individual and excessive’ burden.”

adding that that principle seemed to him to be of the first importance.”

The Upper Tribunal then stated that:

“82.

In our view, the principles identified in Total Technology are equally applicable in this case. In considering whether the imposition of a significant penalty for failure to file a return in circumstances where no tax is due infringes the taxpayer’s A1P1 rights it is necessary to determine the aim of the penalty regime, and whether the aim is a legitimate aim in the public interest. It is then necessary to determine whether there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised, ascertained by establishing whether there is a fair balance struck between the public interest and the requirements of the protection of individual’s fundamental rights.”

Although we are considering registration and trading whilst unregistered rather than filing a return, that is the approach that we should adopt since the penalty in this instance is undoubtedly significant from the appellant’s perspective.

Lastly, in terms of binding authorities, we observe that in HMRC v Trinity Mirror Group PLC [2015] UKUT 421 (TCC) the Upper Tribunal stated at paragraph 15 that:

“15.

A wide discretion is conferred on the Government and Parliament in devising a suitable scheme for penalties, and a high degree of deference is due by courts and tribunals when determining its legality. The state has a wide margin of appreciation, so wide as to allow the imposition of taxes, contributions and penalties unless the legislature’s assessment of what is necessary is devoid of reasonable foundation: see Gasus Dosier-und Fördertechnik GmbH v Netherlands (1995) 20 EHRR 403, [1995] ECHR 15375/89, ECt HR, at [60]. A court or tribunal must be astute not to substitute its own view of what is fair for the penalty which Parliament has imposed”.

and at paragraphs 62 and 63 that

“62.

In our judgment, it is not appropriate for the courts or tribunals to seek to set any maximum penalty, or range of maximum penalties. That would in effect be to legislate….

63.

The correct approach is to determine whether the penalty goes beyond what is strictly necessary for the objectives pursued by the ... regime, as discussed … and whether the penalty is so disproportionate to the gravity of the infringement that it becomes an obstacle to the achievement of the underlying aim of the [legislation]. To those tests we would add that derived from Roth in the context of a challenge under the Convention to certain penalties, namely “is the scheme not merely harsh but plainly unfair, so that, however effectively that unfairness may assist in achieving the social goal, it simply cannot be permitted?”

What then is the aim of the Regulations? That is self-evident, not only from the nomenclature of the Regulations themselves but also from the regular press publicity emanating from HMRC. They routinely point out that HMRC supervises tens of thousands of businesses across the UK under Money Laundering Regulations and helps these firms protect themselves from criminals who seek to launder cash or finance terrorism. The branch of HMRC which handles Money Laundering is called the Economic Crime Supervision team because that is what they do.

Although it deals with different issues, we observe that the Upper Tribunal in HMRC v Jackson Grundy Limited [2017] UKUT 180 (TCC), when discussing the imposition of penalties under the Money Laundering Regulations 2007, found as fact that:

“6.

Estate agencies are among the businesses required to maintain appropriate procedures pursuant to the Regulations to assist in the combating of money-laundering, investment in real estate being seen both as an investment that those involved in criminal activity might make with ‘dirty money’ and also a possible method of transposing ‘dirty money’ into ‘clean money’ by investing the ‘dirty money’ in real estate which is subsequently disposed of….”.

In terms of Regulation 56(5), when unregistered, an EAB is not entitled to carry on in business with the consequential effect that in carrying on trading there is a further breach of the Regulations. If a business that is required to be registered in terms of the Regulations is not registered and continues to trade then HMRC cannot supervise their activities. That is a risk and a not inconsiderable risk.

It is also self-evident that it is clearly in the public interest to have regulation of businesses handling comparatively large sums of money, of potentially unknown derivation, where those businesses are not otherwise regulated.

Whilst we note that the appellant states that they complied with the money laundering legislation, in terms of completing AML checks etc whilst they were unregistered, that misses the point of the legislation because HMRC, the supervisory authority, were unable to monitor the position and assess the risks.

The heading of the Penalties Framework makes the mischief to which the penalties are directed explicit as it reads: “…financial penalties framework: type 2 (trading whilst unregistered)”. At all times the appellant has focussed on the failure to register and views that as an administrative oversight. HMRC have focussed on the length of time that the appellant traded whilst unregistered. We find that HMRC are correct in taking the view that the gravity of the failure to register is the length of time that the appellant continued to trade whilst unregistered.

We find that the legislative objective in imposing penalties for failures to register as an EAB and then continuing to trade is sufficiently important to justify limiting the fundamental right in A1P1 and the imposition of penalties is rationally connected to that.

HMRC is a creature of statute and its powers are set out in statute either expressly or by implication. The power to impose a penalty is at Regulation 76. Parliament did not choose to stipulate the quantum of any penalty, merely stating that it should be appropriate and therefore effective, proportionate and dissuasive. The Penalties Framework is in the public domain and readily accessible.

The issues for the Tribunal then are whether the Penalties Framework:

The Penalties Framework is the civil sanction but, as can be seen, there are also criminal sanctions and so the penalties are at the lower end of the spectrum. As far as the penalties themselves are concerned there are the six bands and an upper cap. As HMRC’s press publicity demonstrates, there continue to be multiple breaches annually and large sums are collected in penalties.

As we have narrated at paragraph 21 above, the penalty calculation is only the starting point and the decision maker must then consider whether the penalty is appropriate in all the circumstances of the case and adjust the penalty appropriately.

Because there continue to be multiple breaches of the Regulations, to an extent it is arguable that the Penalties Framework, or regime, only partially accomplishes the legislative objective which is (a) registration by all relevant businesses, and (b) in the absence of registration the prohibition on continuing to trade.

We find that the framework has checks and balances and does not do more than is necessary to attempt to accomplish the legislative object.

Of course, the appellant argues that the penalty, albeit reduced to £13,350 and then to £10,100, is an excessive burden. However, we must consider why it is high. The framework states that the starting penalty will be the lower of the figure at steps one and two and of course step three only comes in to play if there is a period of failure in registration for more than a year. The appellant’s gross profit falls into the fourth of the six bands when its financial strength (Regulation 83(3)) is evaluated and that would have been disregarded (thereby reducing the penalty) if the period of non-registration had not been so long.

The appellant is the author of its own misfortune in that to be unregistered for longer than the required annual period of registration is not a minor breach and it is that which has led to the size of the penalty which is not the maximum possible.

We understand that the appellant considers the penalty to be harsh but the appellant’s financial strength, or not, given the decrease in turnover in the period, has been taken into account and the appellant is not at the lower end of the spectrum as it is in the fourth band. When considering the balance to be struck between the demands of the general interest of the community and the appellant itself we do not find this penalty to be “an individual and excessive burden”.

Lastly, is the Penalties Framework so unfair that it simply cannot be permitted? We have already indicated that it contains a number of checks and balances. There is considerable flexibility.

It is a very high threshold to say that it simply cannot be permitted. Looking at the Penalties Framework as a whole we cannot find that it is so unfair that it cannot be permitted.

In summary, we find that the Penalties Framework is proportionate and that Officer Little applied those principles when issuing the penalty. In all the circumstances of this case, we find that the penalty is appropriate within the meaning of that word in the legislation.

For all these reasons we dismiss the appeal and uphold the penalty.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.