Summary

It had been entirely appropriate for the Revenue to impose a penalty on a high value dealer for a failure to meet registration requirements in the Money Laundering Regulations 2007 reg.10, even though the trader operated a non-cash policy but had made exceptions for three good customers. High value traders had to make an application in good time ahead of undertaking a high-value cash transaction, even it if was a one-off transaction.

Facts

The appellant (J), a "high value dealer" as defined in the Money Laundering Regulations 2007 reg.2, appealed against a penalty imposed by the respondent commissioners for a failure to meet the registration requirement in reg.10. J was a small business dealing in high quality second hand cars. While checking J's books in December 2005 for cash receipts, the commissioners had identified three cash transactions over the sterling equivalent of the €15,000 limit for registration, which had taken place after April 1, 2004, the start date of the Regulations. J had a policy of never accepting cash, but had made a goodwill exception for three good customers. After the discovery, the commissioners had written to J requiring it to register immediately and requiring it to backdate its registration to April 1, 2004 and warning that a penalty would become payable for non-compliance. Having received no reply from J three weeks later, the commissioners imposed a penalty of £5,000 and required a payment for the annual registration fee for two years. The penalty was reduced to £1,000 on appeal, but the matter came before the tribunal when the commissioners refused to reduce the penalty further or offset the retrospective fees. There was no issue concerning any concealed cash transactions and the penalty had been imposed on the sole ground of a failure to register until the penalty notice was issued. J submitted that in light of its "no-cash policy", it had been unaware of the registration limit. J complained that it should not have to pay both a fee for a period that had fully expired and a penalty for the failure. The commissioners argued that they were entitled to the fee for registration from the time when J should, in its view, have registered, and that they were entitled to decide a level of penalty for non-registration that did not take account of subsequent retrospective registration and consequent fee payment.

Held

(1) It had been entirely appropriate for the commissioners to impose a penalty in the instant case. A high value trader had to make an application in good time ahead of undertaking a high-value transaction; J had failed to apply its own no-cash policy and had therefore been under a duty to register before accepting the cash. Registration was linked to the start of such an undertaking, not to the commencement of the Regulations. Not only had J failed to notice the obligation to register, even for the occasional cash transaction, but it had not responded promptly to the commissioners' letter. It was not necessary to examine in any detail the general efforts made by the Revenue to publicise the Regulations. It was unlikely that J had not received warnings in VAT notes issued to all traders with VAT returns, but even if it had failed to receive notification of the registration requirement, it was nevertheless an absolute requirement and the presumption that everyone was expected to know the law had to be applied. The absence of knowledge was relevant only to the level of penalty. Regulation 14(2) did not however, as a matter of national law, authorise the commissioners to collect a fee retrospectively and at the same time impose a penalty to the extent that both a full fee and a full penalty were being paid. The penalty was an administrative penalty not a criminal penalty for the purposes of the human rights legislation and was a civil penalty in domestic law. In the absence of any precedent, and exercising discretion as to the appropriate penalty for the particular circumstances of the instant case, the sum of £500 was appropriate. Three minor infractions of the Regulations were involved, all of which were clearly recorded and all being transactions with known customers. They had occurred as authorised exceptions to a general policy not to accept cash and against a background of full compliance with other tax obligations. Non-compliance had not been deliberate and it was not a case for imposing a penalty by way of example or punishment. (2) The tribunal was troubled by the absence of any specific mention of the instant penalty and the related proceedings in the Value Added Tax Tribunals Rules 1986. None of the provisions in those Rules was directly applicable to the instant situation. The Rules would probably be replaced shortly. The tribunal was also troubled about the form in which the right of appeal was given to appellants. The right of appeal remained subject to the Value Added Tax Act 1994 s.84(2), which was factually irrelevant to an appeal under the Regulations.

Appeal allowed in part