Sellathamby Sivarajah v The Commissioners for HMRC

Mr Sivarajah appealed against a penalty charged under Regulation 76 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“the Regulations”).

For the reasons we give below, we have decided to dismiss the appeal and confirm the penalty.

We had a 138-page hearing bundle which included the notice of appeal, Mr Sivarajah’s grounds of appeal, HMRC’s statement of case, correspondence between Mr Sivarajah and HMRC, HMRC’s review conclusion letter and extracts from the Regulations. This bundle also included an extract from HMRC’s published guidance in the Economic Crime Supervision Handbook at ECSH82795, headed “Sanctions for non-compliance: financial penalties: financial penalties framework: type 2 (trading whilst unregistered)”. In this decision, we refer to this section of HMRC’s guidance as the “Penalties Framework”. We also had HMRC’s skeleton argument, together with a separate 31-page authorities bundle containing a further extract from the Regulations, and a relevant case.

We had two bundles from Mr Sivarajah. His 54-page bundle included his grounds of appeal, further correspondence between Mr Sivarajah and HMRC, a copy of a Financial Times article about problems with HMRC’s telephone helplines, further extracts from HMRC’s online guidance, and documentation from the Tribunal. His 21-page bundle set out his case in more detail, and included an introduction and background, further extracts from HMRC’s published guidance, an expanded version of his grounds of appeal, his reasons for disputing HMRC’s position, and his conclusion that the penalty should be cancelled.

Mr Sivarajah attended the hearing, represented himself, gave evidence and was cross examined by Mr Borlace. We also had evidence from the HMRC officer who issued the penalty, Jonathan Renton. We had a witness statement from Officer Renton which stood as his evidence in chief. Officer Renton attended the hearing and was cross examined by Mr Sivarajah. We found both witnesses to be straightforward and truthful, and we accepted their evidence in full.

Mr Sivarajah is a qualified accountant and a member and fellow of the Association of Chartered Certified Accountants (“ACCA”). He did not, at any relevant time, hold a practising certificate issued by ACCA.

He was employed until 31 August 2021, then was made redundant.

On 1 April 2022, he started working on a self-employed basis, providing bookkeeping services to a company.

Before he became self-employed he researched his responsibilities on HMRC’s website. This research led him to HMRC’s guidance on the duties of those who are self-employed, such as the need to register for self-assessment and obtain a Unique Tax Reference Number (“UTR”).

He also discovered some HMRC guidance on anti-money laundering registration. He provided us, in his 54-page bundle, with a copy of the guidance that he found. We accept his oral evidence that he found this guidance before or around April 2022, when he began working on a self-employed basis. We reproduce the relevant sections of this guidance below:

Mr Sivarajah’s research also took him to some HMRC guidance that referred to accountancy service providers not needing to register unless their annual turnover exceeded £30,000. We were not provided with a copy of this guidance, but Mr Sivarajah now accepts that this threshold only applied to businesses providing accounting services as a virtual assistant, and so did not apply to him.

As part of Mr Sivarajah’s research into his responsibilities upon becoming self-employed, he made enquiries of some chartered accountants who were the auditors of the business he had worked for previously, before he was made redundant. These people told him he would need to register as a self-employed person, but did not tell him he would have to register for money laundering supervision.

As a result of his conversations with these accountants and his research on HMRC’s website, Mr Sivarajah formed the view that he would not be required to register with HMRC for money laundering supervision purposes until his turnover exceeded £30,000. At some point between 1 April 2022 and 15 November 2022, Mr Sivarajah became aware that his annual earnings would exceed £30,000. Therefore, on 15 November 2022, Mr Sivarajah applied to be registered with HMRC as an accountancy service provider. His application stated that his business activities began on 1 April 2022.

On 28 February 2023, Officer Renton emailed Mr Sivarajah, saying that it appeared he was liable to a penalty for trading while unregistered, and requesting further information. Mr Sivarajah provided the requested information, which included a statement that his earnings that tax year would be £30,000 or more.

On the following day (1 March 2023), Officer Renton sent Mr Sivarajah a letter informing him of his intention to impose a penalty. In the letter, Officer Renton informed Mr Sivarajah that if he disagreed, he could make representations.

On 23 March 2023, Mr Sivarajah responded to this invitation by sending Officer Renton a letter making representations. This letter included the following paragraph:

Officer Renton wrote again to Mr Sivarajah on 27 April 2023, informing him that he had considered his representations, but had nonetheless decided to impose a penalty. Mr Sivarajah had traded while unregistered, contrary to Regulation 56(5), and the penalty was proportionate to the nature and extent of the breach. The letter stated that the amount of the penalty was £2,850, explained the basis on which that amount had been calculated, and informed Mr Sivarajah that the penalty would be reduced to £2,225 if it was paid by 27 May 2023. Officer Renton also offered Mr Sivarajah a review of his decision.

Officer Renton calculated the penalty by following the steps set out in the Penalties Framework. The first step is to calculate the “starting penalty”, which is £5,000 for each three-month period, or part thereof, in which the business had traded unregistered. Mr Sivarajah was trading unregistered for seven and a half months, so his starting penalty was £15,000.

The second step is to consider the gross profits of the business. The Penalties Framework explains that the purpose of this step is to ensure:

Under this second step, Officer Renton noted the information from Mr Sivarajah that his earnings that year would exceed £30,000. This placed him in the £15,001-£50,000 bracket within the Penalties Framework. The Framework provides that a business with profits in this bracket has a maximum penalty of £5,000.

There is a third step in the Penalties Framework that does not apply to Mr Sivarajah because he was not trading unregistered for more than 12 months.

The Penalties Framework then applies a 50% reduction for any business applying to register without being prompted. This applied to Mr Sivarajah. His penalty was therefore set at £5,000 with a 50% reduction, which is £2,500. A further reduction of 25% applied if he paid within 30 days, bringing the penalty down to £1,875. An administration charge of £350 was added, bringing the total to £2,850, or £2,225 if he paid within 30 days.

Officer Renton’s letter of 27 April 2023 was sent through the post, rather than by email, and Mr Sivarajah did not receive it. He first became aware of it through subsequent email communications with Officer Renton in June 2023. Mr Sivarajah sent further representations on 27 July 2023, and on 5 October 2023 he wrote to HMRC’s Solicitor’s Office to request a review of his case.

Although this was outside the normal time limits, HMRC accepted the request for a review. On 10 November 2023, the reviewing officer (Mr Howard) wrote to Mr Sivarajah, upholding the decision to impose a penalty.

On 8 March 2024, HMRC wrote to Mr Sivarajah informing him that they had decided to publish details of his penalty on the gov.uk website. This was in accordance with Regulation 85, under which HMRC have a duty to publish details of penalties imposed under the Regulations, unless an exception applies.

Mr Sivarajah accepts that he should have been registered with HMRC from 1 April 2022 as an accountancy service provider. This is the effect of Regulation 56(5), which relevantly provides as follows:

HMRC is the relevant registering authority for this purpose.

Regulation 76 provides, so far as relevant:

Regulation 83 relevantly provides as follows:

Regulation 85 provides, so far as relevant:

Regulation 99(1)(e) provides a right of appeal to the Tribunal against any decision taken under regulation 76 to impose a penalty or publish a censuring statement.

Regulation 99(4) provides:

Mr Sivarajah’s grounds of appeal, as set out in his notice of appeal to the Tribunal lodged on 19 March 2024, were as follows.

We note that Mr Sivarajah’s appeal was late, but is made with the permission of the Tribunal given in a decision released to the parties on 16 April 2025.

Mr Sivarajah’s activities providing bookkeeping services from 1 April 2022 meant that he was carrying on business as an “external accountant” for the purposes of Regulation 55(3)(c) (as defined in Regulation 11(c)). HMRC have maintained a register of external accountants, as they are empowered to do under Regulation 55(3), since January 2009. Mr Sivarajah was not included on that register until 15 November 2022. As a result, for the period from 1 April 2022 until 15 November 2022 he contravened the registration requirement set out in Regulation 56(5). Mr Sivarajah does not dispute that he should have been registered in this period.

We find that HMRC were satisfied that Mr Sivarajah had contravened Regulation 56(5). HMRC were therefore entitled to impose a penalty on Mr Sivarajah under Regulation 76(2)(a), of such amount as they considered appropriate.

The Regulations place a number of obligations on HMRC when they are deciding to impose a penalty. One is that they must consider whether the person followed any relevant guidance issued by HMRC “and approved by the Treasury”.

We do not know whether any of HMRC’s guidance was approved by the Treasury for this purpose, but in any event we find that HMRC did consider whether Mr Sivarajah had followed their guidance. Officer Renton referred, in his letter imposing the penalty, to Mr Sivarajah’s representation that he had “skimmed” HMRC guidance, and stated that HMRC’s website provides extensive information on money laundering. The reviewing officer, Mr Howard, also referred to the “comprehensive” guidance on HMRC’s website regarding money laundering, finding that the existence of this information meant that Mr Sivarajah had not taken all reasonable steps to ensure he had complied with the requirements.

Another requirement on HMRC is that they must consider the penalty to be appropriate. Appropriate is defined for this purpose as effective, proportionate and dissuasive.

On the question of whether the penalty was effective and dissuasive, Mr Sivarajah submitted that it was not dissuasive on him, because he has never committed any offence or failed to observe any laws or regulations, and would never again be non-compliant.

We note that the rules simply require the penalty to be dissuasive. They do not specify that it must be dissuasive on the person who has received the penalty. We consider that dissuasive should be read more broadly and can include being dissuasive on businesses generally, in the sense that knowing that penalties can and will be imposed will dissuade businesses from contravening the rules in the first place. The fact that Mr Sivarajah has chosen to contest the penalty before the Tribunal shows the strength of his views on the matter, indicating that this is an outcome other businesses would want to avoid. We therefore do not accept that the penalty was not effective and dissuasive.

On the question of whether the penalty was proportionate, Mr Sivarajah submitted that for a business with annual profits of £30,000, a penalty of £2,850 is more than a month’s income, and as such is disproportionate.

In this context, it is relevant to consider the purpose of the Regulations. The predecessor rules to the Regulations were the Money Laundering Regulations 2007 (“MLR 2007”), which were introduced to implement EU Directive 2005/60/EC (the “Money Laundering Directive”). The Upper Tribunal considered the MLR 2007 in Martin t/a Coppergate International [2020] UKUT 159 (TCC), finding at [29] that their purpose was to “implement the Money Laundering Regulations and to counteract money laundering”. The Upper Tribunal commented on the background to the MLR 2007 at [25] as follows:

This passage is a reminder of the importance of effective rules to counter money laundering, and what these rules are designed to achieve. We accept that, for Mr Sivarajah, the amount of the penalty was not trivial. However, that does not mean it was not proportionate. It was calculated in line with the Penalties Framework, under which his “starting penalty” of £15,000 was reduced to reflect the level of his profit. HMRC have therefore given consideration, through the Penalties Framework, to what level of penalty is appropriate for different sizes of business.

Taking all these factors into account, we consider that the penalty imposed on Mr Sivarajah was proportionate.

A further requirement placed on HMRC when imposing a penalty is to take into account all relevant circumstances, including where appropriate the factors listed in Regulation 83(1). Officer Renton’s evidence was that he had taken account of all these factors, and he set out in his witness statement details of the matters he had considered under each heading.

Mr Sivarajah took issue with Officer Renton’s evidence in relation to Regulation 83(1)(c), which requires HMRC to take account of Mr Sivarajah’s financial strength. Under this heading, Officer Renton stated that, as Mr Sivarajah’s estimated earnings are £30,000, he clearly had the means to pay the penalty.

We agree with Mr Sivarajah that his total earnings do not provide HMRC with a full picture of his means to pay. However, the Regulations do not refer to “means to pay”, but “financial strength”. We do not consider that this requires HMRC to conduct a full assessment of Mr Sivarajah’s assets and liabilities. As we have already found, the Penalties Framework takes account of different levels of profit, and Mr Sivarajah’s penalty was reduced from £15,000 as a result. We therefore consider that HMRC did consider Mr Sivarajah’s financial strength.

Officer Renton pointed out that HMRC can put arrangements in place for businesses and individuals who experience difficulties paying amounts that they owe, but these arrangements are not matters for this Tribunal.

The main ground on which Mr Sivarajah challenged the penalty was under Regulation 76(4), which has the effect that HMRC must not impose a penalty for contravention of a relevant requirement if HMRC are satisfied that Mr Sivarajah took all reasonable steps and exercised all due diligence to ensure that the requirement would be complied with. The details of his submissions under this heading are set out in his grounds of appeal at points 1.1 to 1.5, reproduced above.

We note that taking “all reasonable steps” and exercising “all due diligence” sets a high bar. The steps Mr Sivarajah took to establish his obligations included conducting research on HMRC’s website into the obligations applying to people who are self-employed, and speaking to chartered accountants. Notably, these steps did not include contacting HMRC, or ACCA.

We accepted Mr Sivarajah’s evidence that he has had bad experiences in the past when attempting to contact HMRC using their telephone helplines. He described being on hold for long periods of time, sometimes over an hour, after which he would sometimes be cut off, or would speak to someone who was unable to help. We accept that he had these previous experiences.

However, in the circumstances of this case, we are unable to accept that he took all reasonable steps and exercised all due diligence to establish his obligations, without having attempted to contact either HMRC or his professional body, ACCA.

When he was conducting his initial research into his obligations, Mr Sivarajah found the HMRC guidance about money laundering reproduced at paragraph [10] above. This guidance indicates that an accountant must register either with a supervisory body (such as ACCA) or with HMRC, and states “You should check with your professional body about what to do if you believe you should be supervised for compliance with the regulations”. However, Mr Sivarajah did not check with ACCA. Had he done so, he would have discovered what he in fact found out only once HMRC had imposed the penalty, namely that being supervised by ACCA for money laundering purposes requires ACCA to have issued the relevant person or business with a practising certificate, not merely to be a member of that body. Nor did he check with HMRC.

As we have noted above, Mr Sivarajah accepted in the representations he made on 23 March 2023 that he was not clear whether he was required to register with HMRC, given that he was a member of ACCA. The fact that he was unclear on this question meant that he should, acting reasonably, have taken steps to resolve this uncertainty. Even taking account of his previous bad experiences with contacting HMRC’s telephone helplines, we consider that “all reasonable steps” does require him to have at least made the attempt. He could also have contacted ACCA, and did not explain why he did not do this.

Mr Sivarajah emphasised to us that his research focused on the consequences of self-employment, and that HMRC’s online guidance on self-employment does not mention money laundering. However, he did locate the guidance reproduced at paragraph [10], and he was aware there was a possibility that he might need to register (this is made explicit in his representations on 23 March 2023). This awareness should have led him to conduct further research on the issue of money laundering supervision.

His discovery of the £30,000 threshold also indicates that his research led him into areas of HMRC’s website dealing with money laundering. The fact that he “skimmed” (according to his description in his representations on 23 March 2023) the guidance containing the reference to a £30,000 threshold, but reached the wrong conclusion as to when that threshold applied, is a further indication that he failed to take all reasonable steps and to exercise all due diligence.

We also cannot accept that his conversations with chartered accountants meant he had discharged his obligations in this regard.

Mr Sivarajah submitted that the requirement to register is not widely known among accountants. That may or may not be the case. But the point remains that Mr Sivarajah, as he accepted, needed to register with HMRC but did not do so, and Regulation 76(4) prevents a penalty being imposed only if he had taken all reasonable steps and exercised all due diligence to ensure that the requirement was complied with.

Mr Borlace made two additional submissions relating to the approach we should take to Regulation 76(4) and the requirement for Mr Sivarajah to take all reasonable steps and exercise all due diligence to ensure compliance with the requirement to register. In brief, these were:

In the event, we agree with HMRC that Mr Sivarajah did not take all reasonable steps and exercise all due diligence to ensure the requirement to register was complied with. It is therefore not necessary for us to consider these additional submissions.

We now address some additional arguments raised by Mr Sivarajah in his grounds of appeal (including the expanded version of his grounds of appeal in his 21-page bundle).

It was apparent from his submissions that much of the focus of his concern was not on the penalty itself, but on HMRC’s decision to publish his details as someone on whom a penalty has been imposed.

Regulation 85 provides that HMRC “must” publish certain information about penalty notices on their website. There are circumstances where publication must be deferred or anonymised, including where HMRC consider publication of a person’s identity to be disproportionate, but the right to appeal to the Tribunal does not extend to HMRC’s decision to publish information (or not) under Regulation 85. It is therefore not within our powers to decide whether HMRC were right to publish Mr Sivarajah’s details. Instead, our task is to decide whether they were right to impose the penalty in the first place, and we have decided that they were.

Mr Sivarajah submitted that he was a law-abiding citizen who had made an untypical error, and that it was not fair to treat him like a criminal. He told us that the publication of his details had tarnished his reputation, and made it harder for him to gain employment. He submitted that his mistake was unintentional, and pointed out that he applied voluntarily to be registered as soon as he realised he was required to do so. He further submitted that he had not benefited financially from his failure to register.

We would repeat that we do not have jurisdiction over HMRC’s decision to publish his details, and would also point out that HMRC have not published his name as someone who is guilty of any crime, but as someone who has received a penalty for failing to apply for registration at the right time. Unfortunately for Mr Sivarajah, lack of intention is not a defence to a penalty, and nor is the absence of a financial benefit. As for his applying to register voluntarily when he realised his mistake, HMRC gave him credit for this by reducing his penalty by 50%.

A further argument raised by Mr Sivarajah was that HMRC had failed to follow their own guidance. His grounds of appeal included an extract from some online guidance published by HMRC about the factors they will take into account when issuing financial penalties under the Regulations. These include that HMRC will take into account past behaviour, and will be sensitive to the circumstances and behaviours in each case. Mr Sivarajah argued that in his case, HMRC had simply imposed the penalty, without considering his particular circumstances and behaviours.

We would accept that a rigid application of the three steps in the Penalties Framework, without further consideration, will not be sufficient to ensure that a penalty is appropriate in every case. We note that, within the Penalties Framework itself, HMRC officers are instructed that once they have arrived at a penalty figure, they must consider whether the penalty is appropriate, taking account of all the relevant factors of the case.

It was Officer Renton’s evidence, which we accept, that his conclusion in Mr Sivarajah’s case was that the penalty was appropriate, given the length of time for which he had traded unregistered, the size of his estimated earnings, and the reduction for a voluntary disclosure. HMRC’s review conclusion letter demonstrated that the reviewing officer had also given careful consideration to the representations made by Mr Sivarajah, but remained of the view that the penalty was appropriate.

As regards Mr Sivarajah’s previous good behaviour, while HMRC are required (under Regulation 83(1)(g)) to consider any previous contraventions or failures, this does not mean that an absence of previous contraventions or failures will result in no penalty being imposed. We agree with HMRC that the factors in favour of imposing a penalty (the length of time for which he was trading unregistered and the steps he should have taken to prevent the failure occurring) outweigh the fact that this was a first-time contravention, and that a penalty therefore remains appropriate.

In our view therefore, HMRC met the requirement to consider whether the penalty imposed on Mr Sivarajah was appropriate. In making this assessment, they took into account the circumstances and behaviours Mr Sivarajah had brought to their attention in his representations.

We note as a final point that Mr Sivarajah submitted that he knew of other cases where HMRC had waived a penalty, and so had acted inconsistently. This argument does not assist Mr Sivarajah as we can only consider the facts and circumstances of the case before us.

For all the reasons we have given, we dismiss Mr Sivarajah’s appeal and confirm 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.