Late tax return appeal tactic.

Worried about sending a late tax return after an appeal.

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We have appealed against late filing penalties for 2014/15, on the basis that the taxpayer did not receive a notice to file or the penalty notices later issued, not because they weren't issued but because the taxpayer no longer had access to the property. We believe the appeal is legitimate. HMRC have received the appeal but state that it cannot be considered until the 2015 tax return is submitted. We can do this and there won't be a tax liability but we recall some time ago, reading on this site, that if the tax return was submitted, HMRC would contend that the appeal could no longer be accepted because the return was submitted late!

Replies (20)

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Stepurhan
By stepurhan
08th Feb 2017 14:25

The taxpayer did not receive a notice to file, but should they have been aware of a need to file anyway? (i.e. were they in receipt of some form of reportable taxable income)

Because, if not, you should be asking for the return to be withdrawn instead. If the return is withdrawn, then the penalties vanish with it.

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By brian-scholar
08th Feb 2017 15:23

Thank you stepurhan. He only received £4,600 of directors remuneration during the year, about which we informed HMRC as part of our appeal and we did ask them to withdraw the need to file. They haven't done that, 0nly said that they will only consider an appeal when the tax return is filed.

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By tonycourt
08th Feb 2017 16:31

I'm afraid I have to disagree with the post by stephurhan.

If your client did not receive a notice to file there is no need for an appeal against the penalty. A late filing penalty can't apply unless your client has received a notice to file.

Whether your client should have notified HMRC of changeability is a separate matter for which a different penalty regime applies (no liability = no penalty in fact it means there's no requirement to notify chargeability)

For the same reason your client can't ask for the return to be cancelled because there was no requirement to file in the first place.

If you feel you have good evidence to back up the clients claim that the notice to file was not received you should be telling HMRC politely that a penalty is not appropriate and explaining why.

However, discretion being the better part of valour if you want you can persist with the tack of making an appeal or asking HMRC to withdraw the assessment.

Because your appeal is late (or appears to be) HMRC can refuse to accept it. You can appeal the refusal to the FTT or you can go along with HMRC's suggestion and submit the return so that it will consider it. Trouble is that if your client hasn't got a reasonable excuse he'll be stuffed.

I do agree with stepurhan that (assuming you're not going to pursue the lack of notice to file route) that you should ask HMRC to withdraw the return. In that case you should not submit the return, but instead request withdrawal by 5 April 2017. Based on the information given there seems to be a good chance of success.

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By Mr_awol
08th Feb 2017 16:01

Don't let them trick you into submitting the Returns. They tried to tell me to do that recently too. Notices to file had been sent to an address that the taxpayer had moved away from two years previously.

I told them to stick it and refused to file the Returns. Instead I wrote to appeal the penalties on the basis that no valid notice to file had been served. Naturally they allowed the appeal, cancelled the penalties, and as an added bonus wiped clean almost £1,000 of historical tax that would genuinely have been payable had they sent the correct notices to the correct address.

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By SteveHa
08th Feb 2017 16:08

Were HMRC notified of the change of address at the time of the change?

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Replying to SteveHa:
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By tonycourt
08th Feb 2017 16:16

I think that's only relevant if they sent the notice to file to the new address. The might then argue the toss over whether the notice to file was received.

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Replying to tonycourt:
Stepurhan
By stepurhan
08th Feb 2017 17:07

tonycourt wrote:

I think that's only relevant if they sent the notice to file to the new address. The might then argue the toss over whether the notice to file was received.

So are you saying that taxpayers can avoid filing tax returns by moving and not informing HMRC? Isn't it the taxpayers responsibility to inform HMRC of a change of address? EDIT As Mr_awol says, if they weren't in the tax return system at all historically, that would be different.

It seems like you are casually dismissing how easy proving not receiving the notice to file will be. If getting penalties overturned was as simple as just saying "didn't get the notice" then no-one would ever have late penalties.

I am as ready to appeal penalties as the next accountant. I just don't see "didn't receive the notice" on its own as a strong argument. It should at least be backed up by the client having no reason to think they needed to complete a return (hence my original response). Is there case law/tribunal cases that prove success with the lack of notice argument alone?

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Replying to stepurhan:
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By tonycourt
08th Feb 2017 17:37

It's not my view - it's the law.

You can't appeal against a penalty if the penalty doesn't exist, and one can't exist if you haven't been asked to complete a tax return, and legally you aren't considered as having been asked to submit a tax return unless you receive a request to do so. Think about the alternative - HMRC being entitled to charge late filing penalties for return they never requested, but later decide they ought to have done.

You will note that I emphasised that if the client were to pursue this route they should have good evidence to back up their argument. All you need to do is convince HMRC, but we know how sceptical they can be (and largely I don't blame them). Proving delivery of a notice to file a tax return has always been of major importance especially to HMRC collection departments.

You wouldn't appeal against a non-existent assessment (in fact you can't becuae there's nothing to appeal against) so why would you appeal against a late filing penalty for a return which HMRC didn't request (in fact you can't because there's nothing to appeal against).

This is basic stuff.

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Replying to tonycourt:
Stepurhan
By stepurhan
08th Feb 2017 18:15

Traditionally, when one states it is the law, one provides a link to the statute stating the same.

But accepting that anyway, you still haven't addressed my basic point, which is how you prove you haven't received a notice to file. Because the legal position is only relevant if you can prove that, or at least cast sufficient reasonable doubt to satisfy a court.

The alternative you suggest (of HMRC being entitled to charge penalties freely) is ludicrous. The ability for HMRC to charge late filing penalties is still predicated on them at least sending notices to file out, and being able to prove they have done so. If they later decide they ought to have requested a return, their right to charge penalties only arises at whatever later date they send notices out. You suggestion implies that HMRC would become "entitled" to charge penalties by simply claiming they sent notices out earlier that the taxpayer didn't receive. The law does not generally entitle an organisation to do something based on falsified information.

But at this point you are not seeking to satisfy a court anyway. You are seeking to get HMRC to exercise their discretion to agree to overturn the penalties. They are working on the basis that they HAVE delivered a notice, and hence there is a penalty to appeal against. Not relying solely on proving a negative (failure to receive a notice) but providing other reasoning makes them exercising their discretion the easy option for them.

You might want to take it to court (and risk legal costs on top because you can't prove a negative) but I prefer to seek to get HMRC to exercise their discretion without going that far.

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Replying to stepurhan:
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By tonycourt
08th Feb 2017 20:15

S.8 TMA

This article might help you: http://blogs.mazars.com/letstalktax/2016/03/voluntary-tax-return-not-sub...

And for a wider discussion on the consequences of the lack of a valid s.8 notice to file this excellent article by Keith Gordon should bring you up to speed

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Replying to tonycourt:
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By tonycourt
08th Feb 2017 20:22

The first paragraph of this case report might help too - HMRC issued a fresh notice to file. Why? Because without it there's no requirement for the taxpayer to file and so not chance of a penalty, enquiry, determination.........

http://www.ashdownhurrey.co.uk/index.php/component/newsfeed/?command=vie...

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Replying to tonycourt:
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By thehaggis
10th Feb 2017 16:07

Try s115 TMA 1970 and s7 Interpretation Act 1978.
If the notice was posted to his usual or last known address, it is served unless the contrary is proven. His failure to collect his mail from that address does not mean that the notice wasn't served.

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Replying to SteveHa:
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By Mr_awol
08th Feb 2017 16:40

If the taxpayer wasn't 'in the system' at the time (like mine wasn't) then they wont have thought to, or needed to, notify HMRC.

How many employees who've never submitted a Tax Return have ever notified HMRC when they moved?

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By brian-scholar
08th Feb 2017 16:27

Thank you all, your help is much appreciated.

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Worm
By TheLambtonWorm
08th Feb 2017 23:41

Have i totally misread the OP here...

The way I read it, is that the taxpayer HAS been issued with a notice to file, but this was posted to the wrong address, and the OP wants to know if it can be successfully appealed on that basis.

My answer would be "maybe, it's worth a try".

And yes, HMRC will certainly require the return to be submitted before any appeal is considered.

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Replying to TheLambtonWorm:
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By tonycourt
08th Feb 2017 23:53

I think you have misread the OP - it says "on the basis that the taxpayer did not receive a notice to file or the penalty notices later issued, not because they weren't issued but because the taxpayer no longer had access to the property". I take that to mean that the client "did not receive" but has accepted that it was issued.

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By User deleted
09th Feb 2017 09:05

I had a client who set up a sole trade in 14/15 and registered for SA.

Only traded for 2 months and made a loss, but didn't file any Returns and came to us with £1300 of penalties.

We helped draft an appeal on their behalf but HMRC would not accept without a Return being filed.

We then submitted a paper Return with an appeal and the penalties were cancelled.

Not exactly your scenario, as we had accepted that a notice to file was received, and by submitting an appeal you could in theory be accepting that your client received theirs, but yes HMRC wouldn't accept the appeal until a Return was submitted.

Were we lucky to have the penalties cancelled? Extremely.

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By SteveHa
09th Feb 2017 10:30

S.7 of the Interpretation Act 1978 says "“Where an Act authorises or requires any document to be served by post (whether the expression “serve” or the expression “give” or “send” or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post.”

This was sited in Revell v HMRC and deemed to have failed because HMRC had been notified (on P60 in that case) of an updated address, having sent a notice to file to a previous address.

However, the suggestion is that if HMRC had not been notified of an updated address, then the notice would have been valid.

As such, I repeat the question, were HMRC notified, at the time of the change of address, or at least prior to issue of the notice to file, of the new address?

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Replying to SteveHa:
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By tonycourt
09th Feb 2017 12:02

Indeed, you're absolutely right.

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By Matrix
09th Feb 2017 11:16

I have successfully appealed penalties where HMRC were not advised of the new address (although all clients were employed so had P60s but I did not need to use that argument).

Just keep calling the agent helpline until you speak to someone helpful or ask to speak to the technical team to at least try to get the notice withdrawn if there is no tax.

I have never done this since my clients all earned >£100k so HMRC would not have taken them out of SA.

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