HMRC penalties

HMRC penalties

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The background, client is a director of a company and 2014 SATR was submitted sufficiently late that fixed filing and daily penalties totalling the full £1,200 have been charged. Both 2014 and 2015 SATRs have now been submitted, and no liability arises from either. I appealed the daily penalties (not the fixed £100 late filing penalty), on the grounds that the daily penalties are disproportionate, and highlighted that HMRC had only issued a Return (creating an obligation under S8) on the basis of an endemic misunderstanding of S7. HMRC refused the appeal on the basis that ".... you are required to submit a tax return, as you are a company director".

I requested an independent review, citing the relevant parts of S7 detailing why a Return should not have been issued and fully demonstrating HMRC's misunderstanding of S7. They refused on the basis that the S8 obligation had been created by the issue of a notice to file, and refused to engage on the proportionality. I responded requesting that penalties be stayed using powers under S102, which HMRC have refused to comment on, indicating that an appeal route exists to the tribunal.

In the case of HMRC v Anthony Bosher, the UT ruled that the FTT has no jurisdiction over the amount of penalties, which leaves the only appeal route open to our client to be to the UT. Even if we dispense with the lawyer and represent our client directly, the total fee cost of appeal to the UT is likely to exceed any tax saving, and does not come with any guarantee of success.

In a bid to head this off, I also highlighted to HMRC the contents of their statement to the Telegraph that they do want want to penalise "ordinary people who are trying to do the right thing", though it appears HMRC do not actually believe this.

Can anyone think of any further options?

Replies (14)

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By cheekychappy
07th Dec 2015 11:52

Have you written to your local MP?

I've had some success with this in the past.

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By SteveHa
07th Dec 2015 12:13

It's a fine idea. The MP representing the constituency that our client lives in is a chap goes by the name of George Osborne. Anyone got any ideas about him and how sympathetic he might be to the plight of a small businessman?

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Replying to Red Volvo:
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By redboam
07th Dec 2015 12:35

@SteLacca

Never heard of him.

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By HeavyMetalMike
07th Dec 2015 12:14

See my sad story on the same basis,but just for 2014 and just £1,000. (my query)

HMRC refused my appeal.

The internal review did similar.

What I found particularly gauling was that the penalty went up past three months during which I was waiting for the first appeal............."why would I file it if my appeal was on the basis of no TR as no director".

Perhaps I could and should have appealed the extra £900.

My advice - pay it and wait for a new client to come through the door......I'm more than £900 up since I paid the £900 myself although to fair I was responsible for the delay from March to July 2015. You might not be.

Also, there is a barrister wanting to take on HMRC on the legalities of the £900 penalties..........but my client didn't want her name public - especially as I was one shelling out!!!!! 

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By Roland195
07th Dec 2015 13:12

Why were they submitted late?

Can you provide any background as to why the returns were submitted late? It's obviously not just a simple case of the filing deadline being missed so which would usually suggest a further avenue of appeal?  

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By SteveHa
07th Dec 2015 13:20

Nope, it was simply a timing issue waiting for company accounts to establish dividends. There's no additional appeal there. The only avenue is proportionality as far as I can see, but I'm happy to be shown to be wrong.

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Replying to paulhammett:
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By Roland195
07th Dec 2015 13:39

More questions than answers

SteLacca wrote:

Nope, it was simply a timing issue waiting for company accounts to establish dividends. There's no additional appeal there. The only avenue is proportionality as far as I can see, but I'm happy to be shown to be wrong.

If the dividends could not be established until the accounts for the company had been prepared (and let's not debate the rights & wrongs of that approach) then what was happening with the escalating penalties and why were the returns not estimated, especially as it turns out there is no liability anyway?

 

 

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By Duncan Cameron
07th Dec 2015 13:36

Try different grounds of appeal

Didn’t your client have a reasonable excuse? HMRC have been accepting, I understand, almost any old excuse lately – see press reports from May this year.

Hindsight is a wonderful thing. You should have requested the withdrawal of the notice to file before submitting the return. This gives you a bit of dilemma if you are in the daily penalty period or if any penalty date is looming, but you could make the request one day and file the next. If HMRC said no, then there is the internal complaints system. The point of s8A TMA 1970 is that people who owe no tax don't get large penalties.

Depending up on the information given on the penalty notice, you should have appealed the daily penalties on the ground that the penalty notice was invalid. The Donaldson case should have been head by the Court of Appeal by now, I think. The supposed fault with the notice is explained at para 27 of Jack Dyson  FTT TC04336. This applies to Heavy metal Mike as well.

http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j8309/TC04336.pdf

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By cparker87
07th Dec 2015 13:55

Reasonable Care

Few cases lately where the taxpayer had a reasonable excuse because they relied upon a qualified paid professional to deal with all of their tax affairs. For the layperson, that is taking reasonable care. I believe the most recent example was a builder who had relied upon his accountant to submit CIS300 returns. The penalties were reduced from ~£40k to ~£0.3k. You'll have to search for the case name because I'm lazy. 

However, in recommending that course of action you're also saying that you have acted inappropriately which opens a whole new can of worms too. 

Also not clear why the SATR couldn't be submitted even without finalised company accounts? 

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By SteveHa
07th Dec 2015 14:40

With regards to the accounts and estimated figures, I can't answer, I'm afraid. The failure pre-dates my appointment here. The practice splits accounts and tax (I'm the tax guy, having replaced my predecessor), and I have no information to suggest whether or not estimated figures were sought internally.

Turning back to the validity of the notice. FA 2009 Sch 55 p18(1) HMRC must:

 

"(c) state in the notice the period in respect of which the penalty is assessed"

whilst in the case of Morgan & Anor V HMRC, the tribual interpreted the requirement as needing:

"an assessment to establish the debt and the date for payment of it".

These seem to be contrary to me, though if reliance on the FTT can be made then the notice is indeed flawed. However, since the notice includes "for the year ended 5 April 2014" I suspect that we are on a hiding to nothing with that.

I'm beginning to think his only options are to pay up, or throw himself on the mercy of GO :(

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By Tim Vane
07th Dec 2015 14:45

It sounds like your client has grounds to sue your firm for malpractice. Failing to submit a tax return because the company had not yet paid dividends that could not be included on the return anyway because they would have been paid after the taxyear end is a gross failure and you could be in a tricky situation since the ethical advice to offer your client is to seek recompense from your own firm. If I were you I would tread very carefully. At the very least your firm should be paying the penalties.

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By Duncan Cameron
07th Dec 2015 15:38

Re validity of daily penatly notice

I can now see why Portia gets upset. The battleground in Donaldson has moved on from paragraph 18 to paragraph 4. This much is plain from the reference I gave. The question is, does the penalty notice give the information required by para 4(1)(c)? Viz does it state the date when the first £10 was incurred?

I think that I may have my paragraphs mixed up. But the point is HMRC may have said on earlier documents, that the daily penalty would start to accrue from a certain date, but they did not do so on the penalty assessment.

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By Roland195
07th Dec 2015 15:11

Barking up the wrong tree

In the circumstances you have described, I agree with Tim that the liability for any penalties should rest with the firm.

While I can understand that you are trying to make the best of a bad situation & not of your making, I cannot see any good will come of trying to have the penalties overturned at FTT.

It may be that the client has grounds for appeal as CParker87 suggests that his reliance on the firm was misplaced but that is as he said, another can of worms entirely.

Are there other cases like this waiting to come out the wood work?

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By SteveHa
07th Dec 2015 15:23

I certainly hope not. I've been very active with regards to 2015 Returns, and I know exactly who's are outstanding, and that every one of them has been given several opportunities to provide me with the requisite information (knowing full way that today was my deadline - though to be honest it was arbitrary and i have less than 30 returns left to complete by the end of January, so I'm not panicking. I'll even be able to take to phoning and nagging the last few). As best as I can tell, we have all the 2014 Returns done now, with the exception of the habitual non-repliers, who have no one to blame but themselves (even the harshest reminders from me has generated zero response).

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