SA penalties for non taxpayer

SA penalties for non taxpayer

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We were asked to look at a case (no fee) for automatic penalties for late submission self assessment tax returns for 2010/11 and 2011/12.

Yes the taxpayer was late submitting returns and incurred maximum automatic penalties each year (£1600 + £1600) but her income for the past 10 years has been below the tax and NIC thresholds so no liability.

She could not afford an accountant and after a visit to the CAB went to the local tax office who helped her complete a number of SA tax returns.

Her sole income is now disability benefit and HMRC are chasing for the penalties.

Four points:

No loss of tax to HMRC as none due

Standard reply from HMRC received advising penalties still due.

Being chased by debt management for payment of the penalties although she cannot afford to pay them. 

Interest is racking up on the penalties.

This just shows how unfair the current automatic penalties are, yet there appears no way of getting them reduced.

Any ideas on a way forward?

Replies (17)

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By cmg
08th Oct 2014 14:03

A professional colleague has exactly this issue

. . . . a few months ago, and advised the client to pay, which she did, to get HMRC off her back. The client then went to CAB and the upshot was a full refund from HMRC. Both my professional colleague and I were staggered. I'm not a party to the CAB claim so I don't know what transpired, but it does seem that CAB have an answer. The only difference is that in "my" case, the client paid the penalties and then claimed, but presumably the legal basis would be similar.  Good luck.

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Stepurhan
By stepurhan
08th Oct 2014 14:11

Why returns requested

It would seem you have a good case for saying the returns should never have been requested in the first place. If her income was below the personal allowance then there would be no taxable income for those years. I would be inclined to go with the angle that the returns should have been cancelled (eliminating the penalties) rather than submitted. Be sure to point out that this is what the HMRC office should have done rather than "assisting" her to fill in returns. Possibly hint, without stating as fact, that maybe this was done to lock in the penalties instead

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By adramforall
08th Oct 2014 14:55

Agent account managers

If local office is going nowhere then refer this to your Agent Account Manager (AAM) at HMRC and ask them to review the case and cancel the penalties on the basis that the client should never have been within SA in the first place.

I have found this service to be one of the quickest and most efficient ways of dealing with HMRC when the local office/collector/debt management units will not see sense.

 

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By TickTock
08th Oct 2014 16:05

Appeal?
I have a client who was late with returns for 10-11 to 12-13. She has rental income that was adjusted through her tax code so tax had been paid at source. When I did the returns she was actually due a refund for every year because the tax liability on the rental income was lower than the tax that had been deducted at source.

She was penalised the full amounts and, when the refunds were processed, they were set off against the outstanding penalties.

I appealed against the penalties, the initial appeal was denied so I asked for a review and the whole lot were cancelled = £several thousand refund.

The client had a medical problem which was the initial cause of the returns not being filed, but I also appealed on the fact that the penalties were excessive.

I would appeal if your client shouldn't have been issued tax returns in the first place but also that the penalties are extremely excessive.

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By Paul D Utherone
08th Oct 2014 17:48

All of the above & get her MP involved

Probably doesn't work nowadays, but back in the day when there were local offices an MP complaint/letter on behalf of a constituent tended to get things moving

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RLI
By lionofludesch
08th Oct 2014 18:46

Stick at it

All totally out of proportion.

I'd keep writing and complaining. 

Just keep upgrading, ask for the case to be reviewed by more senior officers, Taxaid, MPs anyone you can think of.

If she can't afford to pay, what are debt management going to do ?

I have to say that sometimes CABs have "contacts" and can work wonders.

All these "hard cases" need flagging up to the professional bodies and they need to be lobbying the Government saying "we told you this was totally unfair - get these penalties reduced."

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By seawych
08th Oct 2014 21:53

Why did they ask her to complete returns?

See title!

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Replying to Wilson Philips:
RLI
By lionofludesch
09th Oct 2014 12:48

Cynical ? Moi ?

seawych wrote:

See title!

To see if they could screw penalties out of her ?

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By saudaagar
13th Oct 2014 12:06

If taxpayer makes a mistake, HMRC come heavily down on them. If HMRC make a mistake, they get away with a 'sorry', no financial penalties on them!

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Replying to DavidPaterson20:
RLI
By lionofludesch
18th Oct 2014 10:31

@seawych

saudaagar wrote:

If taxpayer makes a mistake, HMRC come heavily down on them. If HMRC make a mistake, they get away with a 'sorry', no financial penalties on them!

This.

If HMRC gave the taxpayer £100 every time they made a mistake, I'd be less cynical.

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By seawych
13th Oct 2014 15:02

lionofludesch - paranoid?...Vous?

7So, you reckon that they're deliberately [***] unjustified  penalties out of people.  How do you think they're doing it? Do you think that:-

a)They've set up a special team to identify people who are unlikely to submit a return if they

 send them one. (After all sending returns to people who are actually going to complete them wouldn't give them an excuse to lumber them with unneccessary penalties!)

b) They're just chosing people at random

c) There's something else that justifies your response.

In my experience Revenue [***]-ups are invariiably down to genuine error; incompetence or mismanageo completement.  Deiiberate malice is rarely the cause and automatically assuming that it is helps no one.

I was asking a serious question that needs a serious response  and I will explain further

From what the OP says, she should never have been asked to  complete returns.  But she was and there could be two reasons for this.  Either someone in HMRC had reason to think that she had tax to pay or it was a mistake. 

Telling them that the returns shouldn't have been issued will get you precisely nowhere.  If you ask why they were issued, there is a possibility that the matter will get to someone with some commonsense (they do exist but they're hard to find) who will be willing to cancel the penalties.

OK, it's a longshot. But there's no basis for a successful appeal on the only althernative is the tender mercies of DMB.

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By seawych
13th Oct 2014 15:44

sorry unfamiliar keyboard!

The bit in the middle of m last posting that looks like Esperanto should read "complete mismanagment"

Sorry

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By sueh711
13th Oct 2014 16:14

we tried this ...

We had a case where it was a young man age 20-21 and first job since leaving education.  He was put on CIS by the contractor and we don't think he really understood the significance of employed v self employed. By the time he came to us we were into daily penalties.  We had no grounds to appeal as HMRC were correct in charging them.  Tax returns were due and were late.

We filed the return for the late year and for the current year to bring him right up to date.

We then wrote to HMRC appealing against the penalties and explained lack of understanding, no tax lost to the crown as CIS covered any  liability and used the phrase " unfair, unjust and not within the spirit of the legislation"

Penalties were cancelled and refund issued to client..... Result!

 

  

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By angusnicolson
13th Oct 2014 16:20

Disproportionality

I argue disproportionality where no tax was due (or a refund arose) and have a 90%+ success rate.  This has often included late filing penalties as well as the daily penalty, which seems overly generous by HMRC; but then who am I to refuse?

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By lclackett
13th Oct 2014 17:14

Statutory basis of withdrawing penalties
I have overturned penalties in a similar case.  I refer to the extracts from 'withdrawing a notice to file a self assessment tax return' HMRC consultation document dated 24 May 2012 which helped me win.   I would have provided a link but I'm struggling to find the document this time (except for the pdf version I previously downloaded). 2.8There is no express statutory power to rescind a notice to file once it has been issued and there is no right of appeal against a notice to file. But since February 2012 HMRC has invited those individuals who have received a notice to file a SA return, but who think they should not be within SA, to contact the department. If HMRC agree that a SA return is not needed, the notice to file a SA return is withdrawn and at the same time any late filing penalty cancelled – see Annex B: “Do I need to complete my 2010/11 Self Assessment Tax Return?” showing the flowchart used for the current arrangements.2.9Following the introduction of the new penalties, HMRC is, where appropriate, using its discretionary powers of collection and management to withdraw the notice to file a SA return and also using “Special Reduction” to cancel any penalty due (see paragraph 16 to Schedule 55 Finance Act 2009). This approach enables HMRC to ensure that penalties are not levied where it is agreed that a SA return is not needed. However this approach does not offer a long term solution. As the new penalties bed in, the “special circumstances”

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By ldcldc
13th Oct 2014 19:04

SA Penalties

To quote Gilbert and Sullivan ( shows how old I'm getting)  I have found that a simple letter stating that the punishment doesn't fit the crime tends to get the penalties cancelled.  One can generally find a reasonable excuse

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By howlin wolf
18th Oct 2014 17:33

Be specific

You say her income now is disability benefit. Why? that is of no relevance whatsoever. You say that for income for the past 10 years was  below some threshold. Why ? that is of no relevance. What is of relevance is what her income was for 2010/11 and 2011/12. What was her income and is she cheating the system. I bet she has lots of income and not declaring it and playing the disability benefit card. Tax evasion at its best.

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