Boughey v HMRC: ‘Careless’ penalty suspended
A penalty for careless misstatement in a tax return can be suspended even if relates to a one-off event such as redundancy, a tax tribunal ruled.
In the lower tax tribunal case of Philip Boughey v HMRC (TC/2011/09901) Philip Boughey had mistakenly claimed a tax exemption for a £30,000 redundancy payment in his self-assessment tax return when relief had already been given through PAYE. HMRC charged a 15% penalty for careless error.
Boughey accepted that the penalty was due but appealed against HMRC’s refusal to suspend it. He argued that no suitable condition of suspension existed – citing paragraphs 14 to 17 of schedule 24 of the Finance Act 2007.
Paragraph 14 of schedule 24 says that the respondent may suspend all or part of a penalty for careless inaccuracy but “only if compliance with a condition of suspension would help [the person] to avoid becoming liable to further penalties under paragraph 1 for careless inaccuracy.”
The tribunal ruled against HMRC, which it held had proceeded on an “erroneous legal basis”.
Listen to Anne Fairpo's analysis of the case in her 16 July tax podcast.