HMRC has confirmed that it is preparing an appeal against the first tier tax tribunal decision in HOK v HMRC, in which the judge criticised the department for unfairness and using the penalty system as a “cash generating scheme”.
HOK Ltd v HMRC  UKFTT 433 (TC01286) is one of several cases last year in which tribunal judge Geraint Jones QC overturned late P35 filing penalties because HMRC waited several months before sending out notices. The HMD Response decision, detailed in AccountingWEB’s Reasonable Excuse scorecard, includes an identical conclusion from the judge: “In our judgement, the appellant is entitled to rely upon the common law duty of a public body to act fairly not just in its decision-making process but also in administering its statutory powers. We are in no doubt that such a body does not act fairly where it deliberately desists from sending a penalty notice, for four months or more, knowing that the effect will be to impose a minimum penalty of £500 upon somebody whose sin may be no more than oversight or forgetfulness.”
As part of the ruling, the judge commented that it would be a simple matter for HMRC to program its computers to send out P35 penalty notices in May rather than September to avoid the fines piling up as they did in the HOK case.
This view - and the string of similar decisions from Jones and other tribunal judges - was not popular with HMRC, which described the arguments as “out of kilter” with the law.
“It’s no secret that we are preparing an appeal and the HOK decision was the most appropriate case,” an HMRC spokesman told AccountingWEB.
ICAS tax director Derek Allen highlighted the recent decisions in Working Together issue 46 and urged HMRC to adopt a process that respects the tribunals’ stance to ensure taxpayers’ human rights are protected.