Daily penalties batted back

John Flood highlights the recent penalty co-decision of Morgan v HMRC and Donaldson v HMRC [2013] UKFTT 317 which has important implications for practitioners regarding schedule 55 requirements.

On 22 May 2013 the decision in this case involved schedule 55 of the Finance Act 2009.

Schedule 55 imposes penalties for failure to render a return. If a deadline is not met then a fixed penalty of...

Continued...

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Comments

We can do what we like, er hum....    2 thanks

Donald6000 | | Permalink

This latest mess is typical of the HMRC approach to things; rather than sort out an exact date from which penalties are due, which would mean an Inspector decision, here we are letting the HMRC computers decide the matter for us. No doubt the HMRC computer system has been erroneously programmed.

 

Can you imagine the perils of allowing a senior surgeon to say, in the case of the removal of an appendix "Well I will cut him from his throat down to his groin". It just would not be done and I fear that the HMRC just have this slipshod attitude to pretty well most things. What they do in HMRC is rely on the fact that they are servants of the Crown and play on the prerogative powers that this gives the officers. They don't worry about the law because they just simply think they are above it.

 

Its only in decisions like this or operations like this that we discover that in HMRC there are no rules. It's Vodafone all over again.  Tell you what, let's give them all knighthoods. Then they can be in good company with the bankers.

Apepal all daily penalties?

Mister E | | Permalink

Does this mean based on this ruiling we can now appeal all daily penalties on the same basis?

 

Most of the ones I have come across will now be out of date but the 2011/12 late daily penalties are running and once confirmation of those received the 30 days appeal period will start.

Filing    1 thanks

The Rogue | | Permalink

Of course, taxpayers could always file on time ...

Tom 7000's picture

Appeal all penalties?

Tom 7000 | | Permalink

WHat Mister E said above.

 

Should we now appeal them all?

 

Because I have a few clients that would cheer up.

 

On the other side if we dont appeal them...then we are negligent and the clients sue us?

Old Greying Accountant's picture

I would always appeal ...

Old Greying Acc... | | Permalink

... and then get a review if necessary - takes moments and as Tom says, you have covered your behind. Whether to go to tribunal is another matter!

Tom 7000's picture

grounds

Tom 7000 | | Permalink

Well I dont usually appeal. Well not unless we sent the return in and have proof. If the clients  are buffoons and havent done it...whats the point. But now  I fear all must be appealed

Suggested solution for HMRC...    1 thanks

secondhand_22 | | Permalink

...Just put a sticker on the computer which says "I am authorised to say that the Board are satisfied that whatever letters and forms spew forth from your circuits are authorised by them"

 

Sorted.  Tax doesn't have to be taxing.  Or correct.  Or moral.

carole.businessheads's picture

Good news!

carole.businessheads | | Permalink

Thanks to John for bringing this to our attention.

I've always thought the 'automatic' penalties were heinous.  We'll now be appealing everything until there is a decision that they stand.

 

nogammonsinanundoubledgame's picture

A temporary reprieve, methinks

nogammonsinanun... | | Permalink

All that will happen now is that HMRC will correct the wording of their warning notices so that they do not meet the deficiency noted by the tribunal.

Back to square one.

With kind regards

Clint Westwood

HMRC appeal

Mister E | | Permalink

nogammonsinanundoubledgame wrote:

All that will happen now is that HMRC will correct the wording of their warning notices so that they do not meet the deficiency noted by the tribunal.

Back to square one.

With kind regards

Clint Westwood

 

Until then though send the appeals in (until HMRC appeal the decision and it gets overturned.....)

should_be_working's picture

Worth a punt

should_be_working | | Permalink

I'm going to put an appeal in today on one - as said above it only takes a minute, and if you don't try...

 

Frankly the daily penalties system is wrong in principle. If someone is late with their return, then make a determination for last year plus x% - that usually gets them moving.

I mean, it's not as though the penalties are about raising extra revenue, rather than ensuring returns are filed on time is it? *innocent face*

JCresswellTax's picture

mention this case

JCresswellTax | | Permalink

Just wondering, will you guys be quoting the above case, or just arguing on the basis that the legislation at [para 4 (1) c Sch 55]. ?

Old Greying Accountant's picture

The whole thing stinks ...

Old Greying Acc... | | Permalink

... that you get fined more for being late with a nil tax return than you do for mugging an old lady (often even before daily penalties).

They need to change it so that the penalties can be no more than the larger of £100 or the tax due.

A £900 penalty on a £300 tax bill is a higher penalty (as a %age) than if you were delibrately understating tax due on a return submitted on time.

 

On what grounds do you base the appeal.

school63 | | Permalink

I have just been approached by a client who was issued with SA from 3 years back that she had not submitted.

We have since submitted the returns, but off course she was hit with £1100 daily penalties.

If I am to put in appeal on her behalf, on what grounds will i base the appeal.

i would appreciate some help with the wording.

The wording I have used (tailor to individual circumstances):    3 thanks

youngloch | | Permalink

Following seeing this article I have actually now submitted three letters of appeal along the following lines:

".....The appeal is further to the decision in the recent Morgan v HMRC and Donaldson v HMRC (2013) UKFTT 317 in regards to daily penalties raised under Schedule 55 of the Finance Act 2009.

We do not believe that a proper “decision” was communicated to our client that penalties of £10 per day would be levied against him.

To impose daily penalties HMRC must decide that a penalty should be payable (para 4 (1) b Sch 55) and also give a date from when they apply (para 4 (1) c Sch 55).

However, HMRC are, we believe, relying on a SA tax return and reminder which would have stated, “If we still haven’t received your online tax return by 30 April (31 January if you’re filing a paper one) a £10 daily penalty will be charged every day it remains outstanding. Daily penalties can be charged for a maximum of 90 days, starting from 1 February for paper tax returns or 1 May for online tax returns”.

As the tribunal mentioned above concluded, such wording is deemed vague and merely indicates that HMRC could impose penalties........"

We then elaborate further based upon specific client circumstances

I actually issued another appeal letter this morning stating the above and also adding in a handy quote HMRC provided me in a letter they sent us last week which advised that our client needed to file a 2012 return but no further returns would be required. The handy comment they made was: “You can file overdue tax returns online to minimise any late filing penalties that we might charge your client”.

Spot the handy word “might”.

I looked closely at the Sch 55 wording and included (over and above John's fantastic original post) para 4 (1) b . The full wording of Schedule 55 of the Finance Act 2009 paragraph 4 (1) is: (note that “P” is person):

“(1)P is liable to a penalty under this paragraph if (and only if):

(a)P's failure continues after the end of the period of 3 months beginning with the penalty date,

(b)HMRC decide that such a penalty should be payable, and

(c)HMRC give notice to P specifying the date from which the penalty is payable.”

 

Surely if HMRC are issuing letters saying they “might” charge penalties for a 2012 return where the return was issued on 6 April 2012 and the letter saying “might” is issued in July 2013 then you have to hope that this argument has some legs?Certainly if you don’t try then you won’t succeed and it goes down well with clients that you try (even if we don’t really want clients who get themselves into such situations!)

HMRC can't decide ...    3 thanks

tazmaniandevil | | Permalink

Have submitted a small number of appeals.  The first response rec'd from HMRC states that HMRC has yet to decide their response to the FTT decision and therefore cannot respond to the appeal until such time as they make a decision! Penalty currently held over until further notice as is client's payment!

In the meantime then....

youngloch | | Permalink

For now then we continue to put the appeals in as otherwise we risk finding that the FTT decision holds water and face the prospect of clients complaining that they were stuck with penalties because we didn't appeal............. I'm putting the 4th appeal in today actually - no responses from HMRC yet........ I am however being careful to make sure clients know the chances of success are likely to be slim although, as already mentioned, it will delay them chasing payment.

Appeal to Upper Tribunal/ Request for information    1 thanks

hjaflood | | Permalink

I see that the Appeals site has recorded a receipt of an appeal notice from HMRC in connection with a Keith Donaldson. I think it is the Keith Donaldson in the case discussed here. It was received on the 30 August. It is not clear whether the appeal, if it is the right Donaldson,  also involves the other case, though a success for HMRC in the one case would answer the issue in all cases.

 

Meanwhile I am sure readers would be interested  to learn if daily penalties in the context of the case still continue to be issued and secondly, whether HMRC have changed the wording of the notices the subject of the case.

John Flood

Late Filing Penalties and daily penalties

Rollingpinboy | | Permalink

 Daily penalties appeal Posted by JCresswellTax PM | on Wed, 21/08/2013 - 16:07  711  10 comments

#edit-field-aa-comment-comp1 div{margin:0;}
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Has anyone had a response from HMRC regarding daily penalties, citing the recent tax cases shown on accounting web?

A few of us were going to try.  I have had not had a response in 6 weeks, was wondering if anyone had been successful?

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Comments

-->Commentsive had a responseNed Ludd PM | Wed, 21/08/2013 - 16:14 | Permalink

literally opened this post today from hmrc.

 

word for word the relevant bit says:

 

"In your reasons for appealing you mentioned judgement in the First Tier Tribunal case of Donaldson & Morgan v HMRC.

Hm Revenue & Customs are still considering the judgement on this case and have not yet decided on further action.

Because of this I cannot consider your appeal yet. We will write to you again about your appeal when we have decided what action we will be taking following the judgement."

 

 

so no joy as of yet! 

@nedThe Innkeeper PM | Wed, 21/08/2013 - 16:18 | Permalink

and I assume that the hounds will still try and collect !!

Old Greying Accountant's picture6 weeks - pah ...Old Greying Acc... PM | Wed, 21/08/2013 - 16:30 | Permalink

I sent paperwork in for a tribunal hearing in January and have heard diddley squat.

I thought they had to respond in a certain time either accepting the appeal or denying it and informing you how to get the decision reviewed.

Looking at the HMRC site, I can't see this - you have 30 days to appeal, they have 45 days to review therir decision but I can't see anything saying how long they have to make their decision.

The appeal above was declined within 10 days!

 

julian.sims's pictureAppeal to Tribunaljulian.sims PM | Wed, 21/08/2013 - 16:54 | Permalink

If @OldGreying.. has submitted paperwork notifying an appeal to the Tribunals Service (at Birmingham) in January and not heard anything from them, I suggest contacting them urgently to make sure it was received. 

You would normally have received a letter acknowledging the appeal and then one explaining the category to which the case had been allocated.  There are no specific time limits for the Tribunal to deal with the case in, but no communication after seven months looks like they did not receive.

 

JCresswellTax's pictureThanks NedJCresswellTax PM | Thu, 22/08/2013 - 09:17 | Permalink

Wonder how long this will take to be resolved!

Re collection, we must be able to request HMRC suspend collection of these until the outcome of our appeal against them?

@JCresswell TaxThe Innkeeper PM | Thu, 22/08/2013 - 09:29 | Permalink

I don't think that there is any mechanism (formally or otherwise to 'holdover' collection - not like in the good old days pre sa

further infoNed Ludd PM | Thu, 22/08/2013 - 11:23 | Permalink

innkeeper and jcresswell;

 

regarding the payment of the penalties in the meantime the letter says:

 

"until your appeal is settled, any penalties we have charged you are still due, even if they are shown as 'suspended' on tour statement of account. If you have not paid your penalties you should do this as soon as possible."

 

Appeal Deadline.colinx PM | Mon, 23/09/2013 - 12:12 | Permalink

Can anyone clarify the trigger point for appealing against the daily penalties.

HMRC issued a Notice of Penalty assessment on 14th August 2013 for £1200, which we appealed under "reasonable excuse" and also under proportionality. However HMRC are stating that our appeal is out of time as the appeal date is linked to the original £100 late filing notice as issued 22nd February 2013. This seems very unfair. How can you appeal daily penalties when you don't even know if they will arise. P.S we only took over as agent in April 2013 so did not see the original notice. We and the clients were aware the £100 late filing penalty would apply.

 

Time for change's pictureI appealed a similar noticeTime for change PM | Mon, 23/09/2013 - 14:23 | Permalink

from 14 August 2013.

How could you appeal against a penalty of £1,200, having no knowledge of it,until it was raised on that date?

It really does beggar belief how riddled with stupidity HMRC has become.

Late Filing Penalties and daily penaltiesRollingpinboy PM | Thu, 31/10/2013 - 01:31 | Permalink

I have a letter here from HMRC. 22/10/2013. I appealed against penalties this month (oct 2013) for year 2010-2011. My total penalties added up to around £1,300 of which they pinched £400+ which i was due in rebates, even though i was not liable for any tax owed which was Nil. Firstly, they have accepted my appeal and cancelled the penalty for my late tax return under Section 54 of the Taxes Management Act 1970. However, on the next page it states  the complete opposite regarding the Daily Penalties and that i still owe £500+, abeit that this has now been suspended from (22/10/2013) due to HMRC appealing a decision from the First Tier regarding Morgan and Donaldson V HMRC who won their case regarding this. HMRC state that it could take months and  if they win, interest will be added to my outstanding penalties. Interesting that they do this to the unemployed on JS allowance as well! They have also farmed this out to AKINIKA Debt Collectors, who have been on my back for the last 2-3 months. They wont except less that £70 per Month!!

Surely, if HMRC accept the appeal for the late filing penalty, then they should/must cancel the Daily Penalties thereafter! Common Sense really!...I Hope. Will let you know what happens...eventually. 

received today

frankie3 | | Permalink

My case- daily penalties appealed for 2012/13

HMRC reply today as follows   " do not agree that penalty notice was not properly given.... The notice of the date that a daily penalty would be charged from (under para 4 (1)(c) of sch 55 fa 2009)was given in the tax return reminder sent to you.... The case your agent mentioned is one where the tribunal decided that HMRC had not given sufficient notice of the date a daily penalty would be charged from. This case applied to penalties for the tax year 2010-11. HMRC does not accept the tribunals decision in this case and have appealed it. In addition and to put the point beyond any reasonable doubt, the annual tax return reminders for the 2012-13 tax year have been amended to give notice of the date that a daily penalty would be charged from.....I have treated your appeal as settled under (1) TCA1970"

 

Any other updates / thoughts on this since anyone?