Taxpayer wins appeal against 'careless' penalty
A taxpayer has won an appeal against a careless inaccuracy penalty for omitting information about his employment income in his online tax return. His argument was that HMRC's online filing software was to blame.
In the case of Andrew Banks v HMRC [TC03592], the taxpayer was charged a penalty for "careless inaccuracy" after omitting just over £200,000 employment income from two jobs from his online tax return.
When he submitted his return in January 2012 it showed no extra tax due at the end of the year.
Banks appealed against the penalty, arguing that when he completed the forms online it showed no more tax due.
He said that it was not his fault that HMRC’s system had failed to register the details submitted, so he should not be penalised.
HMRC argued that Banks had omitted the details because he thought his employers had dealt with all the tax under PAYE.
It said it had checked its system and found no faults and denied the taxpayer’s claim that the system was "beset by well publicised technical challenges."
Tribunal judges Michael Connell and John Coles agreed with the taxpayer on the "balance of probabilities".
They ruled that the burden of proof was on HMRC to show that Banks had been careless, and HMRC's records were inadequate to meet this test. "HMRC [has] not established with sufficient certainty that if the appellant did not complete the employed income pages the system would necessarily show this," the judges said.
Commenting on the case, David Heaton, employment taxes partner at Baker Tilly, said "Most of HMRC’s well-publicised IT problems have been with the RTI system for PAYE, but few IT systems are problem-free. It is reassuring to know that the courts are there to stop the machines taking over completely, although less reassuring to read that the HMRC staff couldn’t explain to the taxpayer or the tribunal certain aspects of how the system worked."