There has been much publicity recently regarding the funny [!?] HMRC Press Release regarding failed excuses for failing to file Tax Returns on time. Generally, the ‘joke’ seems to be that they are such poor excuses that they are on a par, or even worse claims that ‘The Dog Ate My Tax Return’. This shows the poor standard of education and lack of discipline in our schools. Anyone who has failed with that excuse at school should have at least graduated to ‘A Crocodile Ate My Tax Return’ with an invitation to the Tax Officer to go and retrieve it(!).
No doubt HMRC have much to put up with, and lousy excuses will inevitably test their patience. However, they are Civil servants who should be courteous and sympathetic to all tax payers – not just those they like because of them being ‘compliant’. With this in mind, I refer to the cases of P. Miller and Coomber. Case law shows HMRC are not always correct in their views on penalties. Advisors should always consider whether a penalty being charged is correct, proportional, or could even be suspended.
In the recent case of P. Miller the Courts held that HMRC were wrong in dismissing an application for a penalty to be suspended. The Judge followed the case of Hackett in focussing on the general obligations for all tax payers (rather than the narrow, specific facts of the tax payer’s own mistake) in deciding that there were sensible suspension conditions which could encourage him to avoid a future careless mistake. Thus the immediate imposition of a penalty liability could be avoided. No doubt good news for the tax payer.
HMRC had more success in the case of Coomber, where the Judge rejected a suggestion that a tax payer had a reasonable excuse for late payment when the tax cheque he had written was unexpectedly dishonoured by his bank. Reading the case in detail, it appears to be an object lesson in presenting all relevant evidence and ensuring it is correct in detail. Quoting from Clean Car Co Ltd, the Judge said, ‘The test of whether or not there is a reasonable excuse is an objective one … Was what the tax payer did a reasonable thing for a responsible trader, conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the tax payer, and placed in the situation the taxpayer found himself at the relevant time a reasonable thing to do?’
From the Judge’s comments it may have proved better for the tax payer if he had produced evidence of why the bank dishonoured the cheque (any why it was unexpected) plus better documentary evidence as to the precise dates of events. It is plain details can affect the Judge’s view as to the strength of a case. In this new era of quasi-automatic penalties advisors need to be on alert for sensible mitigating circumstances. Reasonable excuses do go beyond ‘Disaster, death and disease’, to quote the HMRC general view, but throw the excuse ‘A Crocodile Ate My Tax Return’ on the fire!
What are advisors current experiences of penalties and mitigation?