HMRC late filing penalties: Tribunals want proof
The disruptions caused by the 30 June HMRC staff strike highlighted an important precedent on the proof required to show a return was submitted in time, according to Baker Tilly’s George Bull.
Electronic transmissions and payments have an advantage because automated systems are not affected by human protests, Bull advised. But if you continue to rely on post, he added: “At a time when there is likely to be disruption it is always prudent to post items in good time and keep records of posting.”
HMRC’s habitual assumption that any payment or return received late must have been sent late has been shaken by a series of recent tribunal verdicts. The Hornslea case in March hung on HMRC’s lack of evidence to support its contention that the taxpayer had posted his returns late.
Three cases decided in April by first tier tribunal judge Geraint Jones QC upped the stakes for HMRC. Following the precedent set by the European Court of Human Rights decision in the case of Jusilla v Finland, Jones decided that tax penalties demand the equivalent right to fair trial and “beyond reasonable doubt” evidential requirements as a criminal trial.
In the case of a £400 late P35 penalty levied against Ballysillan Community Forum, the judge noted that HMRC provided no evidence to back its claim that the return had been filed late other than asserting that that its computers do not get it wrong and that if there was no record of a P35 on the system, the appellant cannot have been informed that it had been successfully filed.
“That demonstrates a touching faith in computers,” Jones commented in his decision. “My task is straightforward. I have to decide whether HMRC has proved so as to make me sure that the necessary filing did not take place… I have no hesitation in rejecting that proposition and I equally have no hesitation in accepting the truthfulness of the witnesses on behalf of the appellant.”
The decisions in the successful appeals of Anthony Leachman and Dudley Electrical Contractors provide equally entertaining and enlightening reading.