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Appealing 4 years of penalties where no tax due

Any ideas for appealing several years of penalties where there is no real excuse but no tax due

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I have a new client a young lad working in the building trade who has basically his his head in the sand and not done his SATRs for the last 4 years. He said he did try a few times but couldn't deal with HMRC online tax returns and gave up but thought he might be okay because tax was being deducted via CIS and he knew his Contractors were making monthly CIS returns which reported his income to HMRC.

We have brought all his SATRs up to date with HMRC and they show significant refunds but these are sadly wiped out by the penalties.

Has anyone had any success appealing penalties in this type of situation?

I plan to use reference to the provision that HMRC can if they choose make "special reductions" on the basis that the penalties are hugely excessive in relation to his tax position (ie no tax to pay) and contrary to the compliance intention of the law and will throw CH170000 into the mix.

The person I spoke to at HMRC did say HMRC may consider waiving the penalties if there was no tax due but of course nothing in writing from him.

Just interested to hear in similar cases where there isn't really a reasonable excuse whether anyone has achieved any success?

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17th Jul 2017 15:47

Try throwing yourself on HMRC's mercy.

If he can show that he registered for HMRC online and had a go, you may well be successful on the "my client is an idiot" line.

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17th Jul 2017 15:58

Not convinced "hugely excessive in relation to his tax position" will be a valid reason.

I had a similar case recently.

Young, new client, head in sand scenario.

Advised client procedure, told him how to do it & gave the links. Told him to put down on appeal form whatever reasons he could think of for not filing the returns.

-> Result was all penalties cancelled.

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to Wanderer
17th Jul 2017 16:06

Wanderer wrote:

Not convinced "hugely excessive in relation to his tax position" will be a valid reason.

I had a similar case recently.

Young, new client, head in sand scenario.

Advised client procedure, told him how to do it & gave the links. Told him to put down on appeal form whatever reasons he could think of for not filing the returns.

-> Result was all penalties cancelled.

Might be a good idea to kid them on that he's unrepresented.

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to lionofludesch
17th Jul 2017 16:15

Yes, one of the reasons I didn't submit on his behalf was I couldn't really find proper grounds for the appeal. My thoughts were that I didn't want to get into a technical argument. Getting client to do it direct had the desired outcome.

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to Wanderer
17th Jul 2017 16:21

Can't do any harm.

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17th Jul 2017 15:58

Getting penalties removed/suspended is something of a lottery at the moment. I've gone with appeals that I never thought had a cat in hell's chance of being successful and seen them come off, while more solid ones have failed.

This could be an awkward one, as relying on "well he had a go then gave up" is admitting that he knew a return needed to be filed and just chose not to do so or seek appropriate professional assistance. Good luck with it!

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17th Jul 2017 16:05

If there are any other "reasons" for the failure, add them to the appeal.

Otherwise, I agree that you suck it and see.

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17th Jul 2017 16:24

Thanks for helpful feedback.
Sounds like it might be worth not trying to get technical with HMRC and just draft a letter for the client to end in.
Seems to me that the tax payer suggesting he thought it had all been taken care of via CIS returns isn't a bad start!

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to anneaccountant
17th Jul 2017 16:29

Personally, in this scenario, I'd probably not do it by letter but by SA370 forms.

Experience shows that often forms just get processed whereas letters have to be read, considered & implemented (or refused!).

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17th Jul 2017 16:38

I have found the best route is (a) client making appeal (b) keeping it dumb language.

Ie "I knew I didn't owe and tax as I am CIS and its deducted before I get paid. I tried to fill in the form but it was too hard and I didn't understand how to do it. the notes were very confusing. I tried to call you for help but the phone was busy, and as I knew I didn't owe any tax and in the end I left it. I kept getting your letters, I have gone to see an accountant and they said there was no tax due, and will use them for the future"

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17th Jul 2017 17:02

Surely it's possible to get the penalties suspended (if not cancelled). There have been quite a few recent favourable cases on that.

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to Justin Bryant
17th Jul 2017 17:14

Isn't that for careless / inaccurate returns though?

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17th Jul 2017 17:30

I told my window cleaner to be honest and explain how he is semi illiterate (true) and how he had tried on a PC at the library, having not got one at home, yada yada.....he got them knocked on the head. That said, I think he is hoping to use the same excuse this year as Im pretty sure he hasnt got an Accountant yet!

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18th Jul 2017 11:07

Thank you so much to everyone.
Seems best approach is for client to make the appeal and to phrase his appeal in very simplistic terms

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18th Jul 2017 11:46

have the same issue myself - as others have suggested where there is little or no technical argument to be had it is better for the appeal to be made from the client. (the client may wish to point out that at great expense to him he has engaged the services of an accountant to get his position up to date - a sad story always stands a better chance)

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By birdman
19th Jul 2017 10:43

Was there actually "no tax due" or was there a liability covered by CIS deductions? I suspect he would also need to show that he hadn't received any penalty notifications in the whole 4-year period, as otherwise he could hardly say he thought everything was OK. Worth a try though, nothing ventured...

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19th Jul 2017 10:47

I had the same scenario but it was 5 years. I sent in all of the completed tax returns and this client received a tax rebate, except for one year as it was out of time. There were penalties on his account - I wrote to them just pleading ignorance of the client (I flowered it out a bit) and asked them to cancel the penalties as he did not owe any tax and they actually owed him money. They cancelled the penalties.

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19th Jul 2017 11:00

Might be worth getting a tax lawyer's opinion. English Law has a strong line on "proportionality" and if the penalties are disproportionate there may be a good argument for an appeal. I like the "my client is an idiot" argument; there could also be an argument on competence (capacity) if he is intellectually unable to manage his own tax affairs, but that net would include a lot of people!

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19th Jul 2017 20:53

It is clearly worthwhile to get the returns up to date. The CIS deductions don't help from the point of view of the NI position and eventually being in line for a state pension.

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