I know this has been done a million times, but..........
Client reads on HMRC website that directors need to complete a Tax return. He phones HMRC, they issue a Return & he doesn't complete it (God knows why). Late filing penalties are charged. We ask for the notice to file to be withdrawn on the basis that he has no chargeability and the return was issued in error. HMRC refuse on the basis that he requested the Return & now has a legal obligation to submit it.
They go onto say that as part of a wider HMRC transformation agenda they are considering which customers are required to complete a Return in the future & company directors will fall into this review. No decision is likely in the short term but in the interim any customer issued with a notice under s8a TMA 1970 should comply with the legal obligation to complete the return.
My view is that the client registered for SA based on factually incorrect information on the website. The return was issued in error, whther he requested it or not, and should be withdrawn. The fact that in future HMRC may decide all directors need to complete a return is irrelevent.
Any suggestions on how to respond?
Replies (38)
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I would suggest your client might be an idiot and the penalty for being an idiot is £100.
Nothing you have said is wrong but on reading the website your client should have turned to his tax adviser and said "do I need to do this?". He did not.
Furthermore, knowing full well that he had done this and knowing full well he had not mentioned it to you, he didn't do anything with the return.
If I was HMRC I would refuse to withdraw the penalty as well.
Your client has an obligation to complete the Tax return, once he/she has been sent a notice to complete a return.
You could review this http://www.markmclaughlin.co.uk/withdrawing-notices-to-file-tax-returns/ but I would doubt success.
How difficult would it have been to prepare and submit the return, within the time limits?
Agree with Duggimon that your client is an idiot.
However, he is only an idiot in that he believed HMRC's incorrect advice that he had to file a return because he was a director.
Point out to HMRC that he only requested the return because HMRC told him, via the website that he was obliged to complete a return. There's only so far you might want to go to save £100 penalty, obviously, but personally, I think HMRC have a bit of a cheek here and I'd gain some comfort in saying so.
“ HMRC told him, via the website that he was obliged to complete a return”
Do we know the website wording? I doubt it is quite so black & white, it probably says/said something more like “may be required”, which sounds more the sort of thing HMRC would say.
Can't be bothered to look it up but it's more along the lines of ".... you are required to file a tax return if you are a company director".
Much discussed on here over the years.
“ HMRC told him, via the website that he was obliged to complete a return”
Do we know the website wording? I doubt it is quite so black & white, it probably says/said something more like “may be required”, which sounds more the sort of thing HMRC would say.
https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
Section 2
Who ‘must’ complete a tax return.
you were a company director - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car.
Not exactly open to doubt, is it ?
An authoritative, though inaccurate, statement of the law.
I say it’s a lessen that he shouldn’t have asked to be taught.
If I was HMRC, there’s no way I’d withdraw it - he asked to SA, they just complied with his legal request.
I wrote to HMRC on 5 March this year requesting withdrawals of notice to file for 2014/15 and 2015/16 for a client, who was a company director for a part of the period covered.
Whilst I haven't yet received formal confirmation, a check at SA online this morning suggests that they have, indeed, been withdrawn, and so HMRC are still acting on proper S8B requests.
Oh ?
And on whose authority has this legislation been withdrawn ?
And - crucially - when ?
"They seem to suggest that as at some point in the future they intend to issue all directors with Tax returns"
That would be interesting, especially for tens of thousands of people who are unpaid Directors of non-trading companies such as Flat Management Companies or even Dormant Companies.
Good luck with that one. The easiest way to deal with a Tax Return is to complete it and file it, on time.
Have a look at the following:
http://www.bailii.org/uk/cases/UKFTT/TC/2018/TC06320.html
http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10082/TC0...
http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j9898/TC05...
http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC05725.html
http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC05744.html
All First Tier so set no precedent and a selections of wins & losses by HMRC so take your pick of the bones of them and see if there's anything there that might help your arguments with HMRC
The return was not issued in error.
S8 does not determine who should be asked to make a return, it simply says that anyone who gets a notice to do so, must do so.
A notice is given by HMRC, therefore it is HMRC who decide who should get a return. HMRC's published policy is that directors will be given a notice. The notice was given therefore a return must be made.
S8B gives a discretion to withdraw a notice. That discretion lies with HMRC, not the Tribunal.
However, HMRC are not good at defending penalty appeals before the FTT. They usually forget that the responsibilty lies with them to show that the penalty is payable, and Tribunal Judges are getting more insistent on them fulfilling their burden of proof. There is a better than even chance of winning (depending on the Judge).
Geraint Jones sums it up here: http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10337
Not with standing the advice here we now carry out a check 3-4 months after taking a new client on (looking at our account at HMRC). The check is to make sure that we are aware if there are any outstanding tax returns that ought to have been submitted.
We started this regime when a client forwarded two penalty notices for non-submission. The system appeared not to issue a request for a tax return for previous years. Subsequently a further client had the same experience.
Why oh why can not HMRC send us a schedule of the tax returns requested just as it does for Corp Tax.
How do you get them on your agent list without a UTR? Do they all complete a 64-8 with their NI number?
I have a further wrinkle to add to this tangled web (mixed metaphor, I know, sorry).
My client is a director of his own company. He has received a letter from HMRC:
"We're writing to let you know that the last Self-Assessment (SA) tax return you'll need to complete is for the year ended 5 April 2017."
As noted in this thread, this contradicts the advice on HMRC's website.
It goes on to say "If your circumstances change, you can easily view and update your tax information online at any time using your Personal Tax Account (PTA)..."
This is form letter SA251.
Now I'm going to have to have a further conversation with him...
There's so much irrelevance here.
He's a director..........He asked for a return.......He has no chargeability.........HMRC are conducting a wider transformation agenda
{This in itself is a load of shmuck}.......
FACTS
HMRC issued a tax return.The idiot failed to comply. Penalty - pay up and move on.
HMRC issued a tax return.The idiot failed to comply. Penalty - pay up and move on.
Yeah but HMRC issued the return after misleading the taxpayer into believing he needed to submit one.
It's akin to the cowboy builder telling you your chimney needs repointing or it'll fall through the roof.
It's a cheap con trick.
Lionofludesch says the client was mislead into believing he had to file a return. Please read the legislation and the comments from J Andrew's to whom you replied. The client was not mislead. He has an obligation to file because he has been served with a notice. HMRC decides who will be asked to file and their guidance is that Directors will be required to do so. End of story.
You can appeal the penalty but need to show that the client had a reasonable excuse for failing to do so. Hard to see that he had such when HMRC told him he had to file!
Not so. Read my earlier reply. I (and others) have had S8 notices successfully withdrawn using S8B for directors, and the penalties go with the requirement as a matter of course.
Whilst you are technically correct if you ignore 8B, 8B is there for a reason, and should be at least tried if appropriate.
Lionofludesch says the client was mislead into believing he had to file a return. Please read the legislation and the comments from J Andrew's to whom you replied. The client was not mislead. He has an obligation to file because he has been served with a notice. HMRC decides who will be asked to file and their guidance is that Directors will be required to do so. End of story.
I dunno how closely you've been following this thread but HMRC issued this return because the taxpayer asked for it because he was incorrectly told he needed to file a return.
Setting aside the issue of whether it was smart play to leave the return on the cornish once he'd received it, the taxpayer has been given misleading information by HMRC. Yes - he was mislead. I'll go further. HMRC lied to him.
I don't understand why you think the client was mislead or lied to. He phoned to register and was told he had to file. That was correct. The client / agent has subsequently been told that HMRC may at some future point revise it's approach and by implication may not in every case require directors to make returns but that does not affect the client because no decision had yet been taken. At the time he was told what the guidance said and that was HMRC practise. He was given a notice to file and failed to do so despite having been told by HMRC that he had to file.
I don't understand why you think the client was mislead or lied to. He phoned to register and was told he had to file. That was correct.
Woah ! Let me stop you there.
What was correct about it ?
A better question would be "what was incorrect about it"?
There is nothing in legislation about who does have to file, other than the simple rule that anyone who is served with a notice must do so.
Everything else is just HMRC guidance to staff about how it will expect them to apply the legislation.
Well, I suggest you review the myriad threads on this forum on the matter.
Few on here will agree with you.
Would have been easier to say your client was mentally unwell.
Not implying you should. Just making an observation
We registered a client for 2017, which was submitted on time, however, he didn't mention that HMRC had automatically issued notices for the previous two years as well (since he became a director).
Two £100 pound penalties later I thought we might as well try getting them withdrawn as they were entirely unnecessary and.......success. Just a 5 minute phone call and the penalties went away with the returns.
Not sure if it would help given the less favourable circumstances in your case but it might be worth a try.
EDIT: just read your post again, should have had my cup of tea first. Oh well, it can work sometimes at least!
HMRC have now withdrawn the notice to file & cancelled the £1,300 penalties.
Good news! Congrats with the success in finding the HMRC employee who looks beyond "computer says noooo"and getting them withdrawn
Thank you for both starting and concluding an excellent thread. And a great result to boot.