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tax return penalties. Should we submit

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Our client has got tax return penalties for two years when he was not in the country.

HMRC are instisting on tax returns before we can appeal. I was hoping that they were going to cancel the initial request for a tax return. I am concerned that it will more difficult to appeal the panalties once the tax returns have submitted?

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By Rammstein1
13th Aug 2020 10:10

Why were the Tax Returns issued in the first place?

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Replying to Rammstein1:
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By Barry Adams
18th Aug 2020 12:20

The client registered as self employed in 2011 and then left the country (2/3 monhts later) without earning any self employed income or completing a tax return (writing to HMRC to inform them that he was leaving.

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By K81
13th Aug 2020 10:13

have same issue, 2017 tax return penalties as client filled in CWF1 but never actually started self-employment as was offered full time job.
HMRC are insisting on tax return, not sure how successful appeal will be.

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Replying to K81:
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By Rammstein1
13th Aug 2020 10:20

I would have though you have a good case with that one as a Return is not needed.

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By K81
13th Aug 2020 11:07

have tried several times, HMRC said out of date to cancel the return must complete. It's infuriating.

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Replying to K81:
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By Homeworker
17th Aug 2020 11:20

K81 wrote:

have tried several times, HMRC said out of date to cancel the return must complete. It's infuriating.


I have the same issue. 2017/2018 and 2018/2019 tax returns issued in March 2020, supposedly to collect Gift Aid tax relief recoverable from a non-taxpayer. We in fact instructed the client to stop the Gift Aid when we found out about it in 2017, so no returns are required. They cancelled the later return on my phone call but insist that the 2017/2018 return must be filed before the appeal (not the return) can be cancelled.
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By justsotax
13th Aug 2020 11:39

have had the same issue - although in my case the original returns were issued to incorrect address - finally have succumbed to submitting returns and appealing, against my better (questionable?!) judgement. I don't believe they have issued a valid notification however they essentially refused to answer any technical questions on the matter - only other option was a tribunal....rock and a hard place.

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By Paul D Utherone
13th Aug 2020 13:01

Was there any liability in either year, and what evidence is there that a requirement to submit returns was properly issued to the correct address.

The likelihood is that if you submit penalties will be raised, even if there is no liability for the year, and because a return has been submitted the FTT will be hogtied in having any means to do other than say the penalty is due. You will therefore want a trail of correspondence to show that all steps were taken to get returns cancelled as soon as the alleged requirement to make returns came to light where there is otherwise no liability for the year and need to submit a return. With that in place you might stand a chance at FTT when the facts are laid out, though it still looks to be tribunal judge dependent.

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By Matrix
13th Aug 2020 13:06

Has the client moved back to the UK?

Does anyone know what happens if the returns are never filed?

I have a similar situation and drafted the letter to get the returns cancelled but don’t hold out much hope after this thread.

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By richard thomas
13th Aug 2020 16:57

If you want a reply based only on the few facts given, then it is

(1) HMRC have no right to insist on tax returns being submitted before you appeal against the penalties. Don't take this lying down.

(2) Withdrawal of a return may be done up to 2 years after the end of the tax year the return is for or "in exceptional circumstances, such extended period as HMRC may agree" (s 8B(6) TMA). But it cannot be withdrawn once a return is made. Nor can you appeal against a refusal to withdraw.

(3) Filing the returns or not should make no difference to whether you succeed on appeal. The penalties charged do not depend on the income of the client or whether a return is filed, except possibly where para 5 or 6 Sch 55 FA 2009 apply and your client's liability to UK tax was above £6,000. HMRC may of course issue a determination which will require a return to supersede.

All that said you will first need to make the appeals. Assuming the penalties were not all issued within the last few weeks, you will need to explain why they are late. HMRC may accept that the client had a reasonable excuse for lateness and, if so, you will need to show why the penalties are not due. This can be because the notice to file was not sent to the last known address on HMRC's files, or was not sent at all because they had no address. If that was not the case then you have to show why the client had a reasonable excuse for not filing the returns by 31 January or possibly that any HMRC decision on the existence of special circumstances was flawed (no decision at all is a flawed decision).

Obviously you can go to the Tribunal if HMRC do not accept what you say. Currently any such appeal would be dealt with on paper, and it would be important to ensure that the grounds of appeals are comprehensive and backed by evidence which you must supply. It's no good expecting a busy judge just to take the client's or your word for why they didn't do what the penalty is for or to have to make assumptions or read between the lines.

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Replying to richard thomas:
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By justsotax
13th Aug 2020 17:05

I concur with Richard, but from my recent experience the Revenue will simply reply with 'submit your return'.....

The most obvious reason in my case seems to be that if they withdraw the Returns and re-issue to the correct address then they potentially fall outside of the window to enable them to collect the taxes owed as they didn't follow the correct notification process.

My current concern is that they do not accept the appeal against the penalties raised....always the concern once the Returns were submitted.

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Replying to richard thomas:
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By whitevanman
13th Aug 2020 18:58

Not sure I wholly agree. Of course precise facts would be helpful.
We are to assume (for the moment) that a notice to file has been validly served. We have nothing to say otherwise.
The client has been charged penalties for failure to file. Generally there are only two, valid, grounds of appeal against such. Either factual (return was filed or notice not validly served) or Reasonable excuse. In the current case it would seem the latter is what the OP considers to apply. However, one cannot consider a claim to Reasonable excuse until such time as the return has been filed (and the reasonable excuse ended). HMRC guidance at, for example, SAM 10080 confirms this. So, the officer would appear to be acting correctly in refusing to consider the appeal. It is hard to see how HMRC could be expected to deal with the matter otherwise.
Most likely what the OP would like to appeal is the fact that the notice was issued in the first place. It would appear (s)he has not asked for the notices to be withdrawn and is, in all probability too late to do so. In any event, as you say, there is no right of appeal against a refusal to withdraw.
So, in effect, you (or one of your fellow judges) would be asked to consider an appeal on the grounds that there was a reasonable excuse for a failure to file, in circumstances where a valid notice to file has been served and the return has still not been filed. How could you determine that the failure had been rectified as soon as possible after the reasonable excuse ended?
Remember, the fact that the client doesn't think the notice should have been issued, is wholly irrelevant and as a judge, reasonable excuse is the only thing you could consider.

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Replying to whitevanman:
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By richard thomas
14th Aug 2020 20:50

What HMRC SAM Manual says is neither here nor there. It is not anyway up to HMRC to do anything with an appeal (which is to the tribunal, not HMRC) if they do not wish to. Assuming the OP’s client lodges their appeal and gets past the hurdle of making a late appeal (if they are late) then they have notified the appeal to HMRC which is all that counts.

If HMRC decide to do nothing apart from say “we will not deal with it”, then they obviously will not offer a review. The client can ask for a review within 30 days (though that is unlikely to help) or, better, they can just notify the appeals to the Tribunal. There is no time limit for doing this where no review is offered or sought. The penalties should of course be stood over pending determination of the appeal (paragraph 21(2)(a) Schedule 55 FA 2009).

We don’t know of course if the argument is that the assessments are not valid because for example they were not properly served. If that is the argument, it is not technically a reasonable excuse one, because there was in the taxpayer’s view, no failure at all. But everyone involved with these things calls this kind of argument a “reasonable excuse”.

If it is a reasonable excuse case proper, the initial focus in any appeal before the Tribunal will be on the reason why the returns were not filed on 31 January. If that is established to the Tribunal’s satisfaction as giving a reasonable excuse, the question whether the excuse has ceased comes into play. It is at this point that any taxpayer will likely find themselves in very substantial difficulty if the returns have not been filed, but it will all depend on the facts. And there may be special circumstances.

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Replying to richard thomas:
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By whitevanman
15th Aug 2020 00:56

I do wonder whether in fact HMRC have stated that the client cannot appeal until returns are filed. That would be completely incorrect and would contradict the information about appeals, sent with the penalty assessments.
I rather suspect that what they said was they could not deal with the appeals until the returns had been filed.
My reference to the SAM was intended to convey that, the officer(s) dealing with the case(s) referred to by several contributors, are acting in accordance with the guidance issued to them.
If an appeal is notified to HMRC (or indeed the tribunal) it must satisfy certain criteria. In particular, it must state the grounds for the appeal.
If it fails to do so, HMRC may regard it as invalid and may then ask for it to be struck out.
The information provided does not suggest that notices to file were invalid and there is no right of appeal against a notice being issued (or, as you have said, against a refusal to withdraw).
The only grounds for appeal would therefore seem to be "reasonable excuse" and as you have agreed, it would be very difficult to succeed in such a claim where the returns have still not been filed. So, for HMRC to deal with the appeal, they would want the returns. If not provided, I would suggest they may very well apply for striking out.
All of this (and the processes you outlined) might be considered a waste of everyone's time and money. Better by far to get matters dealt with, correctly, by HMRC.
That means filing a request for notices to be withdrawn and valid appeals against the penalties. All relevant facts would need to be provided together with whatever evidence (again as you have said).

The OP does not say that they have applied for notices to be withdrawn but interestingly does say that he had hoped they would be ! Again absence of fact.

If the OP tried to side-step HMRC and go straight to tribunal, the only matter that could be considered would be the penalty appeal(s) and in that connection (in all probability) only a reasonable excuse claim.
Dealing with matters via HMRC (in the first instance) at least carries with it the possibility that the notices to file might be withdrawn.

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By chronus
17th Aug 2020 12:02

You say "Our client has got tax return penalties for two years when he was not in the country."
Does this mean he got the penalty notices when he was out of the country or did he get them when he returned. But notices to file would have been issued prior to the imposition of penalties. When were these issued, before or during his absence or on his return.
All so crucial for grounds of appeal.

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Replying to chronus:
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By Barry Adams
18th Aug 2020 12:27

The client has never received any notices to complete tax returns and the penalties are dated 23/07/20

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Replying to Barry Adams:
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By chronus
18th Aug 2020 14:51

Now that`s most interesting, that the penalty notices are dated 23 July 2020. Let me expound on that.
I too received 2016/17 and 2017/18 late filing penalty notices dated 23 July 2020 for a client who had issued invalid filing notices and were then cancelled with an apology from HMRC and a small monetary gift for their errors.
So what could be blamed but "the computer says nooo".

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By Barry Adams
17th Aug 2020 16:12

Thanks for all your useful responses.

I have since found out that the client did inform HMRC that they were leaving the country.

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By Barry Adams
18th Aug 2020 13:26

GREAT NEWS

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By Barry Adams
18th Aug 2020 13:27

GREAT NEWS - HMRC have now cancelled both the tax return requests and the penalties.

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