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Army veteran left homeless after late appeal fails

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At the first tier tribunal, an army veteran was left homeless and defeated, with shoddy HMRC service and incorrect advice from his accountant costing him over £20,000 in late payment penalties.

28th Sep 2023
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Jason James served in the British Army for 22 years. When he left in 2015/16, he became self-employed and worked abroad.

Specific details in the case summary [TC08882] are sparse but, in short, HMRC enquired into the taxpayer’s 2016/17 and 2017/18 tax returns on a matter related to training days spent in the UK. HMRC closed the enquiry in November 2019, assessing tax payable of £168,963.06. Subsequent assessments related to the high income child benefit charge (HICBC) were also issued in July 2020.

Between February 2020 and February 2021, HMRC issued various late payment penalties under Schedule 55 FA 2009. In total, these came to £21,141.

Back and forth

Between December 2019 and June 2022 there was extensive back and forth between James and HMRC. Highlights of this include the following.

  • A call in July 2020, when James told HMRC he had only just received notification of a late payment penalty (dated March 2020) and asked for details of the sums owed. 
  • A call in late August 2020, when HMRC told James the late payment penalties were “becoming due”.
  • A call in February 2021, when HMRC warned James about interest accruing, but made no mention of late payment penalties.
  • HMRC’s self assessment entry for the taxpayer in October 2021, which referred to a time-to-pay application raised almost two years prior in November 2019 as seeming “to have bounced around”.

In November 2021, James paid HMRC just under £170,000 after selling his home, leaving him homeless and living with his daughter.

Further let down

In addition to HMRC’s antics, James had to contend with his accountant, who had told him that all penalty charges should be appealed once the outstanding tax had been paid.

This advice was incorrect: section 31A TMA 1970 provides that an appeal must be made within 30 days of the penalty assessment. As James had appealed to HMRC against the late penalties in October 2021, this was too late.

Only in June 2022 did he apply to the first tier tribunal (FTT) for permission to give late notice of appeals against the late payment penalties.

Permission to appeal out of time

The FTT followed the three-stage approach set out in Martland vs HMRC [2018] UKUT 0178 (TCC), which considers applications for permission to appeal out of time. Those stages are:

  1. Establish the length of the delay.
  2. Establish the reason(s) why the default occurred.
  3. Evaluate all the circumstances of the case.

The FTT found the delays in this case to be very serious and significant, with all penalties having a delay in excess of at least six months, some even 18 months.

As to why the default occurred, James argued that his accountant had told him that the penalty charges could only be appealed once the outstanding tax bill had been paid. 

The FTT noted that the taxpayer discussed the late payment penalties with HMRC on more than one occasion and that there was no record that it was drawn to his attention that he could or should appeal the penalties. However, as the FTT also noted, HMRC is under no obligation to draw that to the taxpayer’s attention (though any notifications given to James would have pointed out the 30-day time limit to appeal).

The FTT also explained: “When considering applications for permission to make a late appeal, failures by a litigant’s advisers should generally be treated as failures by the litigant.” As a result, the FTT, bound by the decision in Katib, found that the fact the taxpayer was let down by his accountant did not constitute a good reason for the failure to appeal.

As to the other reasons contributing to the default, Covid-19, while a factor in getting HMRC to respond, was not the reason for the failure to appeal the penalties (that being the fault of the advice from his accountant). Equally, a lack of funds was not a reasonable excuse for the delay in this case, per paragraph 16(2), Schedule 56 FA 2009.

FTT decision

The FTT considered all the circumstances of the case, noting that if James was left unable to put HMRC to its proof (although the prospect of a successful challenge to the penalties was “not strong”) he might suffer very significant prejudice and would be liable to pay a substantial sum of money. 

However, that was a consequence of the failure to notify the appeals in time. Ultimately, the FTT determined that it could not be right that a delay that is significant and for which there was no good reason should be overlooked simply because the amount at stake was a very large amount or significant to the taxpayer.

The application was dismissed.

A sorry tale

In the FTT’s words, this taxpayer’s tale is a sorry one.

Ultimately, his application for permission to make a late appeal failed due to incorrect advice from his accountant. However, it is worth highlighting the taxpayer’s stressful experience with HMRC.

As the FTT put it, “HMRC’s recorded view that [James’s] ‘letter seems to have bounced around’ is an understatement”. However, as the FTT noted in its decision, it has no jurisdiction in relation to HMRC’s general interaction with taxpayers – a source of frustration with which many will sympathise.

Replies (10)

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By More unearned luck
28th Sep 2023 17:05

"In addition to HMRC’s antics, James had to contend with his accountant, who had told him that all penalty charges should be appealed once the outstanding tax had been paid.

"This advice was incorrect..."

Indeed it was. But I have had letters from HMRC that say precisely that as regards late payment penalties and that appeals against late filing penalties can't be made until the o/s return has been filed. I've even been told to resubmit my appeal after the return has been filed. What the officers meant was that they can't and won't consider the merits of any reasonable excuse until the default has been put right. But agents shouldn't be credulous as regards what HMRC say.

What is the relevance of the appellant being an old soldier?

Thanks (9)
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By More unearned luck
28th Sep 2023 17:05

"In addition to HMRC’s antics, James had to contend with his accountant, who had told him that all penalty charges should be appealed once the outstanding tax had been paid.

"This advice was incorrect..."

Indeed it was. But I have had letters from HMRC that say precisely that as regards late payment penalties and that appeals against late filing penalties can't be made until the o/s return has been filed. I've even been told to resubmit my appeal after the return has been filed. What the officers meant was that they can't and won't consider the merits of any reasonable excuse until the default has been put right. But agents shouldn't be credulous as regards what HMRC say.

What is the relevance of the appellant being an old soldier?

Thanks (0)
Replying to More unearned luck:
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By dstickl
02nd Oct 2023 12:26

Seeing as how you've TWICE asked ... What is the relevance of the appellant being an old soldier? ... perhaps you've anonymously forgotten that GB's Monarch's peace - so loved by lawyers - can allow GB to be independent from the humiliation of the occupation by cultures foreign to GB, including the all-too-frequently-forgotten-cultural-tradition Great British fairness.
As such (in my opinion) it seems time - high time - that there be a change in taxation law that obliges HMRC staff to prevent the situations reported by FTT: “HMRC’s recorded view that [James’s] ‘letter seems to have bounced around’ is an understatement”.
Furthermore, as the FTT noted in its decision, it has no jurisdiction in relation to HMRC’s general interaction with taxpayers – a source of frustration with which many will sympathise, in my opinion, it seems time - high time - for a further change of law ... that gives the FTT general jurisdiction in relation to HMRC’s general interaction with taxpayers who either currently in the GB military, or are veterans of the GB military.
I feel sure that you would agree with this sensible answer to your question.

Thanks (1)
Replying to dstickl:
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By paul.benny
02nd Oct 2023 13:41

You will find few here who disagree that we should all expect better service from HMRC.

Apart from that, still no idea why appellant being ex-military is relevant, or indeed why serving or former military should get special treatment from HMRC.

Thanks (3)
Replying to dstickl:
Danny Kent
By Viciuno
02nd Oct 2023 16:27

This whole "holier than thou" high horse argument doesn't hold water. Where do you stop?

The soldier who protects our borders, the nurses/doctors who fix you when your broken, the bin men who empty your bins, the tesco checkout worker who sells you your food, the delivery driver who takes said food to Tesco. What if the delivery driver was taking guns to the aforementioned solider? The list of people who do jobs that EVERYONE is society needs to survive is endless...

HMRC's incompetence is shocking and shameful regardless of the occupation of the person they are dealing with. In this day and age nearly every job is important to everyone's wellbeing.

Thanks (1)
Replying to dstickl:
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By More unearned luck
03rd Oct 2023 17:25

Paul and Viciuno have provided the perfect responses to your flame.

Nevertheless, I add this: HMRC has limited resources; if it did provide a better service to serving and former military personnel it can only be at the expense of the rest of us and we will get an even worse service from HMRC then what we currently get, if such a thing is possible.

Interestingly, HMRC's charter does not currently include a commitment to be even-handed, so it seems permissible of it to deliberately give some taxpayers a bad service and others and even worse service.

Thanks (1)
Ray McCann
By Ray McCann
02nd Oct 2023 10:15

Interesting this one, whilst in HMRC I was involved in one of the largest late appeal cases, which I spent years arguing and whilst permission was refused the taxpayer continued to fight it in the Courts for years later to no avail.

I suspect I would have accepted the late appeal in this one!

Thanks (1)
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By johnjenkins
02nd Oct 2023 10:19

£170k is a lot of tax to pay so earnings must have been considerable. We would really need to know all the circumstances leading up to this, considering after 22 years service he would have had a lump sum and a pension.

Thanks (2)
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By Ian McTernan CTA
02nd Oct 2023 12:19

I wonder if he is now persuing a claim against his accountants, hopefully they have good PI cover!

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Replying to Ian McTernan CTA:
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By Jack the Lad
02nd Oct 2023 17:38

I agree. He should certainly put in a formal claim against his accountants, requesting their PI insurer's details.

At the same time, he should put in a formal complaint to HMRC and claim for compensation.

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