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“no one should be expected to make themselves aware of what is not a correct statement of the law”
Brilliant!
I assume the judge misspoke. I am certain that HMRC are the law, and therefore whatever they say goes...right?
I too wonder who paid for the appeal.
Right outcome.
Once again I am puzzled that HMRC staff seem to be ignorant of law and cases.
I would like to see the checklists and protocols used to reach certain decisions and the ensuing actions .
Where are the HMRC PowerPoint training materials explaining the relevant tax legislation , they must exist!
But did the Officers attend the training sessions?
Who at HMRC signs -off the letters and approves courses of action , in spite of the lessons from previous FTT decisions.
This amounts to a waste of resource , paid by shaking the money tree no doubt.
The front line staff never get to see the legislation. They are simply pointed to HMRC internal manuals (which are not necessarily in accordance with the law).
I would, however, expect someone preparing a statement of case to have a clue.
"In particular, it is no good HMRC arguing that a prudent taxpayer should make themselves aware of their duties and responsibilities if HMRC can’t get the law right on its own website"
Classic
Great article and one in the eye for HMRC. I too wonder at the review process within HMRC before getting to a tribunal.
Mr Steele got the right outcome, however if he had got his tax returns on time he would never have got in the position he found himself.
Some people do like to sit on things.
"As the judge pointed out, the gov.uk website does need to be revised, to ensure that what it says tallies with the actual law of the land."
Gosh! What about Marriage Allowance Transfer?
Still just about completely misdescribed on gov.uk - after quite a few years now!
"As the judge pointed out, the gov.uk website does need to be revised, to ensure that what it says tallies with the actual law of the land."
Actually, it rarely ever does. The legislation is, using software industry terms, a Performance Specification. This sets the range of input conditions and states what the output(s) over that range of inputs should be.
HMRC then produces a Design Specification which defines the processes that will do the job.
Using Marriage Allowance Transfer as an example, the Performance Specification makes it quite clear that this should be a like-for-like transfer between the two partys' Personal Allowances. HMRC's Design Specification veers way, way away from this concept- and in doing so they have not only completely smashed the like-for-like concept, they've also introduced all sorts of anomalies that can't be checked for conformance with the Performance Specification because the Performance Specification doesn't - and cannot be expected to - address outcomes that could not possibly occur if the fundamental principles of the Performance Specification had been implemented in the Design Specification !
SNAFU !!
HMRC guidance also suggests that one must register for SA if annual income exceeds £100k, presumably to capture the restriction of personal allowances above that level. However, if the tax code correctly handles the adjustment for reduced PA and the final tax paid is correct, is there still a requirement to file an SA tax return when the only income is correctly taxed under PAYE, despite being in excess of £100k?
What I find so disappointing is that, regardless of how short staffed or underpaid or how much stress HMRC staff may be under (and I'd probably dispute at least 2 of these), why is it that individuals appear not to have any personal or professional inclination to actually read up on the laws, regulations, or general background area of things such as this. Whats happened to professional pride and competence, I can't imagine working in a job where I simply didn't care or couldn't be bothered to find out the actual facts or truth on topics that I'm advising people on. So as much as the middle and top brass at HMRC are to blame for the failings in the system, the lower level staff are possibly equally as bad for simply not caring, having pride in their job or being bothered to learn sufficiently about what they do.
I know that I spend tens if not a few hundred hours reading and learning about accountancy-related matters, the majority of which is done in my own time.
To be fair to the front line staff, they are not given access to the legislation by HMRC. They are ONLY given access to the manuals.
Unlike many accountancy practices, HMRC don't have the Tolley's library to hand in every office, and access to the internet outside of HMRC's intranet is carefully controlled (if it's available at all).
In this regard, the front line are not to blame. It's still the upper echelons that are responsible.
Yes, I totally accept that staff may not have access to the legislation, google or even Accountingweb during working hours, and that they probably aren't given the time to research such things during the paid working day, but what I was getting at was the personal and professional pride that I simply assumed was human nature that someone who is in the business of advising or dealing with accountancy and tax-related matters (or infact absolutely anything in everyday life) , may perhaps have sufficient interest or pride to read and research around the job that they get paid for.
Once again I find myself disagreeing with much of what has been said by a judge and some others.
I agree that much of what HMRC has said and done in the case leaves much to be desired and I would echo concerns about that apparent fall in standards. It seems to me however that once again one must question the decision (on legal grounds).
Firstly, I may be wrong but I always understood that notifying "chargeability" had nothing to do with whether there was tax due. A person is chargeable if (s)he had a source of income ( etc) that is within the charge to tax. Once that is decided, the actual taxable amount is calculated by reference to the rules applicable to that specific source. So it does not matter whether there is a net profit, the source is what counts and it is that source ( in effect) that is notified. Once that is done, it is for HMRC to decide whether to get a return showing the amount etc using S8. So if as here there were several sources, there is a responsibility to notify "chargeability" irrespective of the amount.
Secondly ( and even if I am mistaken on point one) S8 simply provides that a person is required to make a return when served with a notice by an officer of HMRC.
The legislation says nothing about any restrictions ( for present purposes).
Again, some people (and judges) seem to get the whole matter confused. How does HMRC know what income etc a person has? They may indeed have records of employments, but what about other sources? We all know many people who have failed to disclose all their income even when filing a return so you cannot expect HMRC to simply assume they know everything about everyone.
Also, a return is not just of income but also various claims. Again HMRC does know everything about a person's circumstances, hence the need for a return. It really is obvious and should not need stating but judges (and HMRC and others) seem to lose sight of this.
Part of the problem seems to be people focussing on HMRCs guidance, which as we all know, is just that and not the law!
HMRC has "Care and Management" responsibility and if, as part of that they decide that certain factors present greater risk ( levels of income or types of sources (such as directorships)) it is a perfectly proper exercise of that responsibility to say that returns should be required when one or more of those factors is present. It again should be noted that each case should be dealt with on its own merits and not all circumstances are covered in the guidance. So, if a notice is given, it follows that it is correctly given, subject to any issue about actual service. The only reason an officer gives a notice is so they can check a person's liability. What they actually know is entirely irrelevant, as is the question of whether they pay tax under PAYE.
The next question I would ask is, where in the legislation does it say that you cannot charge 3 penalties because the returns were issued at one and the same time? It doesn't and any such suggestion is simply a judge making it up.
Again the fault lies partly with HMRC for failing to put a proper case. It is no good arguing that you did not know what the law required. Ignorance is no excuse. Nor is it a valid argument to say that you did not receive a notice because you were working away. A reasonable person (if a reasonable and knowledgeable judge was asked) would take steps to have correspondence forwarded. Failure to do so is not the action of a reasonable person and therefore not a reasonable excuse.
The final element, and the reason the judgement cannot be appealed even if anyone wanted to, is the "exceptional circumstances" point. The judge found as a fact there were such though I struggle to see exactly what he thought these were. It is difficult to understand if there were such, why they applied to two years and not the third.
Overall, I rather suspect the judge was unimpressed by the case put forward by HMRC and lost patience with some of the ridiculous comments that had been made (in this and other cases it seems). He simply made a decision without too much regard to the legal niceties. But I may be wrong!
Still, an interesting case!
Been known for a long time that there is nowhere in statute that forces a company director to do a tax return. I have had many cases where they do not but just as many where they don't require to do one and HMRC have argued they must do one. Yet another example of wasting time and money - not only through legal cases but if the directors they are talking about do not require to do a tax return due to only having employment income (plus some possibly small other amounts covered by other allowances and reliefs) then surely the overall impact would be a significant amount of additional tax returns to receive and check with £0 tax generated?
It never ceases to surprise me just how often letters come out from HMRC which when looked at carefully, seem to reflect the personal views & thoughts of the writer rather than reflecting the correct tax law & procedures. A case like this is, on the most simple cost benefit basis, complete madness. Frankfx makes a very valid point regarding cost and also who is the (in)competent person pursuing the case. Were HMRC seeking to consolidate their own thinking rather than the law on penalties and thereafter seeking use as a precedent? The protagonist within HMRC, you would think, would verify the actual legal standing before wasting time & money on things like this?