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sleeping rough

HMRC’s scandalous pursuit of penalties from homeless man

28th Feb 2019
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Julie Cameron considers a lack of flexibility by HMRC towards a taxpayer who had hit rock bottom. The first tier tribunal (FTT) cancelled the late filing penalties.

Krzysztof Pokorowski (TC06970) was sleeping rough or in temporary hostels at the time his 2014/15 tax return was due for filing in January 2016 and HMRC pursued him for late filing penalties.

The maximum £1,600 of penalties had accrued by the time the tax return was submitted on 8 July 2017. The FTT considered HMRC’s refusal to reduce the penalties on the grounds of either reasonable excuse or special circumstance.

It was not disputed that the return had been filed late. The FTT considered the penalty rules in Schedule 55 FA 2009 and the meaning of the terms ‘reasonable excuse’ and ‘special circumstances’ as interpreted in previous cases. In doing so, they criticised HMRC’s choice of cases and remarked that the exclusion of the case reports in the documents provided as evidence was “unfair and unjust”.

Pokorowski represented himself and would not have had ready access to law reports.

No forwarding address

Pokorowski’s life had been in crisis since returning from a visit to Poland in April 2014. He was evicted from his permanent address but did not advise HMRC.

The notice to file a return issued in April 2015 and eventual penalty notices issued between February 2016 and 2017 were sent to his old address and were therefore never received.

Given that he had lost his job, had no money, been evicted and his belongings had been lost or stolen, advising HMRC was perhaps the last thing on his mind. The FTT labelled the tax authority’s insistence in this regard as an absurdity – just what do you tell HMRC if you actually have nowhere to live?

Special circumstance

HMRC had referred to the definition of special circumstances in Clarks of Hove v Bakers Union  as something “out of the ordinary run of events” and the FTT found HMRC’s contention to be flawed – being homeless and sleeping on the streets was exceptional and abnormal.

The tribunal concluded “no reasonable HMRC officer acting reasonably could have reached a decision that Pokorowski’s circumstances were not ‘special’”.

Reasonable excuse

HMRC had maintained that Pokorowski had not exercised reasonable “foresight and due diligence” for his responsibilities under the Taxes Acts, citing the VAT case Clean Car Company [1991] VATTR 234. HMRC also maintained that by definition, such a long delay (a year and five months) could never be considered to be reasonable.

The FTT noted the definition relied on from Clean Car was incomplete.  The full judgement in this case mentioned the effect of health issues or some “difficulty or misfortune” specific to the taxpayer on the ability to comply. 

On the second leg of the reasonable excuse legislation, that the failure must be remedied without unreasonable delay once the excuse has ceased to apply, the FTT found that Pokorowski had complied with his obligations by filing the return within three months of finding permanent accommodation.

The tribunal considered that Pokorowski’s circumstances did amount to a particular difficulty or misfortune, and permitted his reasonable excuse claim, commenting that if the excuse had failed, they would have reduced the penalties to nil as a special reduction.

HMRC was unreasonable

HMRC did not emerge smelling of roses from this case. The FTT considered it likely that Pokorowski had mental health issues over this time, which HMRC should have recognised.

The tax authority was slated for unreasonableness and the sheer absurdity of assuming that someone struggling with the basic needs of Maslow’s hierarchy would have the ability to comply with their tax obligations.

TaxAid can help

Pokorowski was fortunate enough to be able to turn his life round and eventually filed his return without apparently needing third party input.  He was sufficiently recovered to represent himself. 

The features of his life at this low point over a period of some three years: homeless, jobless, no money and precious little personal belongings, strike me as similar to the experiences of the clients of TaxAid. 

This tax charity helps those with tax difficulties who need professional help but lack the means to pay for it.

If HMRC insists on sticking to the rules rigidly, the taxpaying public will need to call more and more on TaxAid and its sister charity: Tax Help for Older People.

Replies (27)

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By claudialowe
28th Feb 2019 15:52

Absolutely shocking that it had to go as far as the FTT to reach a humane decision.

Thanks (5)
By Justin Bryant
28th Feb 2019 18:53

The problem is that this sort of patently outrageous behaviour is all now par for the course for HMRC and they think nothing of kicking people when they are down (we have seen other mental illness cases recently were they overzealously and ruthlessly pursue mentally ill people for tax when it is totally unjustified) or in this case when they are down & out.

Thanks (7)
By GHarr497688
28th Feb 2019 20:32

Disgusted - HMRC have no heart

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By Rebecca.Williams
01st Mar 2019 10:06

I'm fighting HMRC with some very similar circumstances at the moment.

Thanks (1)
Replying to Rebecca.Williams:
By lesley.barnes
01st Mar 2019 11:05

I've just (yesterday) had several tax returns withdrawn and penalties removed. The client hadn't been self employed in my case he had always been PAYE until he lost his job. He had therefore no reason to expect to complete a tax return. The client became homeless, was sleeping rough and in hostels and eventually was sectioned. Initially HMRC refused the exceptional circumstances but following this case we tried again and were successful. Presumably unknown to us HMRC were waiting the outcome of this case. You might get a different response if you try again.

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Replying to Rebecca.Williams:
By Nick Graves
01st Mar 2019 15:21

Rebecca.Williams wrote:

I'm fighting HMRC with some very similar circumstances at the moment.

TBF, after one opens a complaint about the 'computer-says-no' junior, I've found that a senior, sensible and humanistc HMRC officer usually relents.

So persevere!

How this poor guy's case got to FTT though is astounding as well as shameful.

I've seen just how easy it is for someone to fall through the cracks in the system and end up like that.

As an aside, if you cannot even pass client ID checks, how the hell do you get a beancounter to assist you?

Thanks (3)
By mominnz
01st Mar 2019 10:17

1. HMRC doesn’t have crystal ball to see what’s going on in someone’s life
2. People are usually careless and it does not mean that they should be exempt
3. The gentleman already delayed the filing and should have informed HMRC his time line of events.
4. Sleeping rough and running away from circumstances doesn’t solve the matter.
5. Sleeping rough is much much more harder than finding a job I.e cleaning plates in a restaurant. Washing cars. Just to name a few.

I don’t believe sleeping rough and just simply not having a address is a way to address the issue.

In the end by taking into account special circumstances who’s going to fill the tax gap?

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Replying to mominnz:
By G Webber CTA
01st Mar 2019 10:23

I'm assuming that the above is tongue in cheek or heavily sarcastic?

Did you read the case?

Thanks (1)
Replying to mominnz:
By Michael C Feltham
01st Mar 2019 10:31

"5. Sleeping rough is much much more harder than finding a job I.e cleaning plates in a restaurant. Washing cars. Just to name a few.".

Callous and very ill-informed comment.

Clearly, you are so far out of touch with the core truths of this broken and dysfunctional society it is worrying...

Neither washing dishes nor washing cars would create sufficient income for rent; let alone eating, heating and etc.

Presumably, your next bright suggestion would be for this poor man to provide HMRC with a Top Cat style address: i.e. third dustbin past the junction of Poverty Row and Carey Street.

Thanks (6)
Replying to mominnz:
By Stratfan
01st Mar 2019 10:31

You're a real ray of sunshine aren't you? Either that or you're some kind of wind up merchant. Assuming your points are genuine, let me try to address them.

1. HMRC did not need a crystal ball by the time this went to a FTT. They could have dropped the penalty at that point having regard to the taxpayer's circumstances - which anyone can see would have been better than pursuing a penalty from someone who clearly has no money or assets to pay it.
2. This is clearly not a case of carelessness, and you know it.
3. As has been explained above, informing HMRC of your circumstances is not going to be a priority when you're sleeping in shop doorways.
4. Do you really think he chose this way of life?
5. Try getting a job when you have no permanent address.

If your post is indicative of your ability to relate to other people then being an accountant dealing with human clients is probably not a suitable career choice.

Thanks (8)
Replying to mominnz:
By tonyglasbey
01st Mar 2019 12:10 response to yours:

1. The question before the FTT was not should HMRC have levied the penalties in the first place, but should they have withdrawn or reduced them upon hearing the facts on appeal. Crystal balls would not be relevant at this stage;
2. There's some difference between being careless and hitting rock bottom;
3. One is hardly running away if one is sleeping rough, as your point #5 suggests;
4. Absolutely right, but there was hardly a choice after being evicted;
5. Right, so why would anyone sleep rough if they had a choice?

In the end, the tax gap is not going to be filled by the destitute. Perhaps we should be looking for deeper pockets, for example, the hundreds of people who spend hundreds of thousands of pounds avoiding millions in taxation. Ans if we think we're going to bridge the tax gap with penalties that would be a gross misapplication of the money, intended only to encourage timeous and correct return-filing by those required and able to do so.

Thanks (4)
Replying to mominnz:
By cereus77
02nd Mar 2019 22:29

Which tax gap?! They were after the poor guy for filing penalties not tax according to my reading of the article.

Thanks (1)
By G Webber CTA
01st Mar 2019 10:21

This is a - I was about to say "shocking", but in fact, not shocking, but what we have come to expect from a dangerously out of control agency.

This follows a case raised by Treasury Select Committee with HMRC on 30th January. A taxpayer who was mentally ill and incapable of handling her affairs was taken to Tribunal for penalties for late returns. In that hearing Jim Harra claimed that HMRC would not have been aware of the circumstances before the hearing.


Surely the required statement of case and reports make it obvious weeks before the hearing. Surely the Solicitor from HMRC had read the papers before appearing. Surely anybody with an ounce of intelligence would have seen the pointlessness of the case, the damage to HMRC and the cost to the public purse on an unwinnable case.

For this to have to get to Parliament before common sense is seen is frankly indicative of how HMRC is just not listening or even doing its job.

Thanks (3)
By Springfield
01st Mar 2019 10:32

There's no jeopardy for HMRC in Tribunal cases. They either win, or walk away without losing anything.

If HMRC, when losing cases, had to cough up under a doubling up process so that they had to pay the other side twice amount they were claiming, they might be more realistic in the cases they decided to fight.

Unfortunately no government is going to want to side with taxpayers and introduce something like this because the political narrative is always about closing the "tax gap", so in the government's eyes HMRC is always right - even when they're wrong.

Thanks (6)
Replying to Springfield:
By cereus77
02nd Mar 2019 22:32

What an excellent idea - at the moment as with other government agencies such as the Home Office, these people seem to be unaccountable to anybody.

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By dmmarler
01st Mar 2019 10:39

If someone has their penalties, etc., overturned in this sort of circumstance could the judge award compensation for all their efforts to defend themselves, and the stress of dealing with a case? Perhaps if this were so, HMRC would be more careful how it proceeded.

Thanks (5)
By digitalabacus
01st Mar 2019 10:41

I would like to tell you that companies such as Amazon -which through its Luxembourg based European operations only paid 0.5% tax on its 2017 profit of £72m ( Turnover of £ 1.99bn ) - is not the cause of any hole in the UK plc finances. Or that the lack of courage from our MPs to come up with an online sales tax to repair that situation is not the cause of the decline of our high streets. But I would be stealing the truth.

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By Nefertiti
01st Mar 2019 11:00

Yet another example of our ruthlessly greedy and hopelessly incompetent HMRC who focus their efforts on the poor and the homeless instead of the rich and famous where they can get windfalls if successful.

One has to realize that like most other employees in companies, the employees at HMRC are also anxious to prove their worth and justify their salaries so they pursue such pointless cases with extreme vigor to prove how useful they are in their jobs and avoid getting made redundant.

Whilst they focus on squeezing each and every penny out of the impoverished public, the government wastes the taxes collected (by the billions in useless ventures). £2 billion of extra funding on the Brexit farce.

Our beloved PM continues going to Brussels on an almost weekly basis (at our cost) to re-negotiate when the EU keep on saying there is nothing to negotiate from their side. I think its time for us all to realize that our government and tax office no longer look after our best interests anymore. The political and taxation system set up centuries ago no longer serves it citizens but enslaves and punishes them. It is time for a purge.

Thanks (4)
Replying to Nefertiti:
By Colleenw
01st Mar 2019 11:41

"I think its time for us all to realize that our government and tax office no longer look after our best interests anymore. "
Ahem, as if they ever did, or even if this was ever a reason for their existence.

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By why always me
01st Mar 2019 11:12

What an absolute waste of taxpayers money. No doubt the 'genius' who pursued this will be promoted to a higher level as seems the way when it all goes wrong.

If I waste company resources to this extent I expect to be disciplined, too many high on 'power' of there position (which is easy when no real accountability)

Thanks (5)
By AndrewV12
01st Mar 2019 11:24

HMRC- Strong on the weak and weak on the strong. Well maybe not

Thanks (5)
By johnjenkins
01st Mar 2019 11:52

What amazes me about all your comments is your surprise that HMRC took the case to FTT. Andrew got it right. Strong on the weak and weak on the strong. Let's just hope Mominnz doesn't become a tribunal judge.

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Replying to johnjenkins:
By AndrewV12
02nd Mar 2019 14:15

Thank s John for your comment, but don't over relay on anything i write, I was just quoting something Jeremy Corbin said at a rally.... and in the house of commons.... and on the radio anywhere and everywhere he visits in fact.

It stuck in my mind for future reference.

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By tedbuck
01st Mar 2019 12:07

Nefertiti has it just about right. Did you see the letter in the press from some HMRC person who had been allowed to crawl out from under her stone, enthusing about MTD nd how business had embraced it and how good it was for them. Those with software already won't notice the difference but all the others with old software, spreadsheets or manual systems now have to retrain to send HMRC the same information they already get. Progress! These people exist in a world of their own which, along with HMG isn't in the same world as those who pay their salaries. Most of them have absolutely no common sense and no negotiating skills viz Brexit. But HMRC takes the biscuit for outright incompetence. I now make a formal complaint every time they do something stupid which does move things on a bit quicker but they really don't learn.

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By intotheblue
01st Mar 2019 13:06

Reading the above I find some comments very offensive indeed.
Having been touched and indeed still suffering homelessness (no fixed abode) myself for the last 10yrs the plight of homelessness is very close to my heart.
At the time of the 08 crash, myself & wife had a profitable company in construction which ceased trading overnight – it seemed someone had just locked the door, sites closed for months on end with our stock/machinery on them, cash flow began to cease.
Personally – at the same time our marriage also collapsed.
Assets were split 50/50 wife = houses, myself = business assets
After living in the “yard” office for 3yrs work gradually began to return.
Health then took a hit, with a broken back, after 12 hr op, 12 pins 2 plates and the help of friends and family I had to learn to walk again. (which I did)
In 2017 work begun again.
I find it remarkable how a UK citizen, a former high rate taxpayer with a yard full assets cannot even open a business bank account as there is no proof of address!!! The fact a Ltd Co doesn’t need a Co bank account, is not the point. I was brought up to do things right & proper.
DVLA even “suspended” my driving licence as they didn’t like the change of address to a commercial address !
Having had the same treatment from HMRC who sent the obligatory “assessed” demand for taxes based on “previous years” I can relate to this poor chap 100%
Never mind mental wellbeing – where is the support from the .Gov
Now I have to contend with MTD – should be exciting – bring it on
Oh and give the homeless a break when you leave the restaurant next time after a good evening with friends.
Today’s thought - How many paydays are you away from homelessness – think about it

Thanks (7)
By rockallj
02nd Mar 2019 16:54

Never mind all that, Pokorowski should have been applauded by HMRC for trying to sort out his affairs and file his late return only 3 months after being off the streets. That in his desperate need to straighten up his life, he filed his return so quickly when there could have been a myriad other other issues for him to get to grips with, Pokorowski faced his responsbilities head on.

Instead Govt, via HMRC give him a proverbial kick in the teeth. How HMRC could let such a case go to tribunal is beyond me and shows not only an appalling lack of judgement, but dare I say it, humanity from a Govt dept.

Thanks (5)
By ghewitt
05th Mar 2019 16:18

It is necessary for HMRC to chase all these small, easy to bully cases to make up for all the big corporate off-shore-tax haven-avoidance schemes. After all, they have to get the money from somewhere.

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