Another tribunal case has concluded that the evidence presented by HMRC wasn’t sufficient to prove that a notice to file was actually sent to the taxpayer.
Last year in the case of Loial Judge Geraint Jones upheld the taxpayer’s appeal because HMRC could not provide adequate evidence that notices to file had been validly issued. The same judge has recently heard a similar case, George Pantelli (TC06929), and has come to a very similar conclusion.
Pantelli was charged penalties for failing to file tax returns on time for 2014/15 and 2015/16, against which he appealed. He argued that he had not received notices to file returns (under TMA 1970 s 8) for those years.
The only evidence provided by HMRC was a printout from the computerised “return summary”, which indicated return issue dates of 6 April 2015 and 6 April 2016 for the two respective years.
Burden of proof
In a penalties case, it is incumbent on HMRC to prove (to the civil evidence standard of “balance of probabilities”) every step which led up to the imposition of the penalty. In this case, that would require proving that:
- A notice to file a tax return was validly issued to the taxpayer’s most recent known address; and
- The taxpayer failed to submit a return by the due date specified by the notice.
Pantelli did not meet the 31 January filing deadlines because (he argues) he had not received filing notices requiring him to do so.
This case, therefore, hinged on the proof of the first element. If Pantelli had conceded that he received the notices to file, the job would be done. However, since Pantelli argued that he had not received any notices, it was for HMRC to prove those notices were correctly issued.
Note that HMRC didn’t have to prove that Pantelli received the notices: merely that the notices were sent to the most recent address shown for him on their records.
Observations of Judge Jones
The date of 6 April appears on virtually every taxpayer’s return summary. No one with any experience of the tax system believes this to mean literally that a notice was posted on that date.
“In reality HMRC sends out notices to file on a staggered basis because, logistically, it could not hand over to the Royal Mail the huge volume of letters which it would need to send if every taxpayer was sent a notice to file on the same day of each year. Nonetheless, that would have to be the factual situation for that record to be true,” said the judge.
He noted: “The record is therefore inherently improbable and unreliable. It may well be that HMRC sends out some notices to file on 6 April in each year, but there is, literally, no reliable evidence to show that that happened in the case of this appellant on 6 April 2015 and/or 6 April 2016, or indeed on any other date”.
“Even if HMRC could show that a notice to file was intended to be sent to this appellant on each of those dates, there is no evidence to show that any such notices to file were actually sent,” the judge continued. “That is because even if the date shown in the return summary, whether inserted by a person or a computer, is accurate, it falls far short of evidencing and proving actual dispatch of any particular document,” [emphasis added].
The judge acknowledged that it is not always possible for an employee of a large organisation to provide witness evidence that they placed a notice in a correctly addressed envelope, and the correct postage was paid before the letter was given to the Royal Mail. For this reason, tribunals do admit evidence which, if sufficiently detailed and cogent, can be sufficient to discharge the burden of proof that a notice was sent.
However, in this case, HMRC had not seen fit to offer any such evidence.
The penalties were cancelled, and Judge Jones again commented: “whatever form the admissible evidence takes, adequate evidence is a necessity; not a luxury”.
Trust in the system
This case highlights a failure by the HMRC officers who prepare cases for tribunal. The aim should be to prepare evidence to focus firmly on the point of fact or law being appealed.
In Pantelli the sole ground of appeal was that the taxpayer had not received notices (and, by extension, that they had not been posted to him). Yet HMRC offered no cogent proof of postage.
Would HMRC have accepted a taxpayer claiming “here is a note I made in my diary on 10 January saying I had completed my return; surely this proves that I did post it before 31 January…”? Of course not, and it is only right that the same standards apply to HMRC as to ordinary citizens.
HMRC’s internal systems are opaque, to say the least, and tribunals are right not to give blind trust to the robustness of those systems.