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Taxpayer defeat for non-filing of SA return

17th Feb 2012
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A recent tax tribunal case about an appeal against late-filing penalties appears to showed “muddled thinking” on the requirements of when to file a tax return, according to Smith & Williamson.

In the case Julie Hawkins v HMRC (TC01764) a woman appealed against a penalty of £200 for the late filing of her tax return for the 2008-9 tax year and for surcharges totalling £824.48 for non-payment of the tax due.

Hawkins stopped being self-employed in January 2008. She became employed and started to pay tax through PAYE. She submitted a tax return for 2007-08 on 16 January 2009, notifying HMRC that she had ceased to be self-employed in January 2008.

Hawkins said she didn’t know she needed to complete a tax return for 2008-09 because she had not received the ‘notice to file’, which was sent out on 6 April 2009.

Hawkins also appeared unaware of the fact that she had been underpaying tax, through PAYE, for the whole period between January 2008 and 5 April 2009. She was surprised when more tax started to be deducted from her income in June 2009, for the tax year from 6 April 2009 to 5 April 2010, the tribunal heard.

There was conflicting evidence about when Hawkins filed her tax return. The tribunal decided that HMRC probably received Hawkin’s tax return on 8 October 2010.

The tribunal judge, Barbara King, decided that Hawkins had not shown a reasonable excuse for the late submission of her tax return.

King said: “The appellant was required to complete a tax return until she was notified to the contrary by HMRC. The onus was on her to obtain a form and to make an assessment of the tax due unless she submitted the form in sufficient time, in accordance with section 9 Taxes Management Act 1970, for HMRC to calculate the tax due and to inform the Appellant of this by the relevant date when it was 5 due for payment, which in this case was 31 January 2010.”

Smith & Williamson said the case appeared to show confusion between the “requirement to file a tax return and the obligation to notify HMRC of a liability to tax”.

What constitutes a reasonable excuse is not defined by legislation, making it hard to know for taxpayers appealing against a tax penalty to judge how strong their case is. As monitored in AccountingWEB's Reasonable Excuse scorecard, over the past year a growing list of tribunals has taken a more lenient view.

HMRC guidance gives examples of acceptable reasonable excuses. While not a definitive legal statement, the reasons include:

  • life-threatening illness, for example a heart attack that prevents you dealing with your tax affairs
  • the death of a partner shortly before a payment or tax return deadline
  • unexpected or unforeseeable postal delays
  • important documents lost, through theft, fire or flood, that can't be replaced in time
  • late receipt of your online Activation Code, User ID or password even though you asked for them before the tax return deadline

Replies (3)

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By Stalytax
20th Feb 2012 15:34

'The appellant was required to complete a tax return until she was notified to the contrary by HMRC.'

Is that correct? If she ceased to be self employed in 2007/8, told them so on her return and really received no notice to file for 2008/9, then I would have thought that, in the absence of psychic powers she behaved quite reasonably.



Thanks (0)
By cameret
21st Feb 2012 14:49

'The appellant was required'[

I agree with Stalytax that the judgement seems odd.

I had assumed that if HMRC were notified of a cessation date on a return, within the allowed time limits, but subsequently required a return for the following tax year, you could argue that the return was issued by mistake?

I successfully appealed against fines for a partnership on the basis that I had submitted an emended assessment advising HMRC of a cessation prior to 5th April 2009, even though they had issued a requirement to return for the following tax year on 6 th April 2009. My appeal was simply on the basis that I had advised them of a cessation, and that the issue of a subsequent return was therefore a mistake on their part. 

It raises the general question of whether HMRC can issue an assessment, with no evidence that the taxpayer might need to complete one, within the requirements of self assessment?

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By Alan Ferris
21st Feb 2012 16:50

Just because you cease to be self employed does not mean you would not be required to complete a Self Assessment return.  Therefore it is irrelevant if the box is complete or not.

Thanks (1)