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31 January
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HMRC misled taxpayer into late filing

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Taxpayer confused his obligations to file personal tax returns and corporate tax returns for his personal company, and incorrect advice from HMRC didn’t help.

29th Jun 2021
Tax Writer
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Oliver Hampel submitted his personal 2015/16 and 2016/17 tax returns more than six months late, on 30 October 2017 and 29 August 2018 respectively. Although the tax returns for his personal company (Progressive) were also filed late, those returns were not the subject of this appeal.

HMRC issued penalties for the late filing of the personal returns, totalling £1,300 for 2015/16 and £1,300 for 2016/17 (ie total penalties of £2,600). The taxpayer appealed [TC08101].

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Replies (20)

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By Paul Crowley
29th Jun 2021 13:32

Yet another DIY blaming others for his lack of understanding.
Should never have been in control of a company without doing a bit of research

Nothing makes sense
HMRC did not him that the personal tax return was filed by filing a company tax return.

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By Eazybean
29th Jun 2021 14:14

Seems to me the client never even had a grasp of the basic reporting requirements for personal and company taxes. Adverts such as QuickBooks send out misleading information that by using their software all the hassle of running a company is taken care off, not that easy I'm afraid.

I phoned up the newly re-emerged agents HMRC helpline with 3 questions and the agent didn't know the answer to any of them but at least he never attempted to answer. Maybe they are told not to guess or answer where there is any reasonable doubt, maybe we will just get 'no comment' answers from now so there is no comeback.

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By Beef curtains
29th Jun 2021 14:21

Good on the FTT for pulling the Revenue's chain. As it has become more and more inefficient it has become more and more unreasonable and dictatorial.

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By SteveHa
29th Jun 2021 14:40

Since when was proportionality a defence against a legislated penalty? The tribunals have repeatedly dismissed this as an argument, until suddenly it's accepted.

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Replying to SteveHa:
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By richard thomas
29th Jun 2021 15:18

Since 2007, but normally only through JR. But see [77] to [92] of the decision which explains that proportionality questions can arise in relation to "special circumstances".

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Replying to SteveHa:
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By Roland195
30th Jun 2021 08:10

I'm certain I have read the results of many other similar cases where proportionality was not considered as although the tribunal sympathises, the penalties are set by statute and is not within the power of the tribunal to vary, so our hands are tied. What's the special circumstance here?

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Replying to Roland195:
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By richard thomas
30th Jun 2021 08:51

May I suggest that you read the paragraphs of the decision that I referred to in my earlier post. The law in this area is continually developing, particularly as the Upper Tribunal hears more cases on penalties and excellent judges like Barbara Mosedale in the FTT explore the boundaries of "special circumstances" and don't fall for the HMRC line.

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By GHarr497688
29th Jun 2021 15:54

Maybe a test for Self Employed people should take place before HMRC allows a taxpayer to become Self Employed. Although No perhaps not as no one would be self employed lol !!

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Replying to GHarr497688:
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By eppingaccountant
30th Jun 2021 13:35

...and maybe a test before people write naff comments on Accountingweb?

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Replying to eppingaccountant:
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By GHarr497688
30th Jun 2021 17:40

It's joke - lighten up baby.

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By Winnie Wiggleroom
30th Jun 2021 08:13

I have always said, there should be a legal requirement for anyone operating a company to engage an properly qualified (by experience or otherwise) accountant, when you look at some of the requests on Bark for example there are literally thousands of Company Directors operating companies DIY that have no idea at all what they are doing.

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Replying to Winnie Wiggleroom:
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By Dr Fauci
30th Jun 2021 11:00

Engaging a qualified accountant is no guarantee of things been done properly. I have seen some absolute howlers in my time by qualified people who should hang their heads in shame.

Also, the focus seems to be at the lower end of the market. If auditors did their job properly the tax payer wouldn't be scr3wed out of huge tax liabilities rather than the peanut their stand to claim from a self-employed person. Carillion, Patisserie Valerie, Wirecard....the list is endless.

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By mhkay
30th Jun 2021 09:43

The problem with these calls to official help lines is that they assume you know what they're talking about. I've just had a call with the Irish VAT MOSS people - a wonderfully helpful lady on the other end of the phone, but she just couldn't grasp that I didn't know the difference between a RAN and a ROS.

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By Self-Employed and Happy
30th Jun 2021 09:47

Firstly, if the tax payer was unsure of his obligations then he should have hired an accountant. No excuse whatsoever to not understand your liabilities as a Director and from a Self Assessment perspective.

On that point alone I would not have reduced to £500 but probably halved to £1,300.

Secondly, at a time when HMRC sort of want to cut out Accountants this highlights more than ever that they don't have the expertise in their ranks to do so, their attempts to do so will just cost us (the taxpayer) more money as HMRC continue to fend off appeals / waste time talking to taxpayers that don't know their [***] from their elbow.

Accountants should be given a far greater level of access to client information / portal items, this alone would save us time and save them time as we wouldn't have to contact them as much.

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By Rgab1947
30th Jun 2021 09:49

Interesting the comments from readers here that there is a total lack of understanding of the basics of being in business yourself (not helped by QB ads) and that there should be some form of understanding before being allowed to be in business.

In the one jurisdiction I am aware of, before you are allowed to run a business you have to go on a business course so you have a basic understanding of the applicable laws and tax regime. Its not heavy academic but practical in nature.

I am fully in support of that.

That same jurisdiction has no sympathies if you do not follow the rules and hence much "admin bureaus" who do the admin work including filing (also of non tax filings). Often these are adjuncts of accounting practices.

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Replying to Rgab1947:
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By David S Ward
30th Jun 2021 11:34

The problem seems to be that everyone who went into business a few years back thought it best to set up a company, and the tax system did encourage that. While I can accept that some self employed taxpayers may be able operate without an accountant, very few company directors are capable of submitting and filing accounts, CT returns and dealing with dividends on their SA returns themselves. I don't think HMRC/Companies House can compel them to use an accountant but I think it's right to suggest they should budget to pay some accountancy fees.

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By Mr J Andrews
30th Jun 2021 09:59

Dear Lucy
Can you - or one of your Tax Writer colleagues - explain what constitutes ''Late Filing'' for personal tax returns nowadays.
We are all aware of the 31 January final filing deadline - which assumes the previous 6 April issue date.
HMRC certainly issue the formal SA Notices { Form SA 316 } showing the issue date as 6 April but we all know the notices are issued in batches not just days after 6 April, but weeks - and I daresay from what some clients advise of the ''received'' date - months after the 6 April date shown on SA316.
I continue to maintain this form of backdating is tantamount to nothing short of fraud. It is certainly not unintentional misleading by the Revenue and I wonder what the FTT would make of a Return filed one week late where the formal notice was received 10 weeks after the blatantly erroneous issue date.
Or is there one rule for HMRC and another for Joe Public as far as backdating documents is concerned ?

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Replying to Mr J Andrews:
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By richard thomas
30th Jun 2021 18:15

Although I am not Lucy, nor a Tax Writer for AWeb, I am a retired judge of the FTT (Tax Chamber) so I am giving you a response to your wondering about what the FTT would make of the situation you describe.

The FTT can only decide an appeal on the basis of the grounds put forward by the appellant, unless the judge considers that a clear point of law in favour of one or the other party had not been raised but would determine the outcome. In such a case the judge would give each party the right to make submissions of law.

So to get the appeal before the FTT in a case involving a penalty under Schedule 55 FA 2009 the appellant will have had to argue that they had a reasonable excuse for failing to file on time, or there were special circumstances which HMRC had not taken into account or the assessment was procedurally flawed.

I am going to assume that the appellant in your putative appeal claimed to have a reasonable excuse because they did not receive the notice to file until, say, 31 July although it was dated 6 April.

My decision would be that the penalty stands, for the following reasons.

The date that a notice to file is received is, in this case, irrelevant. Section 8(1D) TMA 1970 relevantly says-

“A return under this section for a year of assessment (Year 1) must be delivered—
(b) in the case of an electronic return, on or before 31st January in Year 2.”

If it is filed after 31 January then that constitutes “late filing” (an answer to the question in your first paragraph).

There is nothing in section 8 TMA that allows an extension of the time for filing because the notice to file was issued after 6 April, unless the (in this case) irrelevant circumstances set out in subsections (1F) and (1G) apply. Where subsection (1G) (electronic returns) applies because the notice to file was “given” after 31 October, the time is 3 months from the “date of the notice”.

This subsection only makes sense if the “date of the notice” is the date it was given. There is an argument whether a notice is “given” on the date it leaves the sender or the date it is received by the recipient and about the possible effect of section 115 TMA and section 7 Interpretation Act 1978. But in the presumed factual circumstances here it is irrelevant whether that date is 6 April or 31 July or 31 October. It might be relevant if a notice to file was received on 2 November dated 6 April, but as I understand it HMRC will always send the notice in the first few months of the tax year.

The receipt of the notice to file on 31 July cannot conceivably have affected the client’s ability to file by at the latest 31 January. Any taxpayer and any accountant will know that a tax return is required each year by 31 January. Any accountant will know that a notice to file must be given before there can be a valid penalty for failure to file. So even if the taxpayer is in the habit of filing the return at the earliest opportunity (eg to get a repayment) no accountant is going to advise them not to do any work on the return and no accountant is going to wait before doing their work on it until they are in possession of a notice to file.
Any claim that the receipt of a notice at a time after 6 April gives them a reasonable excuse is laughable.

Nothing said above should be seen as condoning what is a misleading practice by HMRC, sending out formal notices many weeks after the date on them. But I wholly fail to see how it can be “tantamount to fraud”. How has anyone been defrauded? For the reasons given above, the HMRC practice does not actually cause any taxpayer to suffer a penalty for late filing.

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Replying to richard thomas:
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By Moo
01st Jul 2021 11:16

'Any accountant will know that a notice to file must be given before there can be a valid penalty for failure to file.'
This is an interesting point because frequently the notice to file is not 'given' to the taxpayer at all but sent to accountants who have at some point acted as agent. i.e. addressed to the taxpayer but at the accountant's office address as if that was the home address of the taxpayer. For several tax years I was getting hundreds of these each year, far too many to reasonably be expected to forward on to the taxpayer so they were being bundled up en masse and sent back to HMRC with a letter saying they were not properly served and needed to be re-sent to the taxpayer. I only eventually managed to stop them with the help of a CIOT 'working together' representative who took the matter up with a tax human with a brain. Seems it was a database error at HMRC.

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By North East Accountant
30th Jun 2021 13:28

Surely I just need to press a button on my phone and it's all done.....

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