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Tax basics: Don’t ignore those HMRC emails

Moving to digital tax proved costly for one taxpayer who discovered that ignoring an HMRC electronic notice to file landed him with £1,300 in late filing penalties.

27th Jan 2020
Head of Insight AccountingWEB
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What happens when you don't read your HMRC notices
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As part of its broader strategy, the tax department has been encouraging taxpayers to switch to paperless communication via their online personal tax account.

The recent tribunal decision in Benjamin Liam Smith vs HMRC (TC07510) sets out the tangle he got into after consenting to paperless filing in June 2016. The following April HMRC posted a notice to file in his online account and sent him an email notifying him about the new message.

Smith had operated a one-person service company up until December 2014, when he took up a full-time job as an employee of a large company.  

Unexpected notice to file

In his testimony before the tribunal convened to hear his reasonable excuse appeal, Smith said he understood from a conversation with HMRC’s helpline in April 2016 that he would not need to file a tax return for 2016-17, so he assumed the email message he received on 6 April 2017 was spam, and deleted it. 

Subsequent HMRC reminders got the same treatment until he received a letter from HMRC informing him that he owed penalties totalling £1,300 for his late 2016-17 tax return.

Agent still in the loop

While working through his personal service company, Smith had authorised AW Fenn to prepare his tax returns. HMRC sent a letter to the adviser in October 2018 about Smith’s £900 late penalties for the 2016-17 return, but AW Fenn said it did not receive the letter and notified HMRC that it was no longer acting for the taxpayer.

The tribunal judges concluded that HMRC had acted in accordance with Mr Smith’s previous and extant instructions and that it was his responsibility to ensure that AW Fenn was removed as his agent.

Was notice “given”?

The taxpayer’s argument was based on the principle that posting a notice within HMRC’s computer system, alerting him about it electronically did not meet the definition of notice being “given” in section 8 of the Taxes Management Act 1970 – a similar, but not identical line of attack in other tribunal cases.

He also argued that HMRC “offered no evidence of any terms of agreement for paperless communication”, saying during the hearing that he had no recollection of agreeing that he would have to go into his online account in order to find out what HMRC wanted to communicate. 

The judges didn’t buy this argument and reminded him of the terms and conditions to which he agreed by ticking the consent to paperless communication box in his personal tax account.

The T&Cs state that “When statutory notices, decisions, estimates and reminders relating to your tax affairs and tax credits are issued to you using your secure online mailbox, a notification email will also be sent to your registered email address to inform you of this,” the decision points out.

Smith told the tribunal that he had read the addresses and first line of the HMRC emails on his smartphone. Having received a number of phishing emails purporting to be from HMRC in the past, he deleted them.

Given the T&Cs he had agreed to, and the content of HMRC’s emails which specifically stated that, unlike most spam emails, “For security reasons, we have not included a link with this email,” the tribunal turned down his reasonable excuse appeal.

What’s expected of a reasonable taxpayer

A reasonable taxpayer who consented to paperless communication would expect to receive some communication from HMRC, the judges decided, and would read more than the first lines of an email from the department on their phone rather than deleting it.

Having viewed the email, the taxpayer would check their online account.

“Even if he was unsure about the spam/not spam status of the email, the reasonable person would know he could safely check his online account using the access codes previously provided,” the tribunal decided.

“We find that Mr Smith did not act reasonably in deleting the email which alerted him to the Notice to File without reading it. As a result, we find that he does not have a reasonable excuse for failing to file his return by the due date.”

The simple lesson from the tribunal judges is that ignoring emails for whatever reason is essentially the same as letting those ominous brown envelopes pile up in the in-tray – foolhardy and potentially expensive.

Replies (3)

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By propraxis
27th Jan 2020 11:16

Hi,

It would have been interesting if the email had not been received if HMRC send out reminders if the online message has not been read as there is no guarantee a sent email will be received.

Regards
SteveB

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By adam.arca
27th Jan 2020 13:08

And this is precisely why I NEVER agree to have anything electronically where I have the option to receive it on paper.

Whether the Revenue like it or not, the psychology of an awful lot of people (obviously including me) is to put a lot more weight on a piece of paper we can see and read rather than some random email.

I actually think pursuing a penalty issue on this is incredibly short-sighted of the Revenue as it will simply discourage people from signing up for electronic communications if / when this issue becomes more widely known (I've already been doing my bit alerting clients to the risks and HMRC are now simply making my argument for me).

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By Cathy Milligan
27th Jan 2020 15:20

On a similar thread, pre MTD, HMRC used to send me (the agent) an email for each client to remind me to file their VAT returns. Post MTD, the emails are only sent now for the non MTD clients?
So where are the emails to the MTD clients going? Or are they not being sent anymore?
Thanks,

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