Save content
Have you found this content useful? Use the button above to save it to your profile.
self assessment tax return form

Taxpayer was victim of PAYE foul-up

26th Oct 2018
Save content
Have you found this content useful? Use the button above to save it to your profile.

HMRC attempted to use a self assessment tax return to collect tax which was only due because of its own mistakes. The first tier tribunal (FTT) cancelled all the late filing penalties.

Michael Griffiths (TC06697) was the victim of a PAYE foul-up by HMRC which resulted in his being served with a notice to file a self assessment tax return for 2013/14.


HMRC’s PAYE computer issued Griffiths with a tax calculation on 31 May 2014. Unfortunately, it only took into account one of his two employments and generated an overpayment of £579.80. A payable order was issued on 1 June, which he received on 3 June and duly banked.

Meanwhile, on 2 June, the computer issued a revised calculation which took account of all his income. Griffiths had, in fact, underpaid tax by 80p for the tax year (which would have been simple either to code out or to discharge). However, because of the payable order issue one day earlier the consequence was an “underpayment” of £581.60.

Putting it right

Griffiths rang HMRC and was assured that the money would be collected through his PAYE code. At the tribunal, HMRC could produce no record of the call, but the judge noted (citing Capuano TC06371) that HMRC’s level of customer service at the relevant time had been so “abysmal” that it was reasonable to believe the conversation took place.

Unfortunately, Griffiths’ level of earnings was too low for the “underpayment” to be coded out. HMRC did nothing for over eight months (by which time Griffiths assumed that the matter had been dealt with), then issued a “voluntary payment letter” which stated they would issue him with a self assessment return if he did not pay the £581.60.

Once again, Griffiths rang HMRC. This time there was a record on the file, although the judge had difficulty interpreting it. It appeared that once again Griffiths was reassured that the money could, and would, be coded out.

Another year or more passed, and then on 28 July 2016 HMRC issued a notice to file a self assessment tax return.

Confused and concerned

Griffiths was now worried and confused:

  • HMRC had told him on two separate occasions that they would be coding out the debt.
  • Griffiths’ tax affairs had always been dealt with under PAYE. He thought self assessment tax returns only applied to self-employed people.

Around this time, there were numerous reports of scams involving correspondence which purported to come from HMRC. Griffiths’ fears of being caught up in a scam were further stoked by the arrival of penalty notices, which did not tally at all with what he was expecting from his relationship with HMRC.

In April 2017 he instructed an agent, who submitted the outstanding tax return in June 2017.

Reasonable excuse

The FTT judge concluded that Griffiths certainly would have a reasonable excuse for the delay in filing his return.

The test, as elaborated by the upper tribunal in Perrin [2018] UKUT 156, requires that “the experience, knowledge and other attributes of the particular taxpayer should be taken into account, as well as the situation in which that taxpayer was at the relevant time”.

Griffiths had not been issued with a paper return, merely a notice to file. Obtaining a paper return involved navigating the HMRC computer system, and seeking more help would involve calling the helpline whose performance “at the time was abysmal; half of calls to HMRC were not answered”. The judge was referring to the scathing National Audit Office (NAO) reports discussed in the Capuano case.

The long delays by HMRC, which led Griffiths to believe everything had been sorted out, along with the telephone assurances that it would all be handled through the PAYE code, did not help. When the penalty notices arrived, it was at a time of much publicity regarding scammers pretending to be HMRC asking for money.

Taking account of all the circumstances of the case, the judge was sure that Griffiths would have had a reasonable excuse. But did he even need one?

Invalid notice

The judge reviewed and agreed with Judge Richard Thomas’ judgment in Goldsmith (TC06284), which dealt with a situation very similar to that of Griffiths.

Section 8 of TMA 1970 empowers an officer of HMRC to issue a notice “for the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, and the amount payable by him by way of income tax for that year”.

Where a P800 tax calculation has been issued HMRC is already aware to its own satisfaction of exactly how much income the taxpayer had, and how much tax he or she owes.

These were not matters that needed to be established, and so the notice to file a return was not made for the reason mandated by legislation. Accordingly, the notice was invalid, and any penalties based upon not complying with the notice would also be invalid.

Judge McKeever joined the growing consensus among FTT judges that a self assessment tax return should not be used as a means of collecting known amounts of PAYE underpayments.


HMRC has once again made a rod for its own back. This case was a “perfect storm” of SNAFUs: an error by the infamous PAYE computer; the abysmal customer service so heavily slated by the NAO; the long delays which added to the all-round confusion; and the inappropriate use of self assessment to rectify a PAYE problem.

In the future, there should be fewer such cases, as the new simple assessment system (TMA 1970 s28H) is now the approved method of dealing with this type of situation.

Replies (17)

Please login or register to join the discussion.

By possep
26th Oct 2018 16:32

Goldsmith has been listed for the UT. Surely if you make reference to the FTT case you should have acknowledged that there is an open appeal.

UT/2018/0037 10 Apr 2018 HMRC v David Goldsmith Substantive Royal Courts of Justice, Rolls Building, Fetter Lane London EC4A 1NL Date/time: 2 days, starting 22,23 or 24 July 2019, TBC

Thanks (0)
Replying to possep:
Head of woman
By Rebecca Cave
27th Oct 2018 11:02

Thanks. I wasn't aware that Goldsmith was listed at the UT. I will watch that case with interest.

Thanks (0)
By Nefertiti
29th Oct 2018 10:51

Quote: that HMRC’s level of customer service at the relevant time had been so “abysmal”
Truth be known HMRC level of customer service is ALWAYS abysmal. It is common to wait up to 40 minutes for a very basic query to be resolved as the staff they hire are disinterested and lack rudimentary common sense.
I spent an hour explaining to a "thick" person that someone at their end had erroneously misallocated a PAYE payment to the wrong company, resulting in an underpayment in one and an overpayment in the other.

After waiting the customary 5 minutes of drab music (in addition to the 20 minutes I spent waiting to get through), she took me through a pile of security questions, then failed to (or refused to) understand the issue.

I was asked for the payment details, bank sort code, account number etc, when the payment was made, how much it was for exactly, do I have a statement to prove it left my account etc. etc.

At each stage she would keep me hanging on to ask another "dumbo" at her end for advice. Finally after 30 minutes I lost my temper and told her that this was not "rocket science", all she had to to was to look at the other company to find the exact same amount as an overpayment, made by our firm.

She then got quite rude and kept me on hold for another 3 minutes, when she got back I demanded to talk to her manager or supervisor but she refused to put me through. Finally the saga ended with her saying she would call me back as soon as she had "figured out" what had gone wrong. Needless to say I never heard from her ever again.

Forced to make another phone call and go through the whole effort again after another 10 days before someone finally resolved it.

What a shambles from the tax authority that pounces on citizens for penalties and interest over each and every small mistake claiming they were negligent and deliberate whilst they themselves provide such a useless, shoddy service.

The government should charge the tax office penalties for their own incompetence and negligence too.

Thanks (2)
Replying to Nefertiti:
By ruth.julian
30th Oct 2018 11:32

Nefertiti's experience is repeated many times a day as most HMRC call centre staff have no taxes background and work from a script. Of the rest, it is potluck whether their previous career in taxes relates to the customer query they are handling now, and if they know someone in the rest of HMRC who could help answer what is not in their script. The managers/supervisors are in the same boat and their time is taken up with management/administration and rarely in keeping up any tax technical knowledge.

Thanks (3)
Replying to Nefertiti:
By sammerchant
11th Nov 2018 13:25

The first thing I do when I ring HMRC is time the call... exactly, to the minute. I then get the name of the person I am speaking to. Rarely will anyone of HMRC staff give you their surname. This is ostensibly to avoid being trolled on social media.

You then have the makings of a specific complaint as all calls are recorded.

Thanks (0)
By Mr J Andrews
29th Oct 2018 12:05

So , the FTT judge mentioned on no less than two occasions that the level of HMRC customer service at the time was abysmal. No doubt the criticism would be escalated if the tribunal was taking place now.
Just hope Griffiths was suitably compensated.

Thanks (2)
By tedbuck
29th Oct 2018 14:33

I had a better one the other week. HMRC decided to code a notional underpayment into the 2017/18 taxpayer's code.

Then when the tax return went in they decided that this was a prior year's underpayment and deducted it from the current year's repayment.

Nice one that don't you think?

2 days later we had another exactly the same - is this a new way of getting extra revenue?

At about the same time we had a taxpayer told she was resident in Scotland because she worked for a Scottish Company despite the fact that her address was a few miles, <10, from the centre of England.

Perhaps this is a new way of getting more money for the Sturgeon!

Good fun!

Thanks (2)
Replying to tedbuck:
By Homeworker
29th Oct 2018 18:05


"I had a better one the other week. HMRC decided to code a notional underpayment into the 2017/18 taxpayer's code.

Then when the tax return went in they decided that this was a prior year's underpayment and deducted it from the current year's repayment."

I've had a couple of these too. It is apparently a "known" problem and I suspect quite widespread. I wonder how many unrepresented taxpayers will not notice/realise.

Thanks (2)
By whitevanman
29th Oct 2018 15:39

HMRC may indeed provide poor customer service some (most?) of the time but that is no excuse for yet another judge at FTT getting it completely wrong as well!
Just because HMRC knows the PAYE details does not mean they know conclusively, what a person's income is not what claims he wishes to make. That is achieved by issuing a return (or more accurately a price to file) and receiving a completed return and self assessment. That is the process parliament have legislated. The P800 is an "informal" route that cannot be enforced. So if it fails to secure the desired result, the formal, legal route is the only one. If only the judges understood these simple points it would be so much better and everyone would be saved the time of reading their drivel.
As to reasonable excuse etc, is it reasonable to cash the cheque after being told it was wrong? Or to keep the money. Also, the judge accepted he called HMRC despite their being no independent evidence, simply because HMRC were, apparently, rubbish at answering the phone. This man says they answered so they weren't bad on that occasion. What evidence did the judge have that they didn't make notes of all calls?
Further, whatever he was told about coding, he received other communications that he ignored and cited "scams" as part of his excuse. Really? Which scammers sent cheques out?
Simply another case where HMRC cocked up the case and the judge made up her own rules.

Thanks (0)
Replying to whitevanman:
By possep
29th Oct 2018 16:50

The P800 can be enforced but it shouldn't be done through SA. The Goldsmith case notes explain the correct procedure.

Thanks (1)
Replying to possep:
By whitevanman
29th Oct 2018 17:24

possep wrote:

The P800 can be enforced but it shouldn't be done through SA. The Goldsmith case notes explain the correct procedure.

I don't believe S29 is appropriate. As stated in my earlier post it all assumes HMRC know what a taxpayers circumstances are and that is not the case without a return. S29 (under Self Assessment) is aimed at circumstances where something is discovered which was not included in a return, where the enquiry time limits have passed. It is not an alternative to a return and should not be used as such. Suppose HMRC made an assessment and the taxpayer felt he was entitled to some additional allowance etc or indeed had another source of income. It is one thing to have a general aim of minimising the number of people required to make returns but that should not apply at the expense of proper collection and administration.
Thanks (0)
Replying to whitevanman:
By richardterhorst
30th Oct 2018 09:01

Sorry, do you work for HMRC?

Personally I think judges get it right a lot more than HMRC. At least they give some protection againts HMRC averice.

Thanks (3)
Replying to richardterhorst:
By whitevanman
30th Oct 2018 11:12

I do not work for HMRC but I did so for a long time and whilst accepting HMRC gets it wrong too often, I think some tribunal judges are catching them up.
Take the Goldsmith case, how can HMRC use S29? It requires there to be an insufficiency in an assessment before the section can be used. There must be an amount that "ought" to have been assessed. Under SA the only time something "ought" to be assessed is when HMRC issues a notice requiring a return. The only assessment outside S29 is a self assessment which is made by the taxpayer as part of a self assessment return. So, no return, n0 access to S29 (for present purposes). The P800 is not enforceable and even the judgement tacitly accepts that. If it were, why would you need a s29 assessment? It would be that assessment that was enforceable not the p800. The judge even acknowledges in the notes that others have ruled that the p800 is NOT an assessment but chooses to ignore that, preferring her own interpretation.
I could go on at length about things she got wrong but suffice it to say that on this central issue she is, in my view, completely wrong and hopefully, when Goldsmith goes to the UTT that will be proven.
I would add that I have no HMRC bias here. I just feel both sides should l0ok at what the law says and apply it properly thereby saving everyone the unnecessary waste of time that is a poorly presented case.

Thanks (0)
By DenholmHay
29th Oct 2018 16:00

HMRC's service is always very poor and - as though it wasn't possible - it's actually getting worse.

We took on a simple case where a Taxpayer's accountant had retired without telling anyone. The Taxpayer had paid tax at source under CIS and his records had been left with his previous agent - who had disappeared. A simple case - contact HMRC - find out how much he had already paid - and see if the Taxpayer is due a bill or a refund. 5 years later HMRC are still refusing to let us have the data on how much has been paid at source and, instead, are insisting on payment in full to the exclusion of payments already made.

I notice that virtually all "errors" are in favour of HMRC - by fluke of course.

Thanks (2)
Replying to DenholmHay:
By vodkaqueen
29th Oct 2018 16:38

I have been told by two of HMRC staff that there were no CIS payments on my client's account - the contractor he worked to went bust and client couldn't find his CIS certs. To cut a long story short I tracked them down, filed his SA and he received a sizeable refund no problem. I don't know if HMRC were either lying the first time, were incompentent or their systems didn't check the refund. I am assuming that HMRC would be able to somehow ascertain there were no payments on account if indeed that were the case but I'm none the wiser.

Thanks (2)
Replying to DenholmHay:
By possep
30th Oct 2018 09:17

From a previous AWEB post (I have also had luck by contacting this address and had no payment info at all)

Customs House
Carbane Way
Carbane Industrial Estate
County Down
BT35 6QG

You need to state:
Taxpayers name / reference
and for each Contractor:
Reference No (if known)
Dates worked
Payments made
Reason Why querying HMRC (e.g. cant get info from contractor)

Thanks (1)
By djtax
31st Oct 2018 10:24

So why don't enough of us make formal complaints (even though, as I appreciate, it is a convoluted process)? If we always did so HMRC might just get the message that all is not well. Too many of us (and our clients) do not always give HMRC the feedback they deserve so is it surprising that some of their remote higher up top people think the level of their service is acceptable?

Thanks (0)