IF YOU COULD BET on court cases, it is likely you would have got long odds on a taxman win in the Hok case.
The first-tier tribunal had admonished the Revenue for what it saw as deliberately failing to act in "good conscience" after architechtural company Hok missed the May deadline to file its PAYE employer's tax return for the 2010/2011 tax year.
The company's one employee ceased employment midway through the year and Hok was unaware a return still needed to be filed.
However, HMRC did not send the penalty notice until October, which caused the fine to accumulate.
Now, though, the first-tier tribunal has, in turn, been admonished by the upper-tier, with first-tier tibunal judge Geraint Jones QC's ruling described as "not appropriate" and based on "assumption" by Judge Bishopp, who presided over the upper tier ruling.
As a result, the accumulated fines have been restored to £500 - £100 for every month missed.
Bishopp even acknowledged that his decision, along with HMRC's pursuit of the case, might appear unfair in the light of recent changes to the taxman's practice, with regular notices of liabilities now sent out.
Not only that, but Hok's non-presence in court - instead making only written arguments - did not afford it the "benefit of any oral submissions to counter those [arguments] advanced by [HMRC]", said Bishopp.
But quite apart from anything else, the key element here is the extent of the first-tier's jurisdiction.
According to the upper-tier's transcript, numerous first-tier tribunals have adopted similar approaches to that taken by Jones in this case, but HMRC contended that the tribunal's authority did not extend so far as to allow it to discharge penalties.
"If the officer has imposed a penalty in circumstances where one is due, and the penalty imposed is of the correct amount, there is nothing the tribunal is permitted to do", argued the taxman.
Bishopp agreed - in what can only be described as a bloody nose for the first tier - that the tribunal's power was limited to correcting mistakes on fixed penalties; deciding that an officer is wrong in believing a penalty was due or; a penalty was imposed of the wrong amount. Wider powers, though, are to not be available to the first tier.
According to Bishopp, there is no doubt that HMRC should act with fairness, rather what is in doubt is whether "the first-tier tribunal can give effect to that duty, by providing a remedy if it is breached".
He ruled that "the first-tier tribunal does not have any judicial review jurisdiction", and while Hok accepted its liability for a fine in the first instance, Jones's position that there was deliberacy in HMRC's delay in notifying Hok of the fines appears not to have sat well with Bishopp.
The response from the wider tax community has not been what one might call a fanfare.
Indeed, one commentator simply asked: "what is the point in a tribunal that can't consider fairness?", while another branded it "extreme and disproportionate".
The reaction has largely been one of disappointment after the taxpayer's apparently reasonable response and the Revenue's recognition - and implementation of - the need for more regular notification of penalties.
Not only that, some are questioning why the case was brought at all, especially over such a meagre figure as £500.
This, though, was a point of principle for both the taxman, which wanted to ensure the first-tier tribunal sticks strictly to its remit in the future, while simultaneously demonstrating its will pursue all tax liabilities rabidly.
In that, the Revenue has proven successful, and has effectively clipped the first-tier's wings in making an example of Hok.
Just got the £400 first penalty for another of the famous submitted online - receipt never arrived - our fault not followed up- second attempt was successful - but first we knew was a £400 penalty - now we get a £100 penalty for a paper return on same client in 2011, because their system wouldnt accept it on line and we were told to send in paper!!!!! Cant win!!!
Posted by: tony taylor disheartened again!!, 30 Oct 2012 | 08:59
This was an appaling decision bereft of common sense and with no natural justice, We may as well scrap all the tribunals as they are a complete waste of time and resource!
Posted by: Stephen Godfrey, 30 Oct 2012 | 10:50
There is bad law and there is now bad Tribunal decisions as well. Now tax law appears to be guilty and no opportunity to prove innocence. Having said that, Hok's non appearance would not have helped his case any.
Stephen Godfrey is right scrap Tribunals and let the uncontrollable beast that is HMRC do what it pleases. And they wonder why some accountants get involved in "legal" tax mitigation strategies.
Posted by: Ian Gillard, 31 Oct 2012 | 06:45
I've been billed £800 for this: first £400 when we thought it had been submitted correctly (due to ambiguous email) and another £400 after it took HMRC months to process our appeal – they kept the meter running. Now it sounds like pursuing to the tribunal is not worth the effort. Absolutely no fairness about any of this. Who polices HMRC? A private company would not be allowed to get away with it.
Posted by: RW, 24 Dec 2012 | 09:49
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