HMRC continues criticised penalty practices

THE TAXMAN is still issuing penalties using practices that have been derided by recent tribunal rulings, Accountancy Age has learnt.

In two recent cases reported by Accountancy Age, Hok Limited & HMD Response International v HM Revenue & Customs, the tribunal criticised the tax authority over the issuing of penalty notices for employer’s end of year returns for the 2009/10 tax year. HMRC had sent out penalty notices months after the deadline, which allowed the penalties to accumulate.

Geraint Jones QC (pictured) said: “There can be no logical reason whatsoever for HMRC to delay sending out a penalty notice for four months so that, in effect, a minimum penalty of £500 will be levied unless the taxpayer has unilaterally realised that it has failed to undertake the necessary filing.”

“That is the course that a fair organ of the state, acting in good conscience towards the citizens of the state, would adopt,” he added.

However, HMRC has not updated its systems to send the penalty notices before the fines begin to accumulate. One letter, dated 26 September and seen by Accountancy Age, charges the taxpayer £400 over the period May to September this year. This was the first letter sent to the taxpayer about the fine.

Richard Godmon, tax partner at Menzies, said that his firm had seen more of these letters over the past few weeks.

Another taxpayer received a similar notice about an error made while submitting their end-of-year employer return. Unbeknownst to the taxpayer, their tax return had only been submitted as a test. The business received an email titled “SuccessResponse” with messages that said “this submission would have been successfully processed if sent under non test conditions” and “the EOY Return has been processed and passed full validation”. The taxpayer’s fine had also accumulated.

However, in the Writtle College Services v HMRC case, tribunal judge Anne Redston found in favour of the taxpayer in similar circumstances for the tax year 2009/10.

Nigel May, tax partner at McIntyre Hudson, said: “HMRC seem to have steamrollered through regardless of the findings of the first tier tribunal in cases which would seem to be directly applicable.”


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