Court of Appeal to create precedent on the issuing of penalty notices
THE TAXMAN is to challenge a tribunal ruling that criticised its practice of allowing fines to accumulate before issuing penalty notices.
The claimant in the original decision, Hok Ltd, did not issue its PAYE employers return by the May deadline. The company’s one employee ceased employment midway through the year and Hok was unaware a return still needed to be filed. However, HM Revenue & Customs did not send the penalty notice until October, which allowed the fine to accumulate.
Geraint Jones QC (pictured) ruled that Hok was only liable to pay the £100 original fine. He strongly criticised HMRC for failing to act in good conscience. “In our judgement there is nothing fair or reasonable in setting a computer system so that it does not generate a penalty notice until four months have gone by from the date of default,” he said.
“We are in no doubt that the computer system could easily be set to generate a single £100 penalty notice immediately after the 19 May in each year. That is the course that a fair organ of the state, acting in good conscience towards the citizens of the state, would adopt,” the judgement added.
Jones also ruled on several other similar cases. HMRC’s decision to challenge the rulings would result in a binding decision in the Court of Appeal that could lead to the taxman changing its processes if it was unsuccessful.