Hok Ltd will have to pay the maximum fine of £500 for a late employer's PAYE return, as HMRC wins landmark test case
THE TAXMAN has won a landmark ruling to claim several months’ worth of fines from a late PAYE filer.
The company, Hok, will have to pay accumulated fines for the late filing of an employer’s PAYE return to HM Revenue & Customs, after the upper-tier tribunal overturned a first-tier tribunal ruling stating only the first month’s fine was applicable.
Hok had failed to issue its PAYE employer’s 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, HMRC did not send the penalty notice until October, which allowed the fine to accumulate.
Geraint Jones QC had originally ruled that Hok was only liable to pay a £100 fine, effectively due in the first month after the lapse. He strongly criticised HMRC for failing to act in “good conscience”.
While Hok accepted that the return was late and that there was no reasonable excuse for the lateness of its return, the taxman argued the first-tier tribunal “had no jurisdiction to discharge such penalties on the grounds of fairness”.
Judge Colin Bishopp’s decision to allow HMRC’s appeal sees the original fines restored, leaving Hok liable to £500-£100 for every month missed.
In summing up, Judge Bishopp criticised the first-tier ruling, observing that HMRC had made no deliberate attempt to charge the maximum penalty – and there was no evidence to suggest otherwise.
He said: “[The decision] was based entirely upon the judge’s perception that because, as he assumed, a penalty notice could have been sent out within a month, the fact that it was sent later meant that HMRC deliberately delayed.
“He [Geraint Jones QC] appears to have made no enquiry of HMRC about the justification or reasons for the practice and simply dismissed the explanation – which we acknowledge was somewhat opaque – given in the statement of case; and in neither case did the judge give HMRC an opportunity to make representations before condemning their conduct as unfair, even unconscionable.
“Against that background, in our judgment, the [first-tier] tribunal’s comments to that effect were not appropriate.”