Business “lulled into false sense of security” by taxman

A WASTE SOLUTIONS BUSINESS was “lulled into a false sense of security” by an HMRC officer after he failed to warn of accruing penalties despite regularly visiting its premises, a tribunal has found.

The first-tier tax tribual slashed the fees Bales Group owed to HMRC as a result of  payments during 2010/11 to £6,756 after the company appealed.

Bales was visited monthly by a tax officer whose sole task was to collect PAYE payments due and arrange the dates of following instalments, but failed to make any comment about the impact of this arrangement or raise the possibility of penalties.

Bales disputed the original fine of £26,265 in November 2011, which HMRC said it was unable to accept as it found no reasonable excuse. However, based on a case in precedent, the penalty was reduced by HMRC to £22,717.

Bales then collected further information and again requested a review which concluded a reasonable excuse had existed for months one, two and three – when Mrs Bale, responsible for much of the company’s administration, suffered a period of illness – bringing the fine down to £11,928.

In July 2012, Bales took the case to the first-tier tribunal, through which it was discovered an agreement had been reached with HMRC to pay month ten late. As a result the penalty was further reduced to £6,756.

According to one of the company’s directors – appointed in May 2010 – Bales had endured two “terrible” years to October 2011, losing a third of its business and taking significant losses. Indeed, the directors re-mortgaged their homes and took minimal salaries in order to keep it afloat.

He emphasised that the officer “had made it quite clear by both his actions and his words” that when he called, provided Bales paid the PAYE when he next visited that everything would be fine.

He denied that he had ever been warned by HMRC of any potential penalty.

In summing up, tribunal judge Sandy Radford found the visting HMRC had “lulled the appellant into a false sense of security by accepting the dates the appellant agreed to pay the PAYE without mentioning that those late dates would give rise to a penalty”.

Judge Radford added: “the appellant had acted carefully and competently as a reasonable businessman and had tried to pay all its bills and keep its business going”.

The tribunal also held that a lack of knowledge of the penalties “cannot reasonably be an excuse” for late payments, and imposed the £6,752 penalty for the first three months, cancelling fines for months four, five and six.