A couple of recent good news cases for taxpayers regarding penalties.
First, HMD Response International v CRC (TC01322) – this referred to a penalty over a late P35. A monthly penalty of £100 was assessed in September 2010 for late filing of the P35 due in May, as four months had elapsed the penalty was £400. The tax tribunal made several interesting points:
~ as the penalty was quasi criminal it was up to HMRC to prove that the return was late and the penalty was due, not for the taxpayer to disprove it.
~ HMRC owed the taxpayer a common law duty of fairness and was not compelled to issue a penalty.
~ it was wrong for HMRC to review penalties on the basis of the taxpayer having to disprove the penalty.
~ it was wrong of HMRC to delay sending out the penalty until after four months had expired when the amount increased monthly.
The tribunal upheld the appeal by the taxpayer, saying HMRC “has neiter acted fairly nor in good conscience”. Ouch.
There is a write up here and case details here
Secondly, Buxton Rugby Football Club (TC1281) – again late P35s. In this case there were penalties for three years, 2005/06, 2006/07 and 2007/08. The club treasurer filed 2004/05 online, but found it complicated, so decided to revert to paper for subsequent years (anyone trying to file online will doubtless have sympathy).
HMRC didn’t issue a paper return for 2005/06, instead leaving it almost two years to send a reminder and a £900 penalty. The club appealed. HMRC ignored the appeal, and two years on – three years from when the return was due – wrote with a further penalty of £1,900.
HMRC argued before the tribunal that they have no statutory obligation to issue reminders. The only statutory obligation is on the taxpayer to file their return.
HMRCs performance got short shrift before the tribunal, and the penalties were all quashed. Case summary here