These two cases nearly slipped by without my noticing, but really we have to wonder why HMRC do not use their resources rather better.
In Eamas Consulting LLP v HMTC 4.4.12 TC 02009 a partnership received a paper Tax Return for 2007-08 in April 2008. HMRC issued a penalty notice in February 2009 indicating they had not received it back. The partnership said they had submitted a nil return as soon as they had received it, and indeed paper Self Assessment Returns had been submitted on behalf of the two partners also in April 2008.
The lead partner then requested a duplicate paper Return, which was eventually both received and completed in August 2009 also showing “nil” partnership income, but by which time a second penalty notice had been issued as the July deadline had passed.
There were telephone calls with HMRC and letters written to different offices which no doubt caused confusion. Anyway, the partnership appealed on the grounds that a Return had been submitted in April 2008 and HMRC should be able to find the original Return, even though the partnership could not find a copy.
A second First Tier Tribunal (referred from the Upper Tribunal) found that on the balance of probability the partnership had submitted the original Partnership Return in April 2008 since the Returns of the individual partners, with nil profits from the partnership, were submitted then. The appeals against the penalty notices were allowed.
What a waste of money with HMRC staff going to three tribunal hearings, when a little common sense would have saved everyone time and worry!
In Kathleen Lomas v HMRC TC 02010 the older lady taxpayer received a letter on 10th January 2011 telling her that she needed to complete a Self assessment Tax Return for the year ended 5th April 2010. She called HMRC and was sent a paper Tax Return which she sent back, duly completed on 17th January 2011. This Return was "captured" by HMRC's system on 27th January. The lady had an underpayment of £270.84 which she paid in March 2011, the day after she returned from abroad, having been away since 18th January.
The lady had upon her return found a penalty notice because she had not submitted the Return on-line, the deadline for paper returns having been 31st October 2010, two and a half months before she was sent the paper return for completion.
The taxpayer appealed against the penalty notice and the First Tier Tribunal found that HMRC had waived the requirement for e-filing by issuing a paper return in January. Again, common sense should have prevailed, and only did when the case reached the FTT. Judge Geraint Jones Q.C. said “The appellant is a lady who, it is accepted, has no blemish on her tax return or tax payment record over the last 40 years. There is no reason whatsoever to doubt her veracity.”
In neither case was there any great precedent being set. “Reasonable Excuse” allows HMRC to cancel penalty notices. Once upon a time, more junior staff of HMRC, or perhaps historically in the Inland Revenue, could exercise their discretion and cancel charges which seemed unreasonable. Since these cases went to the Tribunals, it seems that even very senior staff of HMRC have no power to make sensible decisions or they are incapable of doing so.
It does not inspire confidence in HMRC's ability to extract “the right amount of tax” from the taxpaying public whether errant or otherwise when they apparently show such incompetence in dealing with trivial matters and waste our resources at the same time. What do you think?