HMRC “lacks judgment” February 2012
Posted date: 31 January 2012
HM Revenue & Customs (HMRC) has shown “an incredible lack of judgment” after deciding to appeal a First-tier tax Tribunal decision over the issuing of penalties.
In HOK v Revenue & Customs a £500 penalty was issued for a late end-of-year P35 return. The employer, who agreed that they were at fault for not paying on time, only objected to the delay from HMRC in issuing the penalty.
A rate of £100 is charged for each month that a return is late. However, the first notice that the employer received was on 27 September – more than four months after the original 19 May deadline. A final £500 was charged as the company filed the return on 15 October and had to pay for the part month to 19 October.
The firm argued that the fine was disproportionate. Had it received notice of a non-return shortly after the deadline passed HOK argued it could have taken action to avert such a large penalty.
The judge agreed and said that it was unfair if HMRC “deliberately desist from sending a penalty notice, for a month or more, knowing that the effect will be to impose an increased penalty of £500 upon somebody whose sin may be no more than oversight or forgetfulness”.
Derek Allen, Director of Tax from the Institute of Chartered Accountants of Scotland, commented: “The news that HMRC has decided to appeal the HOK decision is little short of a disgrace.”
Although HMRC would not comment on the ongoing litigation, a spokesperson conceded that HMRC did not agree with the ruling and emphasised that it “does not use small business penalties to boost revenue”.
Allen argues that as the majority of employers now have to file returns electronically there can be no justification for HMRC delaying the notification of penalty notices once electronic communication links are established.
He added: “It [HMRC] should be ashamed of pursuing this appeal. Instead it should sort its system.”
HMRC said that the majority of employers file their returns on time. Its spokesperson explained that the timetable for issuing penalties is designed to allow a reasonable period for it to process all the returns received.
He said: “There is no deadline for employers to tell us when no return is due so the timing helps avoid any penalties being issued to customers who did not need to operate Pay As You Earn in the year concerned but who did not let us know until after the filing deadline.”
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- February 2012
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