Opposing HMRC penalties on grounds of ‘reasonable excuse’

George Hay Chartered Accountants

Recent reports have cast light on some of the most unusual and unexpected scenarios where self-assessment taxpayers have successfully appealed late filing and late payment penalties issued by HM Revenue & Customs (HMRC).

In one instance, a taxpayer successfully appealed a late filing penalty based on a well looked-after ‘signed for’ Post Office slip, per reports.

She had submitted her 2011/12 self-assessment return to HMRC on 29 May – but it had not been received by the Revenue.

Despite this, a Tax Tribunal considered the fact that the return had indeed been sent to HMRC on time – as evidenced by a ‘signed for’ slip which had been stamped by the Post Office.

The envelope could not be located via the Parcelforce Track and Trace system, however, a Judge noted that the audit trail would have been lacking anyway unless the taxpayer had personally handed the envelope, across the counter, to a Post Office member of staff.

The Tribunal’s decision came even though alternative evidence suggested a second self-assessment return had been submitted to HMRC, five months after the deadline, to rectify the matter.

This was presented to the Tribunal, but did not distract from its finding that the ‘signed for’ slip proved a paper return had been submitted 13 months’ prior.

In another unusual case, a taxpayer who had moved abroad successfully appealed penalties, amounting to £1,700, issued for failure to submit self-assessment returns on time.

Having moved to Vietnam the taxpayer had let out his UK residence to a tenant during his time overseas. He argued that he had not received correspondence from HMRC relating to his self-assessment return as the area he was living in had “no residential post” system.

At a Tax Tribunal, HMRC said that documents were “served within the ordinary course of postal delivery in accordance with the Interpretation Act 1978.” However, in this case, the Tribunal doubted whether the Interpretation Act could fairly apply in Vietnam.

Furthermore, it considered that the taxpayer had taken ‘adequate steps’ to handle his tax affairs – primarily because he had appointed a UK-based accountant whilst abroad and because he had completed a 64-8 form.

It also considered the fact that, after clarifying the position regarding his tax returns with HMRC, he had submitted those outstanding within six weeks.

The Tribunal found that, although the ‘reasonable excuse’ effectively came to an end in January 2013 – when he returned to the UK – the delay in submission “was rectified within a reasonable period on 7 March 2013.”

Phil Blackburn, Partner at George Hay, commented: “HMRC define a ‘reasonable excuse’ as something that prevented you meeting a tax obligation that you took reasonable care to meet”

“When it comes to the main taxes, any reasonable excuse put forward for non-compliance will be evaluated by means of a First-Tier Tribunal. There have been cases where HMRC’s own guidance has led to the failings of taxpayers in meeting their obligations and although accepted as a reasonable excuse in some instances, penalties have not always been completely avoided. This depends on when HMRC deem the ‘reasonable excuse’ as coming to an end”

“If an event occurs which you suspect will delay filing or indeed payment, you should notify your adviser, or HMRC, at the earliest opportunity and ensure that every effort is made to appropriately comply thereafter.”

Here at George Hay we understand that taxpayers face a complex system of rules and regulations. We can assist you when it comes to fulfilling your self-assessment obligations and, in the event of an enquiry, we can deal with HMRC on your behalf. To find out more about our personal taxation services, click here.

Link: Reasonable excuse round up

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