Last week we considered
the VAT implications of providing free goods to employees and the
circumstances in which HMRC’s behaviour creates a reasonable excuse for
taxpayers. We also polished our crystal ball to look ahead to the
next Budget on 8 July 2015. Certain clients should be advised to take
action before that date.

Challenging penalties
The HMRC machine spits
out automatic penalties when tax returns or tax payments are delivered
late. Unless the taxpayer can prove he has a reasonable excuse, HMRC
won’t cancel the penalties. But what if HMRC itself is the cause of the
reasonable excuse?  
 
HMRC are reluctant to
admit that they can be in the wrong or that their “helpline” has misled
the taxpayer. The Tax Tribunals tend to take a more sympathetic view of
the taxpayer’s position, as illustrated in two recent cases: Joanna
Porter and John Crangle, which were both heard by the same judge: Peter
Sheppard.
 
When trying to file her
tax return Ms Porter received the message “access denied” from   the
HMRC’s online filing system. The online helpdesk told her the problem
was an IT error and was not her fault. They eventually sent her with a
new ID number which she was able to use to submit her return. However,
HMRC still issued a late filing penalty, and refused to accept her
appeal against the penalty. The Tribunal agreed Ms Porter did her best
to file her tax return and cancelled the late filing penalty.     
 
Mr Crangle ticked the
box on his 2012/13 tax return requesting that tax due of £1442 be
collected through his PAYE code for 2014/15. This return was submitted
online on 20 December 2013, before the cut-off point for altering the
2014/15 code (30 December 2013) but HMRC ignored that request.
 
Mr Crangle believed the
tax due would be coded out until he received a letter from HMRC dated 1
April 2014, which was after the tax due date of 31 January 2014. That
letter was apparently promoted by the taxpayer ringing HMRC on 11 March
2014, but HMRC still issued a late payment penalty on 24 April and
charged interest. The taxpayer had to appoint a tax agent to sort the
mess out.
 

Where your client has
suffered shoddy treatment by HMRC and as a result has received
penalties, it’s worth challenging those penalties at internal review and
through to Tribunal. Our personal tax experts can advise you how to do
this.

This is an
extract from our tax tips newsletter dated 21 May 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
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