On 13 November 2015, HMRC wrote to the taxpayer (Mrs J) advising her, that both a car benefit and a medical benefit were undeclared on her 2011 tax return. Mrs J’s accountant subsequently advised HMRC that she had overlooked reporting the benefits on her Tax Return. Mrs J accepted HMRC’s assessment for the benefits in relation to the year ended 5 April 2011. A request was made that should a penalty be applied in respect of the omission it be suspended on the basis that Mrs J would take appropriate steps to ensure that any such omission would not happen again.
The HMRC caseworker confirmed that it was their intention to charge a penalty under Schedule 24 Finance Act 2007 due to Mrs J’s perceived ‘careless behaviour’ and, furthermore, that there were no grounds for suspending the penalty. HMRC’s reasons for the non-suspension were that HMRC did not believe there was any realistic possibility of careless inaccuracies occurring within a suspension period, which could cause a penalty to be charged. HMRC also advised that they could not identify a specific (practical and measurable) condition or conditions that could be set to avoid an error in the future and that it was not enough for Mrs J to simply improve her systems and checks by retaining all tax related documents.
Our team advised HMRC that its reasons for the non-suspension were flawed. Mrs J continues to receive relevant taxable benefits and, therefore, without her making any corrective measures, further errors relating to the original inaccuracy could recur. We also advised that specific measurable conditions in addition to addressing the deficiencies of the underlying cause(s) could be set to encompass all risks of future careless inaccuracy that could be reasonably be identified. In summary, these conditions would bring Mrs J’s compliance up to the standard of a robust compliant taxpayer.
Our team also raised concerns that HMRC in mounting its technical argument had lost sight of the penalty quantum. Almost a year’s worth of correspondence had been exchanged with regards to the suspension issue for a potential penalty of under £1,000 and that no degree of common sense has been applied by HMRC in this case.
HMRC accepted our representations without substantive challenge and offered very generic suspension conditions in order to bring the matter to a conclusion. This was obviously great news for both Mrs J and her accountant and highlights the impact specialists can have on cases where such correspondence has become protracted.