HMRC's liberal use of penalties checked.

HMRC are becoming increasingly aggressive in the issuing and pursuit of penalties, despite there being no grounds in which to do so.

On 28 November 2017, HMRC were chastised by the First-Tier Tribunal for wasting everyone’s time in “…bringing a case which has very little merit on their side and where the taxpayer seems to have acted in an exemplary manner”. Unfortunately, this does confirm what HMRC stated at a conference at the ICAEW in 2017: explaining that cases will be taken even if they are not winnable.

The facts are that Mr Beardwood left the UK with his family to work in Vietnam for a few years and notified HMRC of his departure using the appropriate forms. He and his wife let out their UK home for a short period during 2010/11 with income of £1,901 each in that year. Mr Beardwood and his wife had registered as Non-Resident Landlords by submitting the required NRL1 form to HMRC. Mr Beardwood had researched HMRC’s website for whether he and his wife had to do a Tax Return for 2010/11 and concluded that they did not due to the level of income and the fact that their personal allowances more than covered the income so no tax would be due. For 2011/12, their rental income exceeded the personal allowance so they submitted their Tax Returns. Mr Beardwood was later charged penalties for late submission of his 2010/11 Tax Return, which he appealed on the basis that he had correctly established that a Tax Return was not required.

HMRC’s submissions to the Tribunal were said to have shown inconsistencies, inaccuracies and unreasonable conclusions while the Tribunal found that Mr Beardwood had done everything required of him. As such, the Tribunal decided that he had a reasonable excuse for his late submission of his Tax Return so his appeal against the penalties was allowed in full and followed with the reprimand of HMRC.

Interestingly, Mrs Beardwood’s penalties had been waived by a different HMRC team.

The conclusion we can take from this is that HMRC can sometimes be very unreasonable and illogical, despite calling taxpayers “customers”. In this case, there was no tax due for 2010/11 so all they were chasing was the £1,600 penalty and they were prepared to waste everyone’s time for it despite the actions that Mr Beardwood had taken. As Sun Tzu said in The Art of War, “Know Your Enemy”.

If you require any guidance or advice in this area, please approach your usual Buzzacott contact or email enquiries@buzzacott.co.uk.

This article was taken from the Spring 2018 issue of the Private Client team's Quarterly Tax Digest. You can access all the other articles here.

You might also be interested in… Tax investigations and resolving disputes.

Guidance from start to resolution

Our service is designed to tailor a strategy to suit your unique needs for reaching resolution with HMRC as quickly and cost-effectively as possible. Our team of tax experts include ex-HMRC Senior Investigators and Inspectors who understand HMRC’s mind-set and can handle any investigation or disclosure for you directly and support you at every stage of the process. 

If your case involves other advisors – such as solicitors or accountants – it’s no problem to mesh our services with theirs. We regularly join forces with other firms to support our clients. We are about easing the process and reaching the best outcome, whilst always complying with tax regulations and legislation.

Our clients have told us that we deliver on our promises, provide honest, open and regular communication that is easy to understand and take an active interest in their case.

Whatever business or industry you’re in, whatever the tax issue may be, you’ll get clear relevant guidance at a fair price agreed upfront. We value our clients and we pride ourselves for always being honest and upfront at all times. 

Specialists in tax investigation and resolving disputes

Download these useful resources:
Buzzacott Tax Investigations and Dispute Resolution brochure

What do our clients say?
Find out what our clients have to say when using Buzzacott's Tax Investigations and Dispute Resolution team