In the third such case in the last three months the independent First-tier Tribunal (the Tax Tribunal) has decided that the taxman was wrong not to suspend a penalty: and forced them to do so.
Where a taxpayer files an incorrect Tax Return, a tax geared penalty can be charged by HM Revenue & Customs. The penalty can be as much as the tax itself, and in cases involving offshore assets could actually be up to 200% of the tax. If the return was wrong because the taxpayer failed to take sufficient care (rather than making a deliberate error), the penalties are reduced: and can even be suspended. Where penalties are suspended, the taxpayer and the taxman need to agree to the conditions which will apply for the suspension period (which is normally two years).
Unfortunately, since this system was introduced in 2008, HMRC have tried to take a very restricted view of how and when it can operate. Fortunately, where taxpayers do not agree with HMRC they can have matters resolved by the independent Tax Tribunal.
In the most recent case, Mr Duncan did exactly that. He had made 3 different errors in his 2013 tax return. The extra tax he owed was £18,960. HMRC agreed that these errors were not deliberate, but were a result of his carelessness. However, they refused to suspend the penalty – on the grounds that the errors had not been caused by systemic problems in record-keeping. For the third time in the last 3 months, the Tribunal said that HMRC was interpreting the suspension law wrongly – and made them suspend the penalty. In this case the condition was that in future he has his tax returns prepared by a Chartered or Certified Accountant or a Chartered Tax Adviser.
What does this mean for me?
There are two important lessons here. Firstly, if you don’t agree with HMRC’s decisions, you can always have the matter decided by the independent Tax Tribunal. It has been estimated that HMRC lose more than half of the cases which are heard by that panel. Secondly, if HMRC want to charge you a penalty then you should be aware that there are a number of legal methods by which penalties can be reduced. Frequently tax inspectors do not apply these fairly. And indeed, in many cases (such as the suspended penalty) HMRC’s internal staff manuals are incorrect, and have not kept up with recent court decisions.
How can Lynam Tax Dispute Specialists Help Me?
When HMRC take a case to the Tax Tribunal they use specialist appeal teams. If you want your appeal to succeed then, in all but the most simple cases, you need to match their firepower with experts of your own. Lynam Tax experts have a huge amount of experience in dealing with tax appeals: and are ready to fight your corner.
Call today for a free initial consultation:
Paul Lynam: 0845 643 9997
Andrew Nutbrown: 0771 877 8710