Notice to file tax return does not need to be given by identified HMRC officer

Section 8 of the Taxes Management Act 1970 says that a notice to file a tax return must be given to a taxpayer by "an officer of the Board". The Upper Tribunal said that this "does not impose a requirement that an officer of the Board is identified in the notice as the giver of the notice. Rather, it imposes a substantive requirement that the giving of a notice must have been under the authority of an officer of HMRC".

"The requirement is that whoever requires the notice to be given, whether identified or not, has the status of an HMRC officer," the judges said.

The case involved two individuals who appealed against penalties for late filing of self assessment returns. In 2018, the First–tier Tribunal decided that the penalties were not valid because HMRC could not show that notices to file a return had been given by an identified "flesh and blood" HMRC officer.

HMRC appealed to the Upper Tribunal. Pinsent Masons, the law firm behind Out-law, acted on a pro bono basis for the taxpayers in the appeal to the Upper Tribunal.

Before the Upper Tribunal, HMRC presented witness evidence explaining the administrative process for issuing notices to file self assessment returns. A team consisting of HMRC officers formulates, and keeps updated, criteria for deciding which taxpayers are to be required to submit tax returns. Having formulated those criteria, HMRC’s computers perform an automated scan of their database to identify taxpayers who meet the criteria. A small team of HMRC officers then manually checks a small sample of 200 cases, essentially to check that those cases meet the criteria as a high level check of the automated scan. HMRC itself then sends notices to file in digital form but HMRC has outsourced the function of sending out notices in hard copy form to a third party provider called Communisis.

"HMRC officers decided on applicable criteria and taxpayers meeting those criteria received s8 notices. The fact that a computer performed the task of identifying taxpayers who met the criteria does not alter the conclusion that HMRC officers authorised the giving of notices to taxpayers who were so identified. Nor does it matter that Communisis physically sent out hard copy s8 notices," the Upper Tribunal said in its decision.

"The legislation does not require officers personally to place stamped letters in post-boxes. It is enough that officers have decided the criteria to be satisfied for a taxpayer to receive a s8 notice leaving the implementation of that decision to administrative staff and contractors," the Upper Tribunal said.

"It is interesting that the Tribunal did not accept, in the context of this provision, that any distinction needs to be drawn between powers conferred on 'an officer of the Board' as compared to powers given to 'HMRC' or 'the Board' more generally," said Lauren Redhead, a tax disputes expert at Pinsent Masons, the law firm behind Out-law.

"Interpreting these terms interchangeably does not appear to have been the intention of the legislation which, for example, designates that both "an officer of the Board" or "the Board" itself has the power to make discovery assessments. Given the proposed changes, however, this distinction is likely to become largely redundant moving forward," she said.

In October 2019 the government announced that it would be changing the law retrospectively to "affirm" that HMRC can use automated processes to issue notices to file returns and to assess penalties. An HMRC technical note said that new legislation will provide that in relation to specified provisions in the legislation which require 'an officer' of HMRC to do something (including s8), "anything capable of being done by an officer may be done instead by HMRC through the use of a computer or other electronic means, whether automatically or not".

Only those with a 'settled' judgment by 31 October from a court or tribunal regarding the use of automation by HMRC will not be caught by the retrospective law change.