Out-Law News | 10 Aug 2018 | 12:50 pm | 2 min. read
"This case shows how important it is to check that HMRC has complied with the law when it purports to charge any penalty or raise any assessment," said Steven Porter, a tax disputes expert at Pinsent Masons, the law firm behind Out-law.com.
"Always check that assessment time limits have been complied with and that HMRC has complied with all the administrative requirements of the law. It is shocking how often HMRC fails to get this right," he said.
The case concerned three penalties amounting to £1300 in total which were charged on Neil Rogers, a self employed individual, for late filing of a tax return for the 2015-16 tax year.
The law provides that a person may be required to make a tax return "by a notice given to him by an officer of the Board" [of HMRC].
HMRC produced evidence in the form of extracts from their computer records which purported to show that a notice to file a tax return was issued to Mr Rogers at his home address. They produced a generic copy of a notice to file a return with no addressee, signature or signature block. They adduced no evidence showing the notice was given by a named officer.
"The phrase 'given to him by an officer of the Board' means what it says. I would expect any such notice to be signed by a named officer and evidence provided which shows that to be the case. The officer giving the notice needs to be identified in the notice because the return must be made and delivered to that officer. In other words there must be evidence that the named officer has signed the notice or it must be otherwise made clear that he is 'giving' it," Judge Popplewell said.
He held that no valid notice to file had been given and so the penalties were invalidly assessed on Mr Rogers.
"This case may also be relevant to people who have received accelerated payment notices (APN). APNs can only be issued if there is a tax enquiry in progress. If HMRC has not validly opened an enquiry, the power to issue an APN falls away. As with a penalty assessment, anyone receiving an APN needs to check carefully that HMRC has complied with the required procedure," Steven Porter said.
HMRC has the power to issue an APN to require payment of tax upfront, before a dispute about the efficacy of a tax scheme has been settled by the courts, as long as a tax appeal or enquiry is in progress. In addition the scheme has to have been disclosed to HMRC under the disclosure of tax avoidance schemes (DOTAS) rules, a general anti-abuse rule (GAAR) counteraction notice needs to have been issued or HMRC must have issued a follower notice. Follower notices are issued where HMRC has succeeded in the courts against another user of a similar scheme.