Late filing appeals

The 2016/17 tax return season was plagued by issues with tax software, which prevented many tax returns from being filed online. The HMRC computer will issue a late filing penalty for a paper return received after 31 October unless there has been some manual intervention.

If you were forced to submit a paper tax return as the taxpayer’s circumstances lay within one of the online filing exceptions, but a penalty notice has been issued, submit an appeal against it without delay. You have a valid reasonable excuse for the “late” paper return because online filing was impossible for that taxpayer, so state that on the appeal form.

There can be technical grounds for challenging the penalty notice, for example, that it was not correctly authorised by an HMRC officer. This was the successful argument in Khan Properties Ltd, which was given some publicity in late January. However, that case concerned penalties for late corporation tax returns, which are issued under a different procedure to that used for SA penalties. So that argument is unlikely to work for SA penalties.

Another technical point, which tribunal judges are accepting in some cases, is that HMRC can’t show that the penalty notices were sent to the taxpayer. HMRC’s recording systems are so poor that this proof is often missing, see the case of Rafik Patel. Also in Rachid Halfaoui the judge said HMRC did not meet the burden of proof required to show the penalty notices were correctly issued.

It may be possible to argue that that tax return itself was not correctly issued as in the case of David Goldsmith. However, where the tax return was issued but the taxpayer didn’t receive it because they had moved house, the penalty is likely to stick. Taxpayers have an obligation to tell HMRC when they change address, or leave the country.

 

Written by the Tax Advice Network