A taxpayer has partially won his case at the Upper Tribunal (UT) regarding tax geared penalties issued by HMRC amounting to some £574k although most of his grounds for appeal were dismissed. The taxpayer had achieved a significant capital gain in the 2012/13 tax year but did inform HMRC of this gain and paid the full amount of tax due. The taxpayer’s accountant had sent a letter to HMRC at the time but the taxpayer failed to submit an actual return. HMRC issued a discovery assessment and then issued the penalty demands.
The first ground of appeal was that there was insufficient evidence of a HMRC officer authorising the issuance of the notice to file a self-assessment return. The UT found that in this case HMRC had not submitted sufficient evidence that a HMRC officer had authorised the issuance of the notice to file a self-assessment tax return so would have allowed the appeal. Critically, subsequent to the initial hearing at the First-tier Tribunal (FTT) new legislation had been passed, with retroactive effect, that stated that where HMRC issues a notice then it is to be presumed that an officer had authorised the issuance so the taxpayer’s ground was dismissed.
The second ground of appeal was that the taxpayer hadn’t been properly informed of the penalties, they had been sent to his accountant and to him via a service address for the LLP that he was member of. The UT dismissed this ground, following prior case law, as they found he had been informed, albeit indirectly, and so was aware of the penalty notices.
The third ground of appeal was that the penalties should be issued on the basis of the net of tax remaining to be paid, meaning that HMRC should have considered the full payment of tax he made at the time the capital gain was realised. The UT also dismissed this argument, holding that the legislation clearly provided for penalties for non-filing as well as penalties for non-payment.
The fourth ground, that the taxpayer won, was that the FTT hadn’t taken account of the special circumstances of the taxpayer and that certain factors should be taken into account to reduce the amount of the penalty, such as the early payment of tax and correspondence with HMRC on the matter. The UT found that the FTT had erred in law in not considering these factors and remitted the case back to a differently constituted panel at the FTT to determine whether and if so by how much the penalties should be reduced. It will be interesting to see how the FTT decides this matter.
The decision can be found at: Peter Marano v The Commissioners for HM Revenue and Customs [2023] UKUT 00113 (TCC) – GOV.UK (www.gov.uk)
This case highlights that substantial fines can be levied by the HMRC where taxpayers do not make filing of tax return on time, but it helps clarify what factors are special circumstances when considering how much tax geared penalties can be reduced by.
Please do contact us if you have received a closure notice or penalty from HMRC or your tax affairs are under enquiry. We can help you negotiate with HMRC and advise on when to make appropriate payments.
