Thursday, 5 October 2017

Revenue Goes Overboard on Alleged £4 Mistake: Penalties Quashed

Tabrez Akhtar was a partner with another person in a newsagents and post office. He had to get the partnership tax return in by 31 October 2015. His accountant posted it first class on 31 October 2015. HMR&C (the Revenue) didn't log it as received until ten days later. Then nearly three months later they sent it back. Why? Because they claimed there had been an arithmetical error in that expenses had been overstated by £4. The tax consequence of this alleged error would have been the grand sum of less than £1 per partner. The return was redelivered to the Revenue by the accountant who disputed any arithmetical error. The Revenue imposed on Mr Akhtar a penalty of £100 because they claimed the return had not been in by 31 October plus a daily penalty totalling £560.

Mr Akhtar appealed against the penalties to the First-Tier Tribunal, Tax Chamber.* The penalties were recently quashed in their entirety. The Revenue had gone wrong in

  • suggesting that the return had not been received by the 31 October, the Tribunal accepting that it was posted when the accountant said and so, effectively, the Revenue had sat on it.
  • charging daily penalties on the basis that the return was not back in their hands until the accountant redelivered it when it was only out of their hands because they had chosen to send it back to the accountant.
  • overlooking a statutory provision ( Taxes Management Act 1970 section  12ABB(1)) which allows the Revenue to correct "obvious errors or omissions in the return (whether errors of principle arithmetical mistakes or otherwise.)'
  • giving misleading information to Mr Akhtar (and they are frequently criticised for this) about what it would take to get a penalty quashed on the ground that there was a reasonable excuse  ** for what had gone wrong.
I reckon that's enough. Incidentally, remember that if you want to submit your return by post and not on-line then you must do so by 31 October. Also, it's now possible to put in a tax appeal on-line (see https://www.gov.uk/tax-tribunal ).

* The case was Tabrez Akhtar trading as Crawley News and Post Office v Commissioners for Her Majesty's Revenue & Customs [2017] UKFTT 0651 (TC)
** A reasonable excuse is one which is genuine and objectively reasonable when you take into account the circumstances and attributes of the actual taxpayer.