Some of my best friends are tax inspectors but I am duty bound to report another tax tribunal loss by the Inland Revenue (or Her Majesty's Revenue and Customs when I am in the presence of a tax inspector).
I told in my 17 November 2016 post (see Blaming Your Accountant) how a taxpayer who reasonably relied on their accountant for advice might be able to get a tax penalty quashed which was imposed because of a mistake for which the accountant was negligently responsible.
In the case of which details have just been published, the taxpayer had made several mistakes in his tax return which were down to him and his own carelessness. As a result, he underpaid nearly £19,000 and the Revenue decided to penalise him for that carelessness in the sum of close on £3,000. Another taxpayer ouch! But he did more than feel the pain. He appealed to the tax tribunal.
The Revenue has power to suspend a penalty for a careless inaccuracy if it sets conditions for the taxpayer to comply with provided the conditions would help the taxpayer avoid history repeating itself. A sort of suspended sentence and if the conditions are complied with over a maximum period of two years then that will see the end of the penalty.
In the tribunal case, the Revenue had followed its internal guidelines and wrongly concluded that the purpose of the statutory power to suspend - you will find it in paragraph 14 of schedule 24 to the Finance Act 2007 if you want to read it up in bed tonight - was specifically to see the taxpayer's record keeping systems corrected. In fact there was a very much wider purpose which was to enable the taxpayer to produce returns which were free from careless errors.
The Tribunal overruled the Revenue and suspended the penalty on condition that the taxpayer retained a qualified tax adviser to assist in the completion and submission of returns for two years and that that the adviser provided him with checklists and post return checks.