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For exceptional reasons, the First-tier Tribunal has cancelled a self-assessment late filing penalty. What can you learn from this judgement that could assist you in overturning a late filing penalty from HMRC?
The appeal of a penalty
Mr Brocklesby (B) missed the deadline for filing his 2016/17 tax return on paper. As a result, the standard late filing penalties were applied by HMRC. B took his case to the First-tier Tribunal (FTT), claiming specific unique reasons about HMRC’s processes and methods.
Appellate grounds
B’s initial explanation was that HMRC had assisted him in filing his taxes in prior years, but his local tax office was permanently shut down in 2017. So B could have submitted his return online instead. Still, he found it difficult for various reasons, including the fact that he didn’t have a mobile phone on which to get the HMRC codes needed to access the online self-assessment services. B’s second line of attack was that an HMRC officer had assured him that he wouldn’t have to worry about late filing penalties if he submitted his return on paper beyond the regular date (the 31st of October 2017). He was “lulled into a false feeling of security” as a result of this. B stated that if HMRC had not assured him that penalties would be imposed, he would have made efforts to ensure that his return was submitted on time.
HMRC said that because B had been doing self-assessment for several years, he should have been aware of the deadlines. He might have quickly hired an accountant or tax expert to assist him in completing and submitting the form. According to HMRC, a “prudent taxpayer” would not wait until the last minute to file a tax return.
HMRC was unreasonable.
B’s refusal to challenge an HMRC officer’s advice was given unreasonable by the FTT. The judge accepted B’s claim that HMRC had said or suggested that he submit a paper return after the 31st of October without incurring a penalty. The FTT also took issue with HMRC’s remark that B waited until the last minute to submit his tax return. It stated that there is no requirement to file early. B would have expected to be able to file his return on time based on his prior experience.
HMRC is causing a delay.
Another mistake on HMRC’s record was its role in the lateness of B’s return, which might have contributed to further penalties. B’s correspondence received a 14-week response from HMRC. It claimed that this did not constitute “exceptional circumstances” justifying the late return. While there was “nothing unusual about the delays in HMRC’s treatment of this case,” the FTT retorted, “that does not entail that such delays cannot form part of a reasonable excuse.” Overall, even though B committed mistakes in judgement, the bad advice and HMRC delays provided a reasonable excuse for him to submit his tax return late.
The lesson from this case is that you should retain a record of any oral advice you get from HMRC, including the time and date it was given. HMRC may or may not give it much weight, but the FTT places a high value on such trustworthy evidence. Furthermore, if HMRC delays in responding to your correspondence contributed to you missing the filing date, you may be reasonable to cite them as an excuse for filing an appeal.