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Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.
Friday, 13 January 2012
HMRC's Money Making Scam
In December I wrote the following about HMRC's shabby attempts to screw taxpayers for late payment fines, by deliberately delaying sending out penalty notices:
"My thanks to a loyal reader, who dropped me a note about a penalty notice that he had received from HMRC. The penalty notice prompted him to search through some case history, with some interesting results.
"In September this year I was issued with a penalty notice for failure to file my employers end-of-year return on time.
In my appeal I queried why I had not been informed earlier, when the amount of the penalty would have been less.
Enough about my own troubles - except that this matter prompted me to do a little research.
I found that in recent tax tribunal findings, scurrilous behaviour on the part of HMRC has been revealed.
In HOK Ltd and Commissioners HMRC, 22nd June 2011 it was stated in the findings:
'...Thus, HMRC deliberately waits until four months have gone by and does not issue the first interim penalty notice until, as in this case, September of the year of default.
By that time a penalty of £400, being four times £100 per month is said to be due....."
I am therefore pleased to see that others have also noted that HMRC are playing dirty.
The Independent reports that the state is "unlawfully using late-payment penalty fines against tens of thousands of small firms who do not file their tax returns on time as a "cash-generating scheme" for the Exchequer."
I have warned about the state (which is bankrupt) using HMRC fines to screw taxpayers for as much money as possible, many times on this site.
This warning has been proven to be correct, the state is using fines to generate revenue; and HMRC is ensuring that the fines are as high as possible. The Tax Tribunal has ruled that HMRC is operating a policy of "deliberately" waiting months before alerting businesses that have not filed their tax returns, so that late payment fines stack up.
On the assumption that this judgement is upheld on appeal, it could result in between 50,000 and 100,000 firms being able to claim refunds on tens of millions paid in fines.
The judge, Geraint Jones, QC, said
"It is no function of the state to use the penalty system as a cash-generating scheme.
We have no doubt that any right-thinking member of society would consider that to be unfair and falling very far below the standard of fair dealing expected of an organ of the state."
The scam operated by HMRC ensures that firms are given no notification of a failure to complete their end-of-year return by the May deadline. Instead, HMRC waits until September before sending out a computer-generated letter telling them they have failed to complete the return and are liable for four months of late payment fees of £100 each plus another £100 fine for late completion.
HMRC attempted to weasel out of the accusation by claiming that that it was not obliged to provide reminders to firms who failed to submit the correct tax returns, and that the penalties for doing so were clearly publicised.
However, Mr Jones saw through HMRC's weasel words and noted that when Parliament legislated to allow a penalty fine it did so "to encourage compliance and, in cases where compliance did not take place, to levy a proportionate penalty".
"It is unthinkable that Parliament would intend a manifestly unjust situation to arise as a result of HMRC being dilatory in sending out a first (or subsequent) penalty notice."
HMRC denied it was using penalties to raise revenue.
It would say that though wouldn't it?
Tax does have to be taxing.
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