Wednesday 25 January 2012

Reasonable Excuse



With the ongoing "hoopla" over fines for the late submission of tax returns, and a heated debate about what constitutes a "reasonable excuse", I am indebted to a loyal reader who dropped me a note about a tax tribunal appeal determined on 17 November last year which featured "reasonable excuse" and delays (another subject of discussion recently) by HMRC in contacting the appellant.

An appeal was made against a surcharge imposed for the late payment of tax for the tax year 2009/2010. The appellant had a considerable number of "challenges" (eg husband had a breakdown, lost his job, high level of debt etc).

Quote:

"There was only so much she could cope with and was unable to manage the amount of paperwork coming in."

HMRC submitted that hardship or distress "is not a consideration that HMRC can take into account", and would be a matter for the Time To Pay Unit.

The Appellant made a time to pay request on 23 February 2011; she was told that HMRC would contact her for further discussion.

HMRC telephoned the Appellant on 29 March 2011 (over one moth later); she was not available and a letter was issued requesting the Appellant to call back in 7 days. On 23 May 2011 the Appellant contacted HMRC and agreed a monthly payment plan which commenced on 2 June 2011.

The Tribunal finds as a fact that the Appellant made all reasonable attempts to arrange a time to pay agreement prior to the trigger date (the date of the letter) and cannot be held accountable for the delay in HMRC attempting to contact her when she had been told that HMRC would contact her to discuss the matter.  

The Tribunal finds as a fact that the separation of the Appellant and her husband, taken together with her husband’s alcoholism, constitutes a reasonable excuse.

The appeal was allowed.

Case details in full:



FIRST-TIER TRIBUNAL TAX SARAH CORNES Appellant 

- and - 

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS Respondents TRIBUNAL: J. BLEWITT (TRIBUNAL JUDGE) 

The Tribunal determined the appeal on 17 November 2011 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 17 July 2011 and HMRC’s Statement of Case submitted on 14 September 2011. 

© CROWN COPYRIGHT 2011 DECISION 

1. This is an appeal against a surcharge imposed for the late payment of tax for the tax year 2009/2010, imposed pursuant to section 59C Taxes Management Act 1970. Submissions of the parties 

2. By Notice dated 17 July 2011, the Appellant appealed to the Tribunal. The grounds relied upon can be summarised as follows: 

(a) The Appellant is a salaried partner in a small solicitors firm who has taken a 50% pay cut for the last 2 years as a result of the recession; 
(b) The Appellant’s husband lost his livelihood 3 times in the past 3 years with a near nervous breakdown many times throughout that period; 
(c) The couple have debts of approximately £85,000 which are being repaid under a Debt Management Plan; 
(d) Due to the Appellant’s husband being an alcoholic, combined with the financial pressures suffered, the couple separated on 20 April 2011. Throughout this period, the Appellant made all efforts possible to manage the separation, her 2 children, working full time and controlling the debt. There was only so much she could cope with and was unable to manage the amount of paperwork coming in. 

3. HMRC’s Statement of Case does not dispute the facts relied upon by the Appellant. Instead, it submits that hardship or distress is not a consideration that HMRC can take into account; any such request would be considered by the time to pay unit. For the surcharge not to have been raised, it s submitted that the Appellant was required to either pay the liability due at 31 January 2011 or have an agreed time to pay arrangement in place by the trigger date of 28 February 2011. The Appellant made a time to pay request on 23 February 2011; she was told that HMRC would contact her for further discussion. HMRC telephoned the Appellant on 29 March 2011; she was not available and a letter was issued requesting the Appellant to call back in 7 days. On 23 May 2011 the Appellant contacted HMRC and agreed a monthly payment plan which commenced on 2 June 2011. 

Decision 

4. The issue for the Tribunal to determine is whether there was a reasonable excuse for the late payment. The claims relied upon by the Appellant are not disputed by HMRC and therefore I find them as fact. 

5. HMRC accept that the Appellant made contact prior to the trigger date in order to request a time to pay arrangement. There is no explanation as to why an agreement was not reached on 23 February 2011; instead the Appellant was told she would be contacted to discuss this issue further at a later date. Contact was attempted by HMRC on 29 March 2011, over 1 month later, however the Appellant was unavailable. The Tribunal notes that this contact by HMRC post dates the trigger date for the surcharge of 28 February 2011. In the absence of any evidence to the contrary, the Tribunal finds as a fact that the Appellant made all reasonable attempts to arrange a time to pay agreement prior to the trigger date and cannot be held accountable for the delay in HMRC attempting to contact her when she had been told that HMRC would contact her to discuss the matter. 

6. HMRC rely upon the fact that the Appellant did not make contact with HMRC following their letter dated 29 March 2011, until 23 May 2011. The Tribunal finds as a fact, having accepted the circumstances of the Appellant to be as set out in the Notice of Appeal, that the separation of the Appellant and her husband, taken together with her husband’s alcoholism, constitutes a reasonable excuse. Separation and the no doubt numerous difficulties arising as a result, not least housing and childcare, is an unforeseeable difficulty and one outside of the sole control of the Appellant. Such events are also not easily resolved overnight. The Tribunal finds that the Appellant had acted as a prudent and diligent taxpayer in attempting to agree a time to pay arrangement prior to the surcharge trigger date. The Tribunal finds as a fact that there is a reasonable excuse lasting throughout the time between the letter from HMRC dated 29 March 2011 and the Appellant’s telephone contact with HMRC on 23 May 2011 on the basis of her circumstances throughout that period. 

7. The appeal is allowed. 

8. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. 

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23 comments:

  1. TBH seems a fair enough decision. Trouble is, and I see this every day, as I work for HMRC,everyone involved in cases like this are actively discouraged from working the whole case. As long as the correct next action code is put on the computer, we rely on the computer picking the case up again. When this happens,someone might do something. Want things to change? Lobby your MP for a return to local tax offices,case workers and fully functioned Enquiry Centres. Almost unbelievably, all those people who have been got rid of WERE actually doing something. The reality of our situation now is this - we have not got enough people left to provide the service many of us feel we should be providing. The slogan and attitude now is self service,DIY - preferably online. The problem is that many peoples expectations is that we can and should offer an individual and,to an extent,bespoke service. Those days are gone.

    ReplyDelete
    Replies
    1. I agree, I think local offices etc were very good.

      The current route being followed wrt call centres (one day off shore no doubt) and the push towards online filing etc etc will fail.

      Delete
    2. They are already 'trialing' (sic) the private sector in two contact centres. The Sitel staff are paid £11k to £14k PA. HMRC staff get £17K - £23K depending on grade. The sitel staff are not tax trained apart from 'an overview' whatever the fuck that means. I am just waiting for the next loss of data or a data security breach bound to happen. Do you know who is accessing your records? Are they HMRC employees? This is destined for disaster.

      Delete
  2. How the hell did this get as far as a tribunal?

    Surely any appeal against the surcharge should have been accepted?

    Or is this just a case of someone strictlty adhering to guidance?

    ReplyDelete
  3. I was in an C&E Vat Appeals Team before I got out. And I agree with Anonymous Jan 25, 2012 06:29 AM.
    An experienced Appeals officer, taking into consideration all of the abvove facts, would in my view have removed the surcharge.
    It would have been dealt with as an individual case rather than a meaningless statistic for an Excel spreadsheet for a Senior Officer to be able to pass onto to his manager. Becuase thats all they want. Machines filling in Surcharge Spreadsheets-Date/VAT No./Name etc.

    But it became a monster and was passed to another section to collect the surcharge.

    You reap what you sow and again a Tribunal has to tell HMRC how to administer Tax.

    ReplyDelete
    Replies
    1. I am still employed by HMRC . I work in debt collection. In days gone by, if after pursuing someone for 4 or 5 outstanding self assessment returns, assessments , determinations etc, it became apparent that the taxpayer had no need to comlete those returns, I took a" big picture" look at the cicumstances, and wiped all the returns. Nilled them - job done. Now I'm not only not allowed to do this, I'm forbidden from accessing his record ( I work for HMRC remember !!) as there is no " business need". So, same case now, off for court action or bankruptcy.
      You really need to work here to appreciate the depths of stupidity and complacency that HMRC's arse covering culture has brought about.

      HMRC Management motto " If you never do anything, you can never get the blame for it".

      Delete
    2. 11:31 AM 10:30 AM Here.

      I know exactly what your talking about. Its hard to believe some of the things that go on.
      Especially just like the example you gave. There is a bunch of nutcases in those offices all ove the UK. No business need to access a record. I swear after those discs were lost some muppet decided-Right thats it, no more access to cases.

      I couldnt take it anymore and got out.

      Delete
    3. Re:Jan 25, 2012 11:31 AM
      You captured NIl returns after you looked at the 'Big Picture' did you. My understanding is only Inspector grades could authorise this - or are you bigging yourself up? I also doubt you had access to the SA capture icon. So did you just create a NIl Return charge? Don't you realise the knock on affect? Perhaps some rules are in place to stop pillocks like you from meddling in things you don't understand. Thank God you're not allowed to do that now.

      Delete
    4. No, not bigging myself up, -why on earth would I want to do that? Your " understanding" is clearly wanting -or do you just believe everything Mummy tells you? Yep, had the Capture SA Return Icon. No didn't just create a nil return charge. Things I don't understand....I do understand that some people are best suited to spreadsheet completion, and some to assisting taxpayers. You, may I venture to suggest, are the former, and I the latter.

      All the poor sods who registered for self employment on the promise of a bit of work, which never materialised, and got enmeshed in SA for YEARS, and who are now in the County Court black hole called Bradford, send you their thanks.

      Enjoy your next whiteboard session.

      Toodle pip.

      Delete
    5. @03.01 am

      Deffo management stooge, full of mock outrage and very sketchy kowledge of job at hand.........lol.

      Delete
    6. @ Anonymous Jan 26, 2012 03:01 AM

      "My understanding is only Inspector grades could authorise this"

      How many inspectors are around these days to authorise this sort of thing?

      "So did you just create a NIl Return charge? Don't you realise the knock on affect?"

      The knock on effect would be insignificant, when compared to the knock on effect of not doing this!
      & If HMRC had decent systems & processes there would be no knock on effect!!

      Delete
    7. Nope, all wrong I'm afraid. Just an AO who knows the job inside out. Unlike you twats, who want to cut corners on the pretence of 'It makes my life easier'. What a bunch of morons.

      Delete
    8. Tend to agree with Anonymous Jan 26, 2012 11:28 AM. If you capture a SAITR with no income, in effect you are saying that is what the t/p has told us. If you had at least created a nil rtn charge it does not imply a ITR has been recieved.

      Delete
    9. In my Region we used to staff Collection with those to thick to handle Taxes work. No change there then, lol

      Delete
    10. Handling Taxes work, lol, crack on with that filing, and z clearing that four inch thick worklist, if your specialist knowledge will let you ......

      "If you capture a SAITR with no income, in effect you are saying that is what the t/p has told us"

      But that is what they told us, my dear.........

      Delete
    11. "Just an AO who knows the job inside out"

      LOL. And knows all the rules, RULES WHICH MUST BE OBEYED !!

      "Cos its easier than thinking............"

      Delete
    12. Tell you what, let me have your PID and I'll get you sacked for gross misconduct you lazy fucker.

      Delete
    13. err, not rules. The Taxes Act you moron.

      Delete
    14. " ...The Taxes Act..."

      Is everything HMRC does, in line with this?

      Delete
    15. Jan 26, 2012 11:09 AM and
      Jan 26, 2012 07:44 AM

      If someone clearly has no outside source of income when DMB turns up at their door, then it is sensible for the collection side not to pursue further tax returns in order to collect a debt that won't be due in the first place.

      Processing/contact centres and compliance also want the returns to be in, but for different reasons. Compliance people don't want nil charges created when they have knowledge that the person has income outside of what they are declaring (rental income for example) and processing want the return in because it seems it's their job to be the person in between juggling the requests of both the other two bits of the business involved in SA returns.

      A smokescreen is created so that debt management and compliance cannot see eachothers systems, but both can access the processing side system. So the person on the processing side has access to the information that either side choose to put on the system, which often isn't very much.

      Delete
  4. @ 03:01 AM

    Sounds like nasty and aggressive HMRC management right there. (Or an arselick who wants to be at the top of the office with the senior mob).

    ReplyDelete
  5. "Tell you what, let me have your PID and I'll get you sacked for gross misconduct you lazy fucker."

    And there you have HMRC's problem in a nutshell, people. This is REALLY how some people who work there are like. Imagine you are a customer who's failed, in some trivial way, to comply with the taxes acts. You stand a good chance of getting this sort of cretin on the phone. Sack 'em all. And blame pricks like this.

    ReplyDelete
    Replies
    1. Fortunately, it is only some of the people who work there who are like this.

      Unfortunately, they seem to be the ones in charge!

      Delete