As loyal readers know, HMRC considers itself to be much like the Pope - infallible.
This self belief in infallibility can best be demonstrated by the following example, as published in the
Telegraph, concerning the estate of Sara Hancock's late grandfather and HMRC's refusal to admit that they had lost a final tax return submitted by the family's accountant.
The result being letters sent from HMRC demanding ever increasing automatic fines.
Now that the media are involved, HMRC has "graciously" waived the fines "
as a gesture of goodwill". However, it still claims that it has not received the tax return.
Given that HMRC is infallible it is clearly, once again, the fault of the hapless taxpayer!
Here is the article in full:
When Sarah Hancock’s grandfather died after
suffering from dementia, she thought she would help her grieving family
get his affairs in order by calling HMRC’s "Tell Us Once" service, and
telling them about his death.
Little did she know that one phone call would lead to a nightmare year
of letters demanding ever-increasing fines, which kept coming even when
both Miss Hancock and her late grandfather's accountant wrote to the
taxman explaining that he did not owe any tax.
Frank Hancock died in December 2014, after an illness which had left
him in hospital for over a year. He and his wife Joyce each took half
the proceeds of a small delivery business, but Mr Hancock’s half was so
low it was covered by the personal allowance and married couple’s allowance.
His accountant, Thomas Shreeve, had continued to file returns on his
behalf, and HMRC’s own tax calculations showed that he was actually due a
small rebate.
When he died, Miss
Hancock called HMRC, and an automatic letter was sent out asking her to
file a return for Mr Hancock’s outstanding tax. This had already been
done, so the couple’s accountant returned the forms alongside a letter
explaining that the return had already been filed, so the form was
superfluous.
Nevertheless, the form was sent again by HMRC in June – a full four
months later – with a standard letter saying that it had not been filled
in correctly.
A month later Miss Hancock received another
letter with a bill for £100, the first late filing penalty. By November,
almost a year after her grandfather’s death, the penalty demands, sent
in "daily penalty reminder" letters, had increased to over £300.
By mid-December the penalty had doubled to £600, and in mid-January a
demand for £1,200 was sent. This final letter was also the first time
the family had been given an option to challenge the fine.
Miss
Hancock said: “It’s been a complete nightmare for the last 12 months. I
made one phone call and got put down as the point of contact, which is
fine, but I don’t want to be dealing with all these fines.”
An
accountant and former HMRC inspector of taxes, Mr Shreeve, who is 96,
said he had filed all the returns on time and helped the family pay
several years of backdated tax on the business before Mr Hancock's
illness.
He said: “Everything was in order with the estate, but they have ignored every single letter that was sent to them.”
At one point the family were told to pay the fine up-front and then
appeal it retrospectively - something they did not want to do as they
did not trust HMRC to listen to their appeals.
When contacted by Telegraph Money HMRC
said it would cancel all the penalties on Mr Hancock's estate as a
gesture of goodwill - but insisted it had not received his return.
However, a spokesman admitted the series of demands sent to the Hancocks
did not deal with the situation appropriately.
The spokesman
said: "We apologise to Miss Hancock. We have cancelled the penalty as a
goodwill gesture and can confirm that Miss Hancock will not have to
submit tax returns in future."
Last year the taxman was given new powers to demand payments within 90 days from those suspected of abusing tax loopholes, and to compel them to pay upfront and appeal the decisions later.
Robin Williamson, technical director of the Low Incomes Tax Reform
Group, which is trying to make the tax system simpler for people with
low incomes, said the Hancocks' problems stemmed from a change in HMRC's approach to fines.
"The automatic penalty regime was introduced in 2010. At the same time
they separated the penalties for returns and the returns for late
payment, so even if you owed no tax, you still got penalties for not
submitting your return whereas previously if you had paid your tax or
did not owe any that would be in your favour.
"It was a
deterrent but it also had the unwanted side-effect of bringing in a lot
of often vulnerable people, elderly people, taxpayers who couldn't get
to an adviser or didn't know how to handle the forms they were getting.
When the right way to deal with it would have been some form of personal
contact, what they get into is this maelstrom of letters.
"It also results in a lot of uncollected penalties which just have to
be written off at the end of the day. So it's a big problem and it
doesn't solve the problem of people who are trying to avoid filing their
returns.
"It's expensive, and useless, because it doesn't solve the problem of the missing return," he said.
In a consultation document published last year HMRC said it would
consider removing penalties where people don't actually owe any tax, as
part of changes to the system of fines. These would not be implemented
until the Finance Bill 2017, at the very earliest.
Chartered accountant Peter Hollis, a senior member of accounting trade body the Institute of Chartered Accountants, who has expressed concerns about similar cases
where lost returns have resulted in large fines for taxpayers,
criticised HMRC for its hastiness to issue fines after technical
glitches or mix-ups.
He said: "This is the sort of thing that
keeps happening. The Revenue would like to think that they deal with
things quickly and compassionately and pick out mistakes, but they
don't. It never ceases to amaze me the lack of compassion within the
revenue and how hard they can be in dealing with people."
He also warned that cases like this could get worse in future as HMRC is given powers to go into people's bank accounts to extract funds.
Tax does have to be taxing.
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