Newsletter Spring 2012

Late later latest

There’s been a lot of publicity about the new penalties for late submission of income tax returns, but the PAYE penalties were put up last year and plenty of people have fallen foul of them. Fortunately the Tax Tribunal has come to the rescue of several employers who were facing substantial fines for failing to file the P35 annual summary or monthly Construction Industry Scheme returns.

One judge quashed a penalty because he ruled that it was up to HMRC to prove that the taxpayer was in default – the opposite of the normal rule for tax liabilities in general – and they didn’t have enough evidence. He cancelled another because he accepted that the bookkeeper genuinely believed that the return had been filed, even though it had gone astray. He cut another penalty from £500 to £100 because HMRC had taken a long time to issue a penalty notice – if they had done it quicker, the employer would have been able to put the situation right and wouldn’t have racked up the bigger fine.

The same judge also criticised HMRC’s interpretation of a ‘reasonable excuse’ which can cancel a penalty – they think it has to involve an ‘exceptional circumstance’. He didn’t think that was what the law said. The words had to carry their ordinary English meaning, which would be likely to involve a much lower threshold.

Ideally, you don’t have to argue about excuses because you comply with all your many tax responsibilities on time. If you want help understanding what they all are, we can explain – and if something goes wrong, we can advise you on whether to argue the point with the taxman.