Case: Late filing penalties cancelled as notice to file invalid

[2019] UKFTT 0286 (TC)

Judge Christopher Staker

Decision released 1 May 2019

Income tax - Individual tax return - Penalties for late filing - Whether properly imposed – Whether notice given ‘for the purpose of establishing the amounts in which a person is chargeable to income tax…‘ – TMA 1970, s. 8 – FA 2009, Sch. 55.

Hurst [2019] TC 07125

Summary

HMRC issued Mr Hurst (the appellant) with a notice to file a tax return for 2015-16. HMRC submitted that they issued a notice to file because: the appellant had not paid enough tax through his tax code as they had shown in their PAYE calculation (P800); the underpayment could not be collected through his tax code; and the appellant had not responded to their voluntary payment letters.

As the appellant had not submitted a tax return for 2015-16 HMRC issued him with late filing penalties under FA 2009, Sch. 55.

The appellant appealed on the grounds that he was within the PAYE system and any underpaid tax could have been dealt with by way of a P800. He relied on the case of Goldsmith [2018] TC 06284. In Goldsmith the FTT had found that returns issued to collect tax already calculated and ‘assessed’ by P800s, and not for the purpose of establishing the taxpayer’s taxable income and tax payable, did not meet the statutory requirements of TMA 1970, s. 8(1), and accordingly the late filing penalties were invalid. In response to HMRC’s statement of case the appellant also relied on the similar cases of Groves [2018] TC 06541 and Lennon [2018] TC 06453.

The FTT noted that similar conclusions to those in Goldsmith were reached in Griffiths [2018] TC 06697 and Mansoor [2018] TC 06518. But on the other hand, in Crawford [2018] TC 06594, the FTT disagreed with Goldsmith. The FTT instead held that the words ‘for the purpose of establishing’ in TMA 1970, s. 8 did not mean merely ‘for the purpose of calculating’, but rather, ‘for the purpose of calculating and assessing’. It was said that an assessment ‘fixes or settles a person with liability to the tax as calculated’, and therefore a notice under TMA 1970, s. 8 could validly be issued simply to assess a known tax liability. The FTT therefore noted that there was a conflict of authorities at FTT level and that the issue had not been considered at the Upper Tribunal or higher level.

In this case the tribunal found it appropriate to follow the line of authority in Goldsmith.

As HMRC had indicated that they were aware of the underpayment of tax when they issued the P800, the FTT found that it was not possible for HMRC to have validly issued a notice to file.

The appeal was accordingly allowed.

Comment

The FTT found it appropriate to follow the line of authority in Goldsmith [2018] TC 06284 and similarly decided cases and therefore not to follow the conflicting decision in Crawford [2018] TC 06594. HMRC’s appeal against the decision in Goldsmith is due to be heard by the Upper Tribunal in July 2019.

For commentary on penalties for late personal tax returns, see In-Depth at ¶181-500.

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