In Hok Ltd v HMRC (TC01286 – 25 July), a company (H) had only one employee, who ceased employment during 2009/10. H did not submit its P35 for 2009/10 by the due date of 19 May.
On 27 September HMRC imposed a penalty of £400 (at £100 per month for four months). H appealed, contending that the amount of the penalty was unreasonable because HMRC should have warned it earlier that it was still required to submit a P35 even though its only employee had left.
The First-tier Tribunal accepted this contention and allowed the appeal in part. Judge Geraint Jones observed that ‘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.
In fact, if the penalty notice operates as a reminder and the taxpayer undertakes the necessary filing forthwith, a further one month penalty arises because the de facto reminder is received only after it is too late to avoid a further £100 penalty.
Thus, the effect of HMRC desisting from sending out a penalty liability notice very soon after 19 May of the relevant year, and choosing deliberately to delay that penalty notice until four months has gone by, is to result in the taxpayer facing a minimum penalty of £500.’
It would be simple ‘for HMRC to set its computer settings so that a default or penalty notice was sent out immediately after the 19 May in any year, instead of some four months later.’ He therefore reduced the penalty to £100.
Why it matters: Judge Geraint Jones was unusually critical of HMRC’s policy of delaying the issue of a penalty liability notice, and therefore reduced the penalty to £100.
In Hok Ltd v HMRC (TC01286 – 25 July), a company (H) had only one employee, who ceased employment during 2009/10. H did not submit its P35 for 2009/10 by the due date of 19 May.
On 27 September HMRC imposed a penalty of £400 (at £100 per month for four months). H appealed, contending that the amount of the penalty was unreasonable because HMRC should have warned it earlier that it was still required to submit a P35 even though its only employee had left.
The First-tier Tribunal accepted this contention and allowed the appeal in part. Judge Geraint Jones observed that ‘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.
In fact, if the penalty notice operates as a reminder and the taxpayer undertakes the necessary filing forthwith, a further one month penalty arises because the de facto reminder is received only after it is too late to avoid a further £100 penalty.
Thus, the effect of HMRC desisting from sending out a penalty liability notice very soon after 19 May of the relevant year, and choosing deliberately to delay that penalty notice until four months has gone by, is to result in the taxpayer facing a minimum penalty of £500.’
It would be simple ‘for HMRC to set its computer settings so that a default or penalty notice was sent out immediately after the 19 May in any year, instead of some four months later.’ He therefore reduced the penalty to £100.
Why it matters: Judge Geraint Jones was unusually critical of HMRC’s policy of delaying the issue of a penalty liability notice, and therefore reduced the penalty to £100.
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