HMRC set to appeal first tier tax tribunal decision

Tax accountants may be interested to learn that HMRC is planning to appeal against the decision of the first tier tax tribunal judge in its case against HOK.

During the case, the judge criticised HMRC for its unfairness and said it used the penalty system as a scheme for generating cash.

HOK Ltd v HMRC was one of several cases concerning the filing penalties imposed on companies who submitted their P35 forms late. Although these companies did file their returns late, HMRC waited several months before they sent out penalty notices, during which time the fines increased.

Judge Geraint Jones QC made the point that it would be easy for the Revenue to program its accounting software to send out the penalty notices in May rather than waiting until September when the minimum penalty would be £500. He also stressed that in certain instances, failure to submit returns was an oversight not a deliberate attempt by companies looking to avoid their responsibilities.

HMRC took exception to the judge’s remarks and said they were out of kilter with the legal regulations.

Sue Walton, the director of central policy at HMRC, denied that the government department was treating late filing penalties as a way to increase revenue. She said the Revenue does not delay issuing reminders and penalty notices just to charge larger penalties. The reason for not issuing them immediately is to give employers a reasonable amount of time to inform it that they do not have a return to submit. This saves the issuance of penalties to employers who did not operate PAYE in the relevant year.

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