It has now been a year since HMRC introduced the internal review system which was intended to be a bridge between the case worker and the First Tier Tribunal in cases such as tax investigations, employment status cases and HMRC penalties to name but a few areas. Initially viewed with suspicion, and still to a certain extent, HMRC have published figures on the process to date.

Unrepresented tax payers have been relatively enthusiastic to use the system, probably on the basis of what have they got to lose – this made up 81% of those using the system. There are however strong distinctions to be drawn between automatic penalty cases where approximately half were cancelled compared with those that are far more substantiative. Even the latter category showed that about 25% were either cancelled or varied – so there is a definite moral here – don’t reject the internal review system out of hand it can be a useful process if dealt with correctly you just need to make sure the person dealing with your case understands the process. So, if you need advice call us today on 0800 917 9176

HMRC have recently published details of their internal review of tax enquiries, employer compliance reviews, tax investigations etc in relation to cases that have occurred since 1 April 2009 which does make for interesting reading:

“Outcomes excluding penalty cases 3,443 cases out of 18,526

Upheld: review complete – 2,603 (76 per cent)
Deemed Upheld: time limit expired – 20 (1 per cent)
Varied – 349 (10 per cent)
HMRC decision cancelled – 471 (14 per cent)

Outcomes penalty cases 15,083 cases out of 18,526

Upheld: review complete – 6,281 (42 per cent)
Deemed upheld: time limit expired – 48 (0 per cent)
Varied – 793 (5 per cent)
HMRC notice cancelled – 7,961 (53 per cent)”

In basic english this means that 24% of non penalty cases were varied or cancelled and a staggering 58% of penalty cases were varied or cancelled

The results clearly show that it is in your interest whether you are an individual or a company (where there is reason to doubt HMRC’s assessment) to complain. We would also add that it is advisable to obtain specialist help when HMRC comes a calling, it’s not a time to dabble so give us a call on 0800 917 9176

It’s obviously the season for HMRC penalty madness, whether it be in respect of the Construction Industry with CIS late filing penalties or self assessment penalties, half a rain forest is being wasted in incorrect paper penalties. However, HMRC have stated that it is no longer the computer that is at fault (I always mistakenly thought a human had to programme/operate a computer but no, they have a mind and life all of their own!), instead it is human error caused by a lack of following procedure. Now anywhere else and you would be questioning a) the training and b) the ability for a complete non review process before these penalties are sent out.

How bad can it be, well one poor sole in Cambridge obviously has an obsessive stalker in the form of HMRC as he received 52 envelopes from HMRC, each containing 4 letters demanding sums ranging from £100 to £3,000 (grand total £39,000).

The taxpayer is appealing the fines, which have been suspended pending a final decision.

HMRC told the Cambridge News:

“Incorrectly issued penalties are not the result of a system problem but failure to correctly follow procedure – this is being put right.“

How many of you have actually looked at the drachonian penalty regime attached to the Construction Industry? Quite frankly if you’re sad enough to sit down and work out the completely disproptionate level of penalties that can be charged for minor infringements then it is absolutely staggering that this regime was allowed in the first place but a challenge is going to be heard because of the case of  SKG (London) Ltd v HMRC. Judgement was handed down on 3 December 2009, in which the Tribunal for the first time analysed the new scheme in light of safeguards in European Law which protect against arbitrary or disproportionate penalties.  The Judges in the case ruled that: “…the Tribunal is left in doubt as to whether or not the statutory provisions for the penalty for late filing of a return…satisfy the requirements of the Human Rights law principle of proportionality”.

Neither side appointed Counsel for the hearing, so the Tribunal has not yet had the benefit of detailed legal submissions and has adjourned its final decision until further legal arguments have been considered – this should be sometime between March and July 2010.  So, watch this space, as it seems that HMRC could be in for a difficult time and the entire new late filing penalty regime could be under threat.