Sometimes incompetence has to be called out
I try and keep an eye on tribunal cases because as an accountant I am only too aware of the stress and strain the process can have on people’s lives to say nothing of their business and of course their bank balance.
I look to the cases not to find some possible loophole to reduce tax liabilities but to see if HMRC are pursuing frivolous cases where their claims are so outlandish or so poorly structured and advanced that one can only conclude that frankly they are “taking a punt” on the taxpayer simply caving in paying additional tax and that they will not be exposed at tribunal. Even when the taxpayer stands their ground and takes the tribunal route you’d think someone at HMRC would review the cases and not allow the department to be frankly ridiculed. Yet they still keep coming and I’m indebted to the team at Croner-i for drawing just two such occurrences.
The first case concerns a Mexican Restaurant which had received a demand for security against possible defaults in payment of their Vat liabilities. So far so good, as the necessity to guard against serial defaulters the deposit approach makes sense. What makes no sense whatsoever is to make a demand for security and to give no reason at all as why it’s being made. Think about it for a moment, you get in to work one morning and find a letter demanding a vat deposit with no reason why. Basically, it’s saying “Pay me because I want you to.”
Fortunately the business did not and went to tribunal with their case and the tribunal ruled that as HMRC had given no reason(s) for making their demand it was both “unreasonable and unlawful”.
I would have been tempted to add “stupid.”
In another case revolving around HMRC’s late filing penalty attribution the taxpayer. The taxpayer had an Accountant who filed the Return online before the due OR so he thought because he had a receipt number. So the taxpayers was happy that their return had been filed on time and so was the accountant and neither of them doubted that the return had been filed.
This simple and obviously belief and reliance on a receipt meant that the tribunal were able to conclude that this belief was genuine and as such obviously reasonable.
The real question which was not discussed was why HMRC thought otherwise.