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Taxpayer had no reason to tell HMRC his new address

Income tax - Fixed and daily penalties for failure to file self-assessment returns on time - Fixed penalties for late payment of tax - Employer had inadvertently used incorrect PAYE code which generated an under collection of income tax - Appellant unaware that he was obliged to file a self-assessment return - Whether reasonable excuse - Yes - Appeal allowed – FA 2009, Sch. 55, 56.

Mahood [2019] TC 07188

Summary

Mr Mahood (the appellant) was an employee, and unknown to him his employer had not deducted enough tax at source because it had used the wrong PAYE code. When HMRC became aware of the underpayment they issued a tax return to the appellant at the address which they had for him. However, the appellant had moved out of that address to various temporary addresses and the correspondence did not get forwarded on to him and therefore he was unaware that he was required to submit a tax return. When the appellant became aware of the underpayment he contacted HMRC, completed and submitted his tax return and arranged to pay the tax he owed in instalments.

As the appellant failed to file his return by the due date and had failed to pay his tax on time HMRC assessed him to late filing penalties under FA 2009, Sch. 55 and late payment penalties under FA 2009, Sch. 56. The appellant appealed against all the penalties.

The FTT allowed the appeal and discharged the late filing and late payment penalties. The FTT found that as the appellant had been unaware of the mistake by his employers and the under deduction of tax, there was no pressing reason for him to notify HMRC of his new address, which in any event would have been a care of address and only temporary. On becoming aware of the tax underpayment he dealt with matters diligently and as quickly as he could.

Comment

The appellant had been unaware of his need to complete a tax return as he had not received the notice to file which HMRC had sent. The FTT decided that as the taxpayer had been unaware that his employer had used the wrong PAYE code which had resulted in him paying too little tax, there was no pressing reason for him to notify HMRC of his new address.

By Croner-i