Groves – Tribunal confirms that a notice to file must be given by an identified HMRC officer
In Groves v HMRC [2018] UKFTT 0311 (TC), the First-tier Tribunal (FTT) has allowed the taxpayer's appeal against penalties issued by HMRC pursuant to Schedule 55, Finance Act 2009, for the late filing of a tax return as the notice to file was not signed by an "Officer of the Board" and in any event, the notice was invalid as it was not given by HMRC for the purpose set out in section 8, Taxes Management Act 1970 (TMA) and therefore any penalties issued for late filing of the return were invalid.
Background
Mr Peter Groves (the taxpayer) was employed during the 2014/15 tax year. HMRC considered that he had underpaid income tax in the amount of £166.80 and in October 2015 sent him a P800 tax calculation showing an underpayment of tax of £166.80.
In January and April 2016, voluntary payment letters were sent by HMRC to the taxpayer asking him to pay the amount or come to an arrangement to pay and, if he did not, collection would be made via the self-assessment system.
The taxpayer did not respond to either of the voluntary payment letters and in July 2016 his record was automatically put into the self-assessment system so that the underpaid tax could be collected.
On 21 July 2016, HMRC issue a purported notice to file to the taxpayer. The filing date for a valid notice to file, served on 21 July 2016, would have been 28 October 2016.
As the return was not received by 28 October 2016 and had still not been received 6 months later, HMRC issued penalties to the taxpayer under paragraph 3, Schedule 55, Finance Act 2009, for the late filing of his tax return for the tax year 2014/15.
The taxpayer appealed.
FTT's decision
The appeal was allowed.
The FTT considered whether the requirements contained in
section 8, TMA, which must be satisfied in order for a notice to file to be valid, had been met.
Section 8(1)(a) provides as follows:
“(1) For the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, and the amount payable by him by way of income tax for that year, he may be required by a notice given to him by an Officer of the Board –
(a) to make and deliver to the officer, a return containing such information as may reasonably be required in pursuance of the notice."
The FTT concluded that section 8(1) was not satisfied as HMRC's purported notice to file had not been given to the taxpayer by an "Officer of the Board". It followed that the notice was invalid. In reaching this conclusion, the FTT was influenced by the following:
- There was no signature block on the pro forma letter which had been sent to the taxpayer. It was therefore not clear whether the letter had been signed by a particular officer or whether it would have been signed by HMRC (or indeed whether it had been signed at all).
- Similarly, there was nothing in the computer printouts relied upon by HMRC to indicate whether an officer, and if so which officer, issued the notice to file to the taxpayer.
Notwithstanding the above conclusion, which was sufficient to dispose of the appeal, the FTT said that if it had found that a valid notice to file had been given by an Officer of the Board, it would still have allowed the appeal on the basis that such notice was invalid since it was not given for the purpose set out in section 8, namely, for "the purpose of establishing the amounts in which a person is chargeable to income".
In the present case, as in Lennon v HMRC [2018] UKFTT 0220), HMRC knew the amount for which the taxpayer was chargeable to income tax and did not therefore need to serve the purported notice to file on the taxpayer in order to “establish” that amount. At the time the purported notice was issued, HMRC had already established the quantum of tax due from the taxpayer in the sum of £166.80. Accordingly, the purported notice to file was invalid in any event.
As the notice was invalid, there was no obligation on the taxpayer to file his return for 2014/15. Accordingly, the penalty regime contained in Schedule 55, Finance Act 2009, was never engaged and the taxpayer could not be liable for the penalties.
Comment
This decision is likely to have wide-ranging and unwelcome consequences for HMRC since its pro-forma notice to file does not contain a signature block and HMRC's records may be unable to confirm whether a particular HMRC officer issued the notice. Given the wider implications of this decision for HMRC, it may well decide to seek permission to appeal the decision to the Upper Tribunal.
A copy of the decision can be viewed here.