Small company gets £100 tax penalty thrown out

A small company has triumphed over HMRC after an appeal it launched against an automatic £100 tax penalty was granted.

Khan Properties Ltd should have filed its tax return by March 31st 2017 but did not do so until May 16th, triggering the computerised issuing of the late-filing charge.

Despite being hauled in front of a judge after its own review upheld its decision, the Revenue failed to show in its submission to the tribunal that it had addressed ‘burden of proof.’

As to its validity, the penalty notice to the company was signed off “HMRC, CT Services, Corporation Tax Services, UK” -- with no individual officer named, despite its text stating “I...”

Judge Richard Thomas reflected: “In my view the requirement…is for a flesh and blood human being who is an officer of HMRC to make the assessment”.

In his ruling, the judge explained that an HMRC officer needed to be named in the penalty notice so that the recipient could know which officer to address any appeal to.

The applicability of the ruling (that the notice was not valid because there was no decision-making by an HMRC officer), is limited to company tax assessments.

However, the judge would have thrown out the £100 penalty anyway because Khan Properties Ltd had a ‘reasonable excuse’ for not filing on time.

A few in fact -- including that the firm’s acting accountant had never before lodged a return late (so the firm had every reason to trust it would be on time), and that HMRC’s free corporation tax filing software was withdrawn in the run-up to the filing date.