HMRC deny imposing harsh penalties to raise money

Once again an HMRC spokesperson has labelled claims it was taking a harder line on penalties to raise revenue as “nonsense” and a “routine refrain about everything we do. It has nothing to do with raising revenue.”

However, actions speak louder than words, and HMRC’s actions certainly indicate that their words should not be relied upon when they have found it necessary to impose penalties on a pensioner and a widow. Both penalties were meted out for what HMRC deemed to be carelessness. John Graham, the pensioner, was slapped with a £318.48 fine for incorrectly filling in his tax return. In the other case, Aileen Bryson received a fine of £748.16 related to undeclared income. Both parties had already settled the outstanding tax liabilities and held unblemished records as taxpayers.

Of course, the same rules do not apply to HMRC, even though they are supposedly “experts”. We have recently had a case where the tax office accused a client of incorrectly excluding a substantial Capital Gain from his return when the paperwork received by the tax office clearly and unambiguously showed that the proceeds had been taxed under PAYE! In that instance it was a case of “Anyone can make a mistake!”

In John Graham’s case he mistakenly entered his net pension on his return where he should have recorded his gross pension. The figure entered for tax deducted was also wrong. The correct amount, the tribunal report notes would’ve been found on his p60, but Graham used bank statements instead.

Aileen Bryson, the widow surrendered a life policy in 2012 to produce funds that she could invest in her then husband’s business. Her husband died suddenly in 2013 and, Bryson told the tribunal, the rest of 2013 was spent dealing with her loss. She admitted that she completed her tax return at “the last minute” on January 31, 2014.

She failed to enter the details on her tax return.

She argued that HMRC seemed to expect “perfection” and refused to consider her exceptional, once-off circumstances. Both she and the tribunal noted that she had paid the outstanding amount plus interest, but still received a 15% penalty for her carelessness.

In dismissing Bryson’s case, the judge said he “carefully considered the circumstances of [Bryson’s] husband’s death which in certain circumstances might have mitigated the penalty”. But, the judge added, “the period of nearly nine months from the date of [Bryson’s] husband’s death to the date the tax return had to be submitted the gap was too long and that this remedy was not an option open to the Tribunal”.

Referring to Graham’s case, the same judge said he is “not unsympathetic” to Graham, but there “is a burden and responsibility on the individual taxpayer to provide accurate figures”.