< Go Back HMRC cannot use Self-Assessment Return to collect known PAYE debts Posted: Oct 29, 2018
the First Tier Tax Tribunal (FTT) decided that HMRC's attempt to use the Self-Assessment system to collect a PAYE underpayment was a step too far. The appellant was the victim of errors by HMRC which resulted in him being served
with a notice to file a self assessment tax return and then being hounded for an inflated underpayment that was not of his making. Michael
PAYE computer issued the appellant with a tax calculation on 31 May 2014 but this only included one of his two employments and, not suprisingly, generated an overpayment of £579.80. A payable order was issued to Mr Griffiths on 1 June,
which he received and promptly banked. Then,
on 2 June, HMRC's computer issued a revised calculation which now included all
his income; the correct position was underpaid tax of 80p for the tax year but because of the payable order issued a day earlier the net position was then an
'underpayment' of £581.60.
A Comedy of Errors
rang HMRC and was told the underpayment would be collected through his PAYE
code. At tribunal, HMRC could not produce a record of the call, but the judge
and noted that HMRC’s level of customer service at the time had
been "abysmal” so it was reasonable to believe the conversation had taken place. Capuano TC06371
Mr Griffiths’ level of earnings was said to be too low for the underpayment to be coded
out but HMRC did nothing for over eight months and then issued a 'voluntary payment letter'
in which said they would issue him with a self assessment return if he did not
pay the £581.60. Mr Griffiths rang HMRC; this time there was a record of the call on file and it seemed Mr Griffiths
was reassured, again, that the money would be 'coded out'. Then another
year passed with no contact from HMRC; on 28 July 2016 HMRC issued a notice to file a
self assessment tax return.
was now 'dazed and confused', HMRC had told him on two occasions they would code out the debt, his tax affairs had
always been within PAYE; he thought self assessment only applied to the self-employed. Unfortunately, at this time, there were numerous scams involving fraudsters who purported to be from HMRC. The Appellant feared being caught in a scam and was not reassured when he received penalty notices; his treatment did not accord with how he expected HMRC to behave so he instructed an agent, who submitted the outstanding tax return in June
judge concluded that Mr Griffiths certainly would have a
delay in filing his return. The test,
as considered in reasonable excuse , required that "the experience, knowledge and other
attributes of the particular taxpayer should be taken into account, as well as
the situation in which that taxpayer was at the relevant time”. Mr Griffiths
had not been issued with a paper return, just a notice to file one. Obtaining a
paper return involved navigating HMRC's website and seeking more
help would involve calling HMRC's helpline again whose performance "at the time was
abysmal; half of all calls to HMRC were not answered”...as stated in the National Audit Office (NAO) reports discussed in the Perrin 2018 UKUT 156 case. Capuano
delays by HMRC, led Mr Griffiths to believe everything had been resolved. Telephone assurances that it would all be handled through the
PAYE code, did nothing to contradict his belief. The penalty notices arrived at a time of
much publicity regarding scammers pretending to be HMRC asking for money. The judge was confident Mr Griffiths had a reasonable excuse; he didn't finish there.
considered and earlier judgement in Goldsmith TC06284 which concerned a similar poistion to that faced by Mr Griffiths.
s.8 TMA 1970 authorises an officer of HMRC to issue a notice "
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”. When HMRC had issued a tax calculation then HMRC was already aware of how much income and how much tax is involved in the matter and nothing further is required to be established, so the notice to file a
return was not made for the reason set out in the relvant legislation. The
notice was therefore invalid, and any penalties based upon not complying with the invalid notice
would also be invalid.
There appears to be an increasing awareness and dissaproval among FTT judges that a self assessment
tax return should not be used by HMRC as a means of collecting already established PAYE
This type of situation shouldn't be as much of an issue in the future as the simple assessement system (s.28H TMA 1970) should adequately deal with this type of matter. However, we are seeing more and more instances of HMRC's improper use of their powers and authorisation to draw taxpayers unecessarily into the main self-assessment system to try to collect tax that should have been collected alternatively and in doing so, taxpayers are then drawn into the world of automatic penalties for late filing, late payment and so on.If you have issues with HMRC penalties and need help or you
need advice please