< Go Back The First Tier Tax Tribunal criticise HMRC's absurd pursuit of late filing penalties from a homeless Taxpayer in crisis Posted: Mar 2, 2019
It's not often that a news story about tax creates such an overwhelming feeling on unease at the approach taken by HMRC, but this case has already achieved the dubious honour of receiving universal condemnation. Krzysztof Pokorowski was experiencing significant personal difficulties
and was sleeping rough or was in temporary accomodation around the time his 2014/15 tax return was due for filing in January 2016. Despite this, HMRC relentlessly pursued him for late filing penalties. By the time the late return was eventually submitted in July 2017, the maximum £1,600 of penalties had already accrued.
The First Tier Tax Tribunal (FTT) was asked to consider HMRC’s refusal to reduce those penalties on the grounds of either reasonable excuse or special circumstance.
It was not in dispute that the return had been filed late. The FTT considered the penalty rules in Schedule 55 FA 2009 and the meaning of the terms ‘reasonable excuse’ and ‘special circumstances’ as interpreted in previous cases. The FTT criticised HMRC’s choice of cases and the exclusion of the case reports in the trial documents provided as evidence was thought “unfair and unjust”, Mr Pokorowski represented himself and did not have easy access to law reports.It was no exaggeration to describe Mr Pokorowski to have been 'in crisis' since he returned from a visit to Poland in 2014; when he was evicted from his permanent address. He did not advise HMRC of his circumstances at the time. A notice to file a return was issued to him by HMRC in April 2015 and subsequently penalty notices were issued between February 2016 and 2017; they were all sent to his old address and were never received by the Appellant as he was living rough elsewhere.
He had lost his job, had no money, had been evicted and all his belongings had been lost or stolen. Telling HMRC of his circumstances was not an obvious overriding priority; the FTT described HMRC's insistence in this regard as an absurdity. HMRC had referred to the definition of special circumstances as set out in
C something “ larks of Hove v Bakers Union out of the ordinary run of events”. The FTT found HMRC’s contention flawed, stating that being homeless and sleeping on the streets was most certainly exceptional and abnormal. The FTT concluded “ no reasonable HMRC officer acting reasonably could have reached a decision that Pokorowski’s circumstances were not ‘special’”.
HMRC had maintained that Pokorowski had not exercised reasonable “foresight and due diligence” for his responsibilities under the Taxes Acts, citing a VAT case,
, as authority. HMRC argued such a long delay (nearly 18 months) could never be reasonable. Once again the FTT disagreed, noting the definition relied on from Clean Car Company  VATTR 234 was incomplete. The full judgement in that case mentioned the effect of health issues or some “ Clean Car ” specific to the taxpayer on the ability to comply. The second leg of the reasonable excuse legislation, required the failure to be remedied without unreasonable delay once the excuse has ceased to apply, the FTT found that Mr Pokorowski had complied with his obligations by difficulty or misfortune filing the return within three months of him finding permanent accommodation.
The tribunal believed Mr Pokorowski’s circumstances did amount to a particular 'difficulty or misfortune', and permitted his reasonable excuse claim, commenting that if the excuse had failed, they would have reduced the penalties to nil as a special reduction anyway.
The FTT considered it most likely that Pokorowski had ongoing mental health issues over this time, which HMRC should have recognised. HMRC were roundly criticised for patent unreasonableness and the sheer absurdity of assuming that someone struggling with the basic needs of Maslow’s hierarchy would have the inherent ability to comply with their ongoing tax obligations. The abject disregard for the clear and obvious difficulties faced by an individual who had lost everything and had hit rock bottom is disturbing to say the least.
Although an extreme example, this is yet another case adding weight to the concerns recently expressed by the House of Lords Economic Affairs Committee regarding the conduct of some HMRC officers falling below the standards expected of a Public Service. What is even more concerning is that this case would have been subject to internal reviews and scrutiny long before the matter ever reached the FTT and yet still it was pursued, indicating a systemic problem, rather than one regarding individual officers. Sadly, similar, systemic, attitudes are permeating many investigation and intervention cases.
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