< Go Back Reliance on HMRC Advice can be a reasonable excuse and HMRC error leads to award of costs Posted: Nov 25, 2019
the First Tier Tribunal allowed late appeals against imposed penalties as the appellants had relied on incorrect advice from HMRC which was deemed to be 'a reasonable excuse'. Claire Shenstone, Georgina White, Henry White v HMRC  TC7378
If you are out of time in appealing a tax penalty you can write to HMRC and, if you have a 'reasonable excuse' you can ask then if they will accept a late appeal, they may accept the late appeal but even if HMRC do not, a taxpayer can apply to the Tribunal who will consider if:
You have a reasonable excuse for the delay, or it is in the interests of justice to do so.
In this case, the appellants were a mother and her adult children, and partners in a
partnership. They had fallen behind with their tax returns due to
family illness and the death of their accountant. HMRC assessed imposed late filing penalties covering several years:
They made late appeals against the penalties. HMRC accepted some of the late appeals and
then dismissed those appeals on the grounds that they had no reasonable
excuse but appeals relating to one tax year remained to be decided. HMRC had advised Henry White, by telephone call, that the
penalties could not be appealed until the returns had been filed.
At the point the penalties were issued the returns were still being prepared. Appeals were quickly made after the returns were filed. Georgina White’s record with HMRC had an incorrect address listed and letters had been returned to sender as a result.
The FTT judge allowed the late appeals in the absence of the taxpayers and their agent:
It was reasonable that reliance had been placed on HMRC’s advice
that appeals could not be made until the returns had been filed. The judge felt able to infer that one of the penalty notices was
amongst Miss White’s returned mail; not receiving a penalty assessment
was a very good reason for not appealing the penalty. It was clear Mr White had passed on HMRC’s incorrect advice about
not appealing the penalties until the returns had been filed to his
sister and that it was reasonable that she had relied on this
information. The family illness and reliance on the now deceased accountant were not reasonable excuses for late appeals.
This case confirms that the ordinary taxpayer who is most likely to rely on advice from HMRC shoudl not then be unduly punished if that advice then turns out to be misplaced. Then, in a similar vein, another case was published which also dealt with an error by HMRC.
First Tier Tribunal (FTT) ordered the HMRC to pay 50% of the appellants costs. HMRC had denied the taxpayer relief based up an incorrect argument. This
became the subject of a very complex appeal and it transpired that if HMRC had adopted the
correct argument in the first place it would have
saved both sides' costs. KS MacMillan and G Boardman v HMRC  TC 07408, The taxpayers had claimed Capital Gains Tax (CGT) Entrepreneursʼ Relief on the 2014 disposal of loan notes acquired in 2006. HMRC denied relief, citing the complicated transitional rules in FA 2008. The Tribunal established the transitional rules did not apply or need to be considered. HMRC agreed and the parties settled the appeal by agreement.
As the case was listed as complex, the FTT were able to consider costs. Usually, in complex appeals, the loser pays the winners costs.
The FTT found that the taxpayers' orginal argument was not correct but then neither was HMRC's. Both sides could be said to have caused
expenditure on costs which might have been avoided. However, had the
taxpayer not brought the appeal it would not have obtained the relief
sought. On that basis it was just and fair for HMRC to pay 50% of the
The above cases show that HMRC, unsuprisingly, are not immune from getting in wrong in the complex world of modern taxation in the UK but, where those errors dissadvantage the taxpayer the FTT may look to provide redress, at least in part, to remedy the damage.
So, if you have Trouble with the Taxman
contact us for a no obligation discussion about how we may help you.