A penalty for careless misstatement in a tax return can be suspended even if relates to a one-off event such as redundancy, a tax tribunal ruled.
In the lower tax tribunal case of Philip Boughey v HMRC (TC/2011/09901) Philip Boughey had mistakenly claimed a tax exemption for a £30,000 redundancy payment in his self-assessment tax return when relief had already been given through PAYE. HMRC charged a 15% penalty for careless error.
Boughey accepted that the penalty was due but appealed against HMRC’s refusal to suspend it. He argued that no suitable condition of suspension existed – citing paragraphs 14 to 17 of schedule 24 of the Finance Act 2007.
Paragraph 14 of schedule 24 says that the respondent may suspend all or part of a penalty for careless inaccuracy but “only if compliance with a condition of suspension would help [the person] to avoid becoming liable to further penalties under paragraph 1 for careless inaccuracy.”
The tribunal ruled against HMRC, which it held had proceeded on an “erroneous legal basis”. The judge, Geraint Jones, noted the appellant’s co-operation ( “material consideration”) and that his mistake was due to carelessness “rather than anything more serious”.
The judge commented: “It is clear... that the decision maker proceeded on the erroneous legal basis that any condition of suspension must be designed to ensure that, in the future, the appellant correctly declared the receipt of any redundancy payments. That was far too narrow a view and discloses a highly material error of law.”
In agreeing to a two-year suspension, the judge applied a condition that Boughey’s tax returns must be completed on his behalf by a chartered or certified accountant.
In her 16 July AccountingWEB tax podcast, Anne Fairpo confessed to mild indignation that chartered tax advisers were not included in that list.
However law firm Pinsent Masons said the tribunal’s decision was “welcome confirmation that the suspension provisions can be used to set a condition which is not specific to the tax return] inaccuracy.”
In the lower tax tribunal case of Philip Boughey v HMRC (TC/2011/09901) Philip Boughey had mistakenly claimed a tax exemption for a £30,000 redundancy payment in his self-assessment tax return when relief had already been given through PAYE. HMRC charged a 15% penalty for careless error.
Boughey accepted that the penalty was due but appealed against HMRC’s refusal to suspend it. He argued that no suitable condition of suspension existed – citing paragraphs 14 to 17 of schedule 24 of the Finance Act 2007.
Paragraph 14 of schedule 24 says that the respondent may suspend all or part of a penalty for careless inaccuracy but “only if compliance with a condition of suspension would help [the person] to avoid becoming liable to further penalties under paragraph 1 for careless inaccuracy.”
The tribunal ruled against HMRC, which it held had proceeded on an “erroneous legal basis”. The judge, Geraint Jones, noted the appellant’s co-operation ( “material consideration”) and that his mistake was due to carelessness “rather than anything more serious”.
The judge commented: “It is clear... that the decision maker proceeded on the erroneous legal basis that any condition of suspension must be designed to ensure that, in the future, the appellant correctly declared the receipt of any redundancy payments. That was far too narrow a view and discloses a highly material error of law.”
In agreeing to a two-year suspension, the judge applied a condition that Boughey’s tax returns must be completed on his behalf by a chartered or certified accountant.
In her 16 July AccountingWEB tax podcast, Anne Fairpo confessed to mild indignation that chartered tax advisers were not included in that list.
However law firm Pinsent Masons said the tribunal’s decision was “welcome confirmation that the suspension provisions can be used to set a condition which is not specific to the tax return] inaccuracy.”
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