HM Revenue & Customs (HMRC) apparent failure to keep their address book up to date has cost them dearly, after a Tribunal sided with a businessman who claimed he had never received a notice to file.
According to the gov.uk guidance, a director must register for self-assessment (SA) and send a personal SA tax return to HM Revenue & Customs (HMRC) each year.
However, businessman Mohammed Salem Kadhem has proved that this is not always the case and there are, in fact, exceptions to the rule.
Mr Kadhem had been a director of a property company since 21 May 2014 but had received no benefits or dividends from that company and so chose not to register for self-assessment.
However, unbeknown to Mr Kadhem, he was automatically registered for self-assessment by HMRC. After apparently “failing” to complete an SA tax return, HMRC sent a notice to file immediately for 2014/15 on 6 April 2015.
The director not only denied ever receiving this notice but stated that he believed an SA return was unnecessary as all of his income was taxed at source through PAYE. Despite this, Mr Kadhem eventually submitted a return for 2014/15 on 21 September 2016 in response to a second letter, this time demanding a £100 penalty fine.
Such was the length of time that the tax return was delayed, further fines were issued totalling £1,200.
Mr Kadhem appealed the fine and attended a tax tribunal. HMRC quoted the guidance as published on gov.uk, but the tribunal ruled that the guidance does not have the force of law and did not “accurately reflect what the law says”.
It added: “If a person receives a notice to file a return he is under an obligation to file a return by the due date, but that is not what the Government guidance says.”
Further to this, HMRC could not prove that the notice to file a return was sent to the director’s correct address.
The tribunal accepted that he had a “reasonable excuse” for filing a late return and all penalties were quashed.
Although this case proves that there are indeed rare occasions where HMRC can be challenged, the majority of directors will not be able to rely on the defence that they have not received a letter from the taxman and will therefore need to ensure that their returns are filed within the stipulated deadlines.
At Moore Thompson, we can help with a range of tax and accountancy services for businesses and can help ensure that you and your clients do not attract the unwelcome attentions of HMRC. To find out more, please contact us.