This is a story about a lovely lady in her late70’s, Cath Rigby, who is a neighbour of mine. Cath, a retired nurse, had never needed to complete a tax return until just over 10 years ago, when she inherited her mum’s house and decided to rent it out to bolster her retirement income.
I explained to Cath how to complete her first paper tax return and which boxes were relevant to her. Cath duly filled the form as per my suggestions, received a tax account from HMRC, showing the tax due, paid it the day she received the account and continued in the same happy vein for 10 years.
Bully Boy HMRC: Fast forward to June 2020
By 2020 HMRC had decided that it was far more efficient for it to receive all data, documentation, forms and submissions of any kind, in a digital format. But, as usual, they did not consider or ask, the ordinary taxpayer when making this decision. They just arrogantly assumed that everyone had a computer, was computer literate and generally at ease with the digital world.
But back to Cath Rigby. When Cath contacted HMRC in June 2020 to ask why she had not yet received her 2019/20 paper return, she was informed that a message had been posted in her tax account six months earlier, As Cath only used the account once a year to pay her tax, she hadn’t seen the message and was therefore unaware of the change. Cath didn’t complain and as requested, duly set up an electronic online account to complete the online version of the tax return.
Cath completed her electronic tax return in July 2020 and as part of the process, she was able to generate a calculation showing that she owed the taxman the grand sum of £906.44. Cath being a bit old-fashioned, as is her wont, sent off a cheque to HMRC and this was cashed in September 2020. Cath patted herself on the back that she’d successfully completed the task, including paying the tax due, so she consigned her 2019/20 records to the loft.
Bully Boy HMRC: Fast forward to March 2021
The story now moves on to March 2021, when Cath received a letter from the tax office stating that her return had not been submitted to HMRC by the deadline of 31st January 2021 and as a result she had incurred a penalty of £100. Two weeks later, Cath received a further letter from HMRC stating that her cheque had been received and cashed, but that the payment was currently unallocated.
Cath did not have a clue what HMRC meant and she didn’t understand the terms used, so she logged into her tax account. Once she had completed the security questions, she was greeted with a page stating that she had paid the correct amount of tax and that there was nothing more to pay this tax year. Cath was therefore understandably confused as to what was going on, having been told in fairly quick succession that she hadn’t submitted a return but had apparently paid the correct amount of tax due.
Bully Boy HMRC: HMRC unresponsive
Cath came to see me in tears and I assisted her to write an appeal against the £100 penalty, confirming she had sent the return in on time and including a screenshot of her tax account message, plus a copy of the cashed cheque for £906.44 that her bank had provided.
It then took nearly five months before HMRC responded, and when they did, they upheld the penalty, stating in their letter that Cath may not have completed the final step in the online process.
Cath then tried multiple times to contact HMRC by phone and when she eventually got through the jobsworth who spoke to her effectively said, ‘”Computer Says No…” , without offering any explanation or advice. Frantically Cath tried to submit a further online return but the system would not let her.
Meanwhile, she incurred a six-month late filing penalty of £300 and daily late filing penalties of £900. With seemingly no other options, I helped her complete a paper copy of the 2019/20 return, which was submitted by Special Post, together with a further appeal against the penalties.
After months of stonewalling by HMRC, Cath was getting nowhere so I suggested that she take her appeal to a first-tier tax tribunal. She’d never been in court before and was terrified, I eventually managed to persuade her by promising to accompany her as a McKenzie Friend (See Note 1).
Bully Boy HMRC: Fast forward to August 2022
On Monday 15th August the tribunal started. They first decided that Cath had been correctly issued with a Notice to File and therefore a late submission of the return was subject to penalties. With that formality out of the way, they next considered whether Cath had a ‘reasonable excuse’ for not submitting the return on time. Reasonable excuses are often a difficult concept, as there is no statutory definition, indeed I have done a number of Blogs on the subject. See https://www.morganjones.co.uk/?s=reasonable+excuse
HMRC provided a log of Cath’s activity on the day she claimed to have submitted her return. She spent an hour and 43 minutes working on her return but, according to HMRC, she closed the session while the return was only 95% complete and the calculation showing estimated figures, although when pressed by the chair, they admitted that the screen did not make it clear that the figures were in fact estimates.
Bully Boy HMRC: Reasonable excuse
The HMRC litigator then trotted out their standard litany of, “it’s the taxpayer’s responsibility etcetera, etcetera. The tribunal however was unmoved and came to the conclusion that Cath reasonably believed she had submitted the return by reaching the calculation screen and had not seen the messages stating otherwise. They further did not accept HMRC’s claim that, as it was her first online submission, she should have checked with HMRC that the return had been received, as they accepted that Cath had genuinely believed the return had been submitted, so had felt no need to confirm this with HMRC.
Moving on to the statement mentioning an unallocated payment, the tribunal found that Cath did not understand what this meant, having never heard the term before. They also felt that she had acted reasonably throughout; truly believing that she’d submitted her return on time. When she received letters to the contrary from HMRC she was confused and sought to confirm her beliefs; her online account stated no payments were due and HMRC had cashed her cheque, ergo everything must be up to date.
All in all, it was objectively reasonable that Cath thought all was well until March 2021 when HMRC confirmed otherwise. As soon as this happened Cath had taken immediate steps to get a ‘further’ return to HMRC. The FTT found she had a reasonable excuse for the late submission and allowed her appeal and cancelled all penalties and accrued interest.
Tax Accountant’s view
As someone who these days checks their front door is locked at least twice before retiring to bed, I always double check that HMRC have received my submissions. Cath, unfortunately, did not share my mindset (although I suspect that she may now!), but after a bit of a stressful time for a while, this case ultimately turned out well for her. Now, have I definitely closed the downstairs loo window?
(Note 1: A McKenzie friend is someone who assists a litigant in a court of law in England and Wales, by prompting, taking notes, and quietly giving advice. They need not be legally trained or have any professional legal qualifications.)