If you have received a tax penalty from HMRC, you are entitled to appeal against it. Of course, there are specific rules and procedures to follow.
There are a variety of grounds for appeal which depend on your circumstances and the type of penalty that has been issued.
You can appeal against the issue of the penalty itself, the size of the fine and if a penalty for mistakes or errors is not suspended by the tax office (HMRC). Each type of penalty has its own grounds for appeal.
Late Filing of a Tax Return
Appeals against late filing of a return will be considered if the taxpayer is considered to have a “reasonable excuse” for missing the deadline. This is HMRC’s definition of “reasonable” and includes circumstances such as (but not exclusively):
- The taxpayer was in hospital, ill, or there was a significant family incident
- Taxpayer believed that online filing had gone through successfully, but it had not due to technical issues or internet connection failure.
- The return was posted in enough time, but was delayed in the postal system
- A return was not due
- The taxpayer never got a notice to file from HMRC
- The taxpayer trusted a third party to complete and submit a return and they did not meet their responsibility
- The taxpayer received the wrong advice about online filing or deadlines from HMRC
Late Payment of Tax Bill
Similarly, a late payment penalty can be appealed against if there is an HMRC approved “reasonable excuse”, such as (but not exclusively):
- Delay in the postal system
- Mistakes by the bank
- IT failure
- Lack of internet connection
- Taxpayer accident/illness
- Post not logged appropriately by HMRC
In both these types of penalties, two requirements must be met to establish the validity of the “reasonable excuse”. Firstly, the taxpayer must submit their “reasonable excuse” as part of their appeal. Secondly, it must be determined if the excuse is indeed reasonable when put in the context of the missed deadline that subsequently led to the penalty in question.
Errors or Mistakes
You can also receive penalties for making mistakes in tax returns or other relevant documents which result in declaring too little tax or claiming too much in tax relief. These can be appealed against if it is considered that the taxpayer “took reasonable care”.
The grounds for appeal in this instance are:
- The taxpayer took reasonable care, so it should be reduce to 0%.
- The mistake was made by a third party (possibly even HMRC), and this third party would usually be expected to have the total trust of the taxpayer
- The mistake was a total, one-off accident and the taxpayer took reasonable care of their financial matters
- The penalty amount has been calculated wrongly or is excessive
First Steps to an SA penalty appeal
If you get a Penalty Notice from HMRC, do exactly as instructed and make your appeal in writing to HMRC. They should then offer a review of the decision to issue your penalty.
If the penalty is then upheld, then taxpayers can take it to the next level and appeal to the First Tier Tax Tribunal.
Tribunals
Tax Tribunals are governed by tight regulations which are available to the public online. Usually minor tax penalty appeals just require the taxpayer to follow the directions given by the judge.
This will include things like dates, any representation you have employed and, possibly, written ‘representation’ from the taxpayer and HMRC. You must follow the judge’s directions. They will also tell you what should be included in ‘the bundle’ and case and evidence authorities.
‘The Bundle’
This is the bundle of documents you need to prepare for the hearing; possibly with a basic argument from the taxpayer and HMRC if it is a complicated case. All correspondence between HMRC and the taxpayer will be included, but the other content requirements are case dependent and that is why they are part of the judge’s directions.
Stick to the Rules
There is absolutely no tolerance for any breaches in the legal process. Nothing is flexible and no “reasonable excuses” are available. A taxpayer actually had to pay HMRC’s costs at a tribunal in 2014 because they, or their representative, had not notified the tribunal of a change in representative and withheld evidence.
SA Appeal Process
The taxpayer becomes known as ‘the appellant’, as they are bringing the appeal. They, or their representative, then puts their case forward with all supporting evidence, including calling witnesses as required.
Evidence
Unless there is a purely technical dispute, it can be seen that the quality of evidence is usually the deciding factor at tribunals. When considering previous case outcomes, taxpayers who make an appeal without any evidence are unlikely to get a favourable outcome. There are different types of evidence but it is a good idea to have a third party to support your appeal. For example, if you filed late due to your own illness, there are several possibilities: a sick note submitted to your workplace and corroborated by a statement from your boss, a physical witness to support your assertion that you were ill, a doctor’s certificate.
The Result
If you disagree with the First Tier Tax Tribunal decision, you can sometimes appeal against their decision to the Upper Tier Tax Tribunal. On some occasions, if there are particularly complex technical issues in a case, it may jump straight to the UTT.
