Partner Article

The early return catches the worm! Or does it?

The owners of a business called Valley Centre took their tax obligations seriously. Their end of year PAYE return for 2010-11 was due by 19th May 2011 but, unlike the many taxpayers who leave their filing to the last minute, they filed on 7 April 2011 – only two days after the year end.

They filed electronically, as they were required to do, and got an electronic receipt saying that their return had been successfully received by HMRC. Job done. Or so they thought…

They were more than a little surprised – and I suspect that their actual reaction was unprintable in a polite publication such as this bulletin – to find that several months later they were landed with a penalty of £500 for late submission of their PAYE return.

What had gone wrong? It turned out that what they had submitted in April was in fact a test transmission and not the actual submission of the return.

They had unknowingly pressed the wrong button, but the electronic receipt which they got back from HMRC was exactly the same as it would have been had they filed properly, so the first they heard about their error was when the penalty notice arrived.

They appealed to the tribunal and the Judge found in their favour and cancelled the penalty. The Judge clearly didn’t think much of HMRC’s automated message system - ‘I would have thought that HMRC’s system could acknowledge by email in simple comprehensible terms whether a successful submission was a test or a real one.’

HMRC has actually made great strides in their IT systems in recent years and much of the technology works well (it copes remarkably efficiently with the rush to file returns on 31 January each year), but this case shows that there are still problems and that not everything is yet smooth and straightforward. We have also seen for example real problems in managing the return process for the new tax on high value dwellings.

But what the case also shows is that sometimes it is worth fighting the system. The tribunal Judge did not even require any witness evidence – everything was done by letter. Sometimes the little man really does win…

This was posted in Bdaily's Members' News section by Baker Tilly .