What's popular this month?

    Each month we review the emerging themes from the calls to our tax advice lines. Below is a short summary of the key points our team has been discussing with accountants in October.

    Reasonable excuse tax case victory

    Mr Robert Morris successfully defended himself at a first-tier tribunal after appealing against penalties imposed by HMRC for the late submission of two self-assessment returns.

    A part-time guitar teacher with modest earnings, Morris filed his 2012/13 tax return online and, on completing his filing, he received a receipt and reference number.

    He went through the same process for 2013/14 and 2014/15, filing the returns on or soon after 1 January 2015 and 1 January 2016 respectively. Instead of receiving a receipt and reference number as before, on each occasion an on-screen message simply said words to the effect of ‘Thank you for your submission’ or ‘Submission complete’.

    Morris recognised the change in process compared to what he had experienced with his 2012/13 filing but assumed HMRC had changed or updated the filing system.

    Unbeknown to him, the 2013/14 and 2014/15 tax returns had not been successfully received and HMRC had charged daily and late filing penalties. Neither was Morris aware that HMRC had been writing to him with notices to file the returns and reminders etc. because he had moved house a number of times. He did not tell HMRC about each move, preferring to advise HMRC of his latest address at the same time as filing his tax returns.

    He only became aware there was a problem when he received a letter from a company called Frederickson on 7 January 2017 seeking payment of national insurance contributions. The letter set off a chain of enquiry revealing the penalties for the first time.

    Morris successfully filed his returns for 2013/14 and 2014/15 online the same day.

    HMRC argued Morris did not have a reasonable excuse for either of the ‘late’ tax returns because he was at fault for failing to register his change of address; had he done so, he would have received the notices to file, penalty reminders and penalty notices.

    The tribunal found Morris to be a credible and honest witness with good IT skills having previously built his own computer.

    It accepted the evidence put forward by Morris and that he did have a reasonable excuse because of the unqualified confirmation message on his computer screen. If HMRC had provided evidence that such a message was not capable of appearing, the tribunal acknowledged it may have arrived at a different view.

    All penalties challenged in the appeal were cancelled. The decision can be viewed here.

    Criminal offences for offshore evasion

    As part of HMRC’s ‘No Safe Havens’ initiative, new criminal offences targeting offshore tax evasion and non-compliance were created in FA 2016.

    The new criminal offences take effect for the tax year beginning 6 April 2017 onwards and should make prosecution, for failures to report offshore tax exceeding £25,000, easier because there is no requirement to prove dishonesty on the part of the taxpayer in question.

    These offences apply where taxpayers fail to notify or provide HMRC with inaccurate information about a liability to tax in respect of offshore income and gains. There is no offence if the total of the relevant tax unreported to HMRC for the year of assessment in question does not exceed this threshold amount.

    Calculation of this amount will exclude tax on income or gains reported to HMRC under the Common Reporting Standard (CRS) or by member states under the directive on administrative cooperation (DAC).

    The regulations come into force on 3 November 2017.

    For further information regarding either of these hot topics, please contact the author of this article, our Head of Technical Research, Guy Smith.