We recently highlighted the importance of ensuring HMRC have taken the right steps in terms of the use of their powers – see Make Sure HMRC Notices are Valid! – Technicalities and Human Rights Law. This has been confirmed by a further recent case which again shows the importance of checking the facts.

In A Revell v HMRC the First-Tier Tribunal was asked to consider whether HMRC had acted correctly within the legislative framework for their powers. The taxpayer in the case had voluntarily submitted a tax return for 2008/09. HMRC had sent the request to deliver a return to the wrong address, despite having received the updated address for the taxpayer.

HMRC attempted to enquire into the return and determined that further tax should have been due. The taxpayer, however, appealed on the basis that the enquiry was invalid because he had not received a notice requesting a return under TMA 1970, s8.

The First-tier Tribunal agreed that no request to deliver a return had been made due to it being sent to the wrong address. They found that the taxpayer had not waived the requirement for the issue of a notice to file under TMA 1970, s8 by submitting a voluntary return. As such, they determined that his return should be treated as a notice of liability to income tax under s.7 and not a self-assessment return.

The appeal was therefore allowed. In addition, as the time limit to request a return had expired HMRC’s only further option would be to issue a discovery assessment. This would appear to then bring further technical considerations into play, as to whether such a discovery assessment itself would be valid based on case law (see our blog post on some of the case law in this area for further information).

This case again shows the importance of ensuring HMRC are acting within their powers as a first step. It also appears to raise some interesting questions as to the implications for making a voluntary tax return, as the Tribunal found that these should not be treated as a self-assessment return.

Recent cases have emphasised the importance of that European Human rights laws have on the UK tax system; however the cases and our own recent experiences suggest that HMRC do not take these implications seriously.

The recent Tribunal case of PML Accounting Ltd v HMRC [2015] considered a number of issues, including one relating to Human Rights.  The case involved an HMRC Notice requiring information from PML Accounting and the firm’s appeal against a penalty for failing to provide the information on time.

The Tribunal found that the information notice had not been complied with and that the taxpayer did not have a reasonable excuse for the failure.  However, they also determined that the Notice was invalid as it had been issued under the wrong piece of legislation.

The notice was issued under FA 2008 Sch 36, para 1 as part of a review of the company’s position under the Managed Service Company Legislation.

The Tribunal determined that there had been suggestion that any investigation under the MSC legislation would lead to a charge on PML.  As a result, the information notice should have been issued under paragraph 2 (third-party notices) instead of paragraph 1.

The Tribunal also concluded that the Notice breached the human rights of PML’s clients as it had been issued under the wrong paragraph.  A paragraph 2 notice relating to third-parties provides a level of protection for the taxpayers involved as they may not be issued without either the taxpayer’s prior consent or the tribunal’s approval.

There have also been a number of other cases highlighting the inadequacy of HMRC’s approach to human rights law.  For example, in Bluu Solutions Ltd v RCC [2015], the Tribunal confirmed that a tax penalty, which is meant to be punitive and to deter, is “criminal” for the purposes of Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms.  This provides taxpayers subject to HMRC penalties with additional protection stating that taxpayers have the right to a fair trial and requires that the taxpayer is presumed innocent, with the burden of proof on HMRC.  Also proceedings have to be brought within a reasonable time, and the taxpayer must have enough resources and time to defend against the penalty.

Further protection is provided by Article 7 which requires that any penalty should have a clear basis in law and therefore where there is genuine uncertainty as to the underlying tax law, it could potentially be a breach of Article 7 to impose penalties based on non-payment.

These points all provide extra protection that advisors should bear in mind when assisting clients faced with HMRC investigations.  If you have any concerns over HMRC’s approach then please contact us and we will be delighted to assist.

More cases on the scope of HMRC powers.

The first concerns a current successful barrister.  His penalty for failing to react to HMRC information notices was £1.2m+.  Many would say “Ouch!  That hurt!”  However, in this case, the judge in the Upper Tribunal pointed out that some of the information requested went back over 9 years to the death of the taxpayer’s father and his Inheritance Tax affairs.

The judge found it “difficult, if not impossible to understand why a man of the Taxpayer’s means had not appointed a professional advisor to help him deal with all his tax affairs”.  The judge felt the money spent on penalties could have been far better used! (CRC v Ronnie Tager).

With the background to the case and the incredibly lengthy delays in getting information, it is difficult to avoid thinking HMRC were on the side of the angels in this case.

In the case of J Dyson, the taxpayer appealed against a penalty for late filing of a partnership return.  He said he had done all he could to ensure compliance, but it was held that he had no right of appeal whatsoever, because only the ‘representative partner’ had any rights of appeal.

Whilst it seems reasonable that the ‘representative partner’ should generally be the main point of contact for HMRC, to deny altogether the rights of other partners would seem a trifle un-sporting.  The First Tier Tribunal thought so and felt it was in breach of his civil rights that he had no right to a fair hearing.  However, their conclusion was that they had no powers to overrule the legislation.  As the first case notes, individual taxpayers can be unco-operative, and that must be frustrating for Revenue Officers.  However, does that make it appropriate for them to take action against other taxpayers, where the position is perhaps unfair?

The final ‘powers’ case shows that repayments of excess tax paid in earlier years, under self- assessment may be reclaimed in appropriate circumstances.  Andrew Michael Higgs overpaid tax on account.  The courts held the taxpayer was not limited by the 4 year time limit generally applying on claims.

A fair summary of the line of cases would seem to be that:

a)     Circumstances alter cases.  If unfortunately you find yourself amidst disaster, then look carefully at the facts to try to detect an escape hatch.

b)    Investing in timely reporting and good professional advice to keep matters up to date is likely to be money well spent, both financially and emotionally.


Darren is a mythical former Inland Revenue man.  He worked in the local Tax District and was someone’s nephew or cousin or husband.  He was the man you thought of when the Inland Revenue (as all organisations do) made a mistake.  Your view was “Yes, it’s wrong, but Darren is not nasty.  Misguided sometimes, but he’s ok.  It will be sorted out fairly”.

This blog is a campaign to keep Darren safe from being bought a long Government mac and turned (against his nature) into a quasi Gestapo imposer of penalties and seizure of personal funds with no appeal for the taxpayer.

I am grateful to my loyal clients and the support given over 20 years of practice as Eaves and Co, but sometimes, I peruse my debtors list and wish that some would pay quicker.  I am sure many other business men think the same!  Perhaps, even HM Revenue and Customs?  Having said that and even knowing the hassle it takes to make a County Court claim it has never crossed my mind that I should have the right to raid a client’s bank account!  Surely that would be wrong in principle, because, by definition, any dispute would not have been fully resolved.

Quite apart from it being wrong in principle, I am absolutely certain that HMRC (like any other organisation) will make mistakes (see recent press regarding private debt collectors).  I am not saying they will do it on a vast scale, but publicity recently on tax credit debts and prior PAYE errors, suggests that mistakes can and will happen.

MPs, suppose you vote for the measure and then one of your constituents loses his business/marriage/health/commits suicide because of a raid on his wife’s account, which then leads to job losses…

Are these HMRC powers necessary or proportionate?  I think not, and commend the Taxation Articles  (May 29) “Just Say No” and “Departmental raid on the downtrodden”.

Wise HMRC personnel ought to campaign against taking too much power as well.  Adverse publicity caused by a bad case or cases (which statistically must be likely to happen) must surely have a much worse impact on overall compliance than any marginal benefit through acting to curtail current appeal rights.  The publicity contrast on the apparent abuse of power in that situation would be easy and profound.

I liked HM Inland Revenue.  They were civilised, sophisticated and well trained.  (I did used to work for them!)  I was nervous of HM Customs and Excise who seemed to be (I generalise) trained to hide behind rocks, shoot people and indulge in intimate body cavity searches – probably essential, but not a subject for normal, civilised commerce.  Then they merged and were given lots of new powers, responsibilities and centralised computer projects.

From having a foothold in every town through local Tax Districts (systematically closed some time ago) we now learn that even the centralised Help centres are to be closed down.  Inevitably, this will make HMRC appear more remote.  I think this is bad for the taxpayer, the country and indeed HMRC.

It is brought about by ‘wrong thinking’ in misnaming taxpayers as ‘customers’.  Sensible business strategies may focus on the 80-90% of core customers to make a business successful.  (Tesco are unlikely to offer tailor made Purdey shotguns at the end of a frozen food aisle).  However, HMRC has to work for all taxpayers, even those in unusual circumstances.  This is not easy, but having worked with people in various European jurisdictions my view is the general level of compliance in the UK is significantly higher than many other European states.  This is a huge benefit to society as a whole, but it is a tender beast, surviving through the public view of perceived fairness of action and local involvement.

Please do not turn Darren into a nasty man with a long dark mac raiding personal bank accounts.  HMRC do not need more powers.  They need more trained personnel to enforce existing powers consistently and fairly.

Give Darren more friends not powers!