HMRC found to be ‘unconscionable’ in recent case on Special Relief

Recent blogs have considered the HMRC interpretation of reasonable excuse as requiring Death, Disease or Disaster. Although this latest case may not concern this interpretation of ‘reasonable excuse,’ it continues the theme of HMRC taking a hard line and refusing to consider circumstances.

In Maxwell v CRC, the taxpayer’s accountant, who had been responsible for preparing and submitting the tax returns, passed away. When the filing dates for Mr Maxwell’s self-assessment returns were missed due to the unfortunate death of his agent, determinations were raised by the HMRC. The determinations that were raised by HMRC were subsequently found to be excessive when compared to the tax due; the determination for the 2007/08 tax year was just under £5,000 whereas the tax liability for was found to be only £400. Unfortunately, the deadline to displace the determinations raised by HMRC was also not met by the taxpayer and HMRC stood by the original determinations refusing a claim for Special Relief.

Maxwell appealed under TMA 1970, Sch 1AB para 3A, which states that a claim for relief can be made where HMRC would believe it to be unconscionable to seek to recover the amount or to withhold the repayment of tax.  Maxwell had been unaware of his agent’s illness and believed that he had been handling his taxation matters efficiently so therefore felt it was unconscionable for HMRC to recover the excess tax.

The measures in question were introduced in 2011 with equitable liability replaced by the new statutory Special Relief.  In 2011 this ‘special relief’ was introduced as a form of relief which can apply to amounts charged in HMRC determinations for self-assessment where no other statutory remedy is available. Although conditions have to be met to be eligible for special relief, the relevant condition in question in Maxwell v CRC was whether HMRC found it unconscionable to seek to recover the amount charged by the determination.

The taxpayer appealed against HMRC’s refusal and the FTT tribunal ruled that the taxpayer had satisfied all conditions required. His appeal was allowed and relief was granted. Consequently, HMRC was found to have acted in a manner deemed unconscionable in this case.