ALICE IN OSBORNELAND

 

BLOG 234

 

ALICE IN OSBORNELAND

 

Alice came to a clearing.  In it was a large table and at one end of it sat the Hatter, who Alice had previously met at the Tea Party.  Only this time the large label on his hat read “HMWRC”. 

 

“What is HMWRC?”, said Alice. 

 

“Don’t be rude”, responded the Hatter, “It’s obvious!  Her Majesty’s Wonderland Revenue & Customs.  I’ve taken on responsibility for your tax affairs and you’re in deep trouble, young lady”.

 

“What have I done wrong” said Alice hesitantly, being a bit bewildered but having learned how easily it is to go wrong in this strange underground world.

 

“You filed your return too early” said the Hatter.  “That makes you liable for a penalty”. 

 

“A penalty for filing early!  That cannot be right”, retorted Alice. 

 

“No”, said the Hatter, “A penalty for not filing at all.  I’m talking about Alice Ltd’s RTI returns of course”.

 

“Nonsense” said Alice, “I know what I pay myself each month and I know there is a penalty for being late, so I filed all of my January, February and March returns last January”. 

 

“Exactly”, said the Hatter, “You didn’t  file returns for February and March”.

 

“Yes I did”, said Alice.  I filed them online and HMWRC’s online system responded “Success”.  “I kept a screen shot”.

 

“Ah”, said the Hatter, “When HMWRC say “success” it does not mean that you successfully made a return; it simply means that our computer accepted what you transmitted”.

 

“But I’ve got a copy of what I sent”, said Alice.

 

“What you sent too early is irrelevant” retorted the Hatter, “It is not a return.  Accordingly, you have not made returns for February and March and must pay penalties for non-submission”.

 

Alice stamped her foot.  “You’re mad”, she exclaimed.  The Hatter looked at her severely.  Too late Alice remembered that it was the mercury used in curing felt that addled a Hatter’s brain, and it was impolite to have pointed his misfortune out to him. 

 

 

 

The Hatter was silent for what seemed like ten minutes and then said, “It’s you who is mad.  No-one in their right mind could think that a return submitted too early should be regarded by HMWRC as satisfying the requirement to file a return”.

 

Alice was beginning to get angry.  “Your computer accepted the returns, surely it would not have been programmed to do so if it was wrong to submit a return early.  HMWRC encouraged me to submit the returns early so how can you now complain”, she said triumphantly. 

 

“You must spend more study time on vocabulary”, said the Hatter.  “HMWRC didn’t encourage you to file too early; it merely facilitated your wish to do so.  Facilitation is no more encouragement than cheese and chalk”.

 

I suspect that by now readers will be thinking that I am letting my imagination run riot and, as I am no Lewis Carroll, this is beginning to get farfetched.

 

I admit I made up Alice, it is a pseudonym for John Howard, and Alice Ltd is a pseudonym for Quayviews Ltd.  But the rest is real – well not word for word, but it is what actually happened to Quayviews Ltd.  Whether the tax legislation of Wonderland is identical to that in the UK as I have assumed is questionable though.  I doubt that Wonderland (if it exists) would have enacted such ridiculous legislation as the UK Parliament under David Cameron, and at the request of Chancellor of the Exchequer, George Osborne, has done – or at least Judge Anne Fairpo (who I have respect for) believes that it has done.  I blame David and George because I think the problem is that the RTI legislation does not appear to take into account the pre-existing penalty rules.

 

Actually, I am not convinced Anne is right.  She started from the penalty legislation and seems to have assumed that there is a statutory obligation to submit an RTI return each month.  If she had gone back to the PAYE Regulations, I am not confident that she would have accepted that such an obligation existed.  At least, I cannot find it.  I hasten to say that I am not criticising Anne for not having looked at the Regulations.  Tribunal judges are not expected to search out the law.  It is for the parties to draw to their attention the law on which they rely and where, as in this case, there is a taxpayer in person (or its lay director), there is an expectation that HMRC will draw the Tribunal’s attention to legislation that supports the taxpayer’s case as well as its own.

 

I suspect that Quayviews real problem was not the law.  This seems to me to allow a return to be filed at any time before the remuneration is paid.  It is that HMRC have programmed their computer to expect an RTI return each month.  Where a return is filed before the start of the month, the computer treats it as a return for the month in which it is filed because, being inanimate, it cannot interpret what is being filed; it simply knows something has been filed.  The corollary of that is that it knows when it does not receive anything during a month.  It is programmed to flag up that it has not received a return.  It is obviously depressing if HMRC have programmed their human staff to believe the computer without investigating the reason for the flag, but I think it more likely that they simply do not have the resources to investigate why the computer has flagged up that a return has not been filed.  But penalties can be charged only for breaking the law.  Although HMRC frequently seem to think otherwise, they cannot be charged for not conforming with HMRC’s internal systems or not following HMRC’s guidance.

 

I do however think that something is seriously wrong within HMRC for a case like Quayviews Ltd to have been argued before the First-tier Tribunal.  I doubt that HMRC’s Solicitors Office actually employs the Mad Hatter (if he exists) but I do not understand how, with knowledge of the facts set out by Judge Fairpo in her decision, the Solicitors Office took the appeal to a hearing rather than concede the case.

 

Happily, and in my view inevitably, Judge Fairpo had little difficulty in finding that Alice/John Howard had a reasonable excuse and threw out (sorry, set aside) the penalty on the basis that John Howard had acted reasonably.

 

ROBERT MAAS