Make It Count - Bains MiC Autumn 2018 Bains_web | Page 4

Don’t ignore your tax obligations – the penalties can be harsh PLAY BY THE RULES! A ppeals against income tax and penalty assessments taken to tribunal rarely succeed, according to research. This is the case for all late tax payments where there is no reasonable excuse – a ‘reasonable excuse’ being defined by HMRC as ‘something that stopped you meeting a tax obligation that you took reasonable care to meet’. HMRC suggests that bereavement of a close relative or a serious illness may be a reasonable excuse, but the appeal would certainly be rejected if you relied on someone else to do your return and they didn’t, or you made a mistake on your return. Of the last 50 appeals to the tax tribunal, only 14% succeeded in the taxpayer’s favour, 70% in HMRC’s favour and the remainder were split outcomes; meaning that although a penalty was still due, it was reduced. To give you an example, In July 2018 a decision was made with regards to an appeal made by an individual, Dennis Madden, against income tax and penalty assessments in relation to 11 years from 2003-2004 to 2013- 2014. These assessments were raised following HMRC’s investigation into Mr Madden’s tax affairs, which found that he had failed to pay various LIMITED COMPANY SUBMISSION CHECKLIST What? To whom? When? Annual accounts Companies House and HMRC 9 months after your company’s financial year end Company tax return HMRC 12 months after your accounting period for corporation tax ends Pay corporation tax to HMRC HMRC 9 months and 1 day after your accounting period for corporation tax ends Confirmation Statement CS01 Companies House At least once every 12 months Self-assessment for directors if required HMRC Paper 31 October 2018, online 31 January 2019 for 17/18 tax year Of the last 50 appeals to the tax tribunal, only 14% succeeded in the taxpayer’s favour, 70% in HMRC’s favour taxes on time. HMRC stated that the sum in dispute over the 11 years was £244,982.70 – a combination of underpaid tax and the corresponding penalties. Before the tribunal, Mr Madden had also signed an outline of disclosure of failure to submit returns of income, failure to submit and operate PAYE and failure to submit rental returns. However, he had not included any admission of VAT fraud in the disclosure, which HMRC subsequently found to be the case. Mr Madden supplied a large volume of evidence to HMRC for this trial only two weeks before the trial began, leaving no time for them to be reviewed. He had not requested a later hearing to accommodate the late filing of records, and therefore the tribunal proceeded based on evidence collected previously. Mr Madden did not attend the tribunal and some of the meetings before it, which had an impact on the level of penalties. The absence of credible accounting records did not help Mr Madden’s case. He disputed HMRC’s methodology but did not provide alternative methodology with integrity and credibility, leaving inadequate documentary proof. Decision: appeal dismissed. In conclusion, without a reasonable excuse there is little chance that the tribunal will accept an appeal against late tax payments and penalties. If you are struggling to meet your tax obligations on time, get in touch so that your accountant can get you back on track. Bains Financial Management Chartered Management Accountants T: 07983 938173 • Email: [email protected] www.bains-fm.co.uk 3 Oswin Road, Leicester, LE3 1HR