Company tax return late filing penalty must be issued by an individual HMRC officer- not a computer

Fri 22 Dec 2017

The First tier Tribunal (FTT) has held that a penalty for late submission of a company tax return cannot be issued by a computer without the authorisation of an individual HMRC officer.

Background

The Court of Appeal in Donaldson ([2016] EWCA Civ 761) held that, while a general policy decision that all persons who were more than three months late in filing their tax returns was valid notification for the issuing of a penalty, it had considerable doubts (but did not need to decide the point) that a computer programmed to issue a notice in accordance with that policy decision, would meet the notification requirement.

The FTT has now considered the same issue in Kahn Properties Limited. The was issued a penalty for late filing, the notice of penalty being issued by “HMRC, CT Services, Corporation Tax Services”, but with no name of an HMRC officer being given.

TMA 1970 s.100 and s.113 apply for the purposes of issuing a penalty under FA 1998 Sch18 para 17. TMA 1970 s.100(1) specifies that an authorised officer of the Board may make a determination imposing a penalty, and s.113(1D) says that the officer may entrust the responsibility for issuing the notice to any other officer of the Board, whether using a computer or otherwise.

The FTT could not find anything in TMA 1970 comparable to that in the Social Security Act 1998 s.2 that permits a determination or assessment in respect of National Insurance Contributions to be issued by a computer for whose operation an authorised officer is responsible. As a result the penalty was vacated.

Action

Penalty notices from HMRC should always be checked as to whether they were issued in the proper form. If not made in accordance with the law, there may be an argument that a penalty has not been properly issued and so is invalid.  For a further discussion of tax penalty matters, refer to the Tax Investigations team.