Suspending – disbelief

/ 9 October 2023

Geraint Jones

One of the frustrations of life as a tax adviser can be having to explain the law to HMRC.  It can be particularly galling when an officer is misled by slack wording in their guidance manuals, especially as nowadays it’s common for officers to treat their guidance manuals as if they were an authoritative statement of the law (though to dismiss them, as has been done, as ‘an interesting but irrelevant ex parte statement of opinion’ may be going a shade too far).

An example: we were recently surprised to be told by HMRC, when seeking suspension of a penalty, that – terribly sorry and all that – they couldn’t by law consider the request.  How come, we wondered?

HMRC are required by law to consider suspension of any penalty which is imposed for an inaccuracy in a return or other document which is attributable to ‘carelessness’, and to do so in a way which is reasonable (in a judicial review sense).  ‘Carelessness’ includes, for example, failing to check for obvious errors in or omissions from information that has been provided or prepared for you by others – which was precisely the case we were dealing with.

However, HMRC are not required (or indeed empowered) to suspend certain other penalties.  In particular, if A’s return is inaccurate because B has deliberately supplied A with incorrect information, then B is liable to a penalty, and HMRC have no power to suspend it.

Unfortunately, it turns out that this distinction has found its way into HMRC’s guidance to officers in a mangled and abbreviated form:

 “You cannot under any circumstances suspend a penalty for an error in a person’s document attributable to another person”

You can thus see how an HMRC officer relying on the published guidance rather than the law comes to the wrong conclusion.  The guidance implies that if my tax return is inaccurate because I failed to spot an obvious mistake in information provided to me, any resulting penalty cannot be suspended.  This is quite wrong: the fact that the error is in some broad sense ‘attributable to another person’ is in general no bar to suspension.

However, persuading HMRC that they have the obligation to consider suspension and persuading them that it is unreasonable to deny suspension are two very different things.  We shall in a future piece return to the practice of HMRC in suspending penalties.  Meanwhile, for more information on responding to HMRC investigations and penalties, please get in touch with your usual BKL contact or use our enquiry form.

Geraint Jones

Partner, Private Client Tax

T +44 (0)20 8922 9354
E geraint.jones@bkl.co.uk

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