HMRC March Update

• Following the Bank of England raising the base rate of interest, HMRC have raised their rates of interest for late payment tax from 2.75% to 3% from 21 February 2022. Whilst it has not been announced at the time of press, it is expected the rate will rise to 3.25% following a further raise in the base rate on 17 March 2022
• The rate of interest paid on repayments of tax has remained at 0.5% since 29 September 2009
• HMRC have advised that any person who is still unable to file their tax return by 28 February and can provide evidence that the failure to file is due to COVID reasons, then HMRC will consider this a reasonable excuse and cancel the penalty

ETC case success

It is always pleasing to report on good results we achieve on behalf of clients. I can report on success of a case that was due to be discussed using the Alternative Dispute Resolution (ADR) at the end of February. HMRC withdrew their case just one week before the meeting.

It is a case we became involved in around 2 years ago, following many years without progress.

The case concerns a discovery assessment raised in 2010 for a total of £160k for the 2004/05 tax year, to which appeals had been made to HMRC.

We made representations to HMRC questioning the validity of the assessment. The representations were initially rejected by the HMRC officer, and again at independent review and had spent some 12 months being discussed following appeals for the case to be heard at the tax tribunal.

Prior to the ADR, HMRC advised that they had changed their mind and agreed that the assessment was invalid. The assessment was withdrawn. Whilst we were very pleased for our client, we are disappointed that HMRC did not recognise the position through the usual appeals and review process, despite robust representations.

We will be considering whether HMRC have acted negligently throughout the duration of the enquiry and will be making a complaint to recoup unreasonable costs our client has had to incur as a result.

Next, we look at an interesting tax case that has been heard at the Tax Tribunal and where we consider the verdicts to be relevant and interesting, either from a tax technical point of view or how to handle HMRC when assisting with a tax enquiry.

Yerou and Anor v HMRC

The case related to an appeal against a formal notice issued to a taxpayer to produce information and documents under Sch 36 FA 2008 after a discovery assessment had been issued.

The tribunal came to the view that the purpose of the information notices was to check the taxpayers’ tax position. However the taxpayer had argued that they had given all relevant information to HMRC already and as such, that the information requested under the Schedule 36 notice was not reasonably required.

A further point is that HMRC had already ‘discovered’ an underpayment of tax and therefore it was questioned whether they should be asking for additional information to try and confirm their position.

It was clear to the tribunal that there was no likely resolution to the case as both sides were at polar opposites, and so there was no realistic expectation of a resolution being agreed.

The tribunal therefore allowed the taxpayer appeal against the information notice on the basis it was not reasonably required, and neither would it assist in reaching a resolution.

The case is interesting as it gives further weight for arguing against HMRC information notices where it is felt they are asking questions, the answers to which are not required.