A leading law and tax investigation company has said that thousands of taxpayers may have been wrongly fined for paying their taxes late or not submitting their returns on time.

It transpires that Her Majesty’s Revenue and Customs (HMRC) has recently lost several cases and been criticised by the courts into the bargain for fining people wrongly says McGrigors.


According to McGrigors the courts are now taking a more lenient approach to the law than HMRC would like to see. And with the vast majority of people either believing that HMRC must always be right, or being too scared or not having the funds to challenge the fines, they believe that HMRC has become ‘a law unto itself’.

McGrigors, which was named National Law Firm of the Year 2010 by The Lawyer magazine, says the guidance that HMRC provides should not be taken as absolute.

Jason Collins, a partner of McGrigors said “The spate of recent cases suggests that HMRC has been imposing penalties far too harshly on taxpayers who have genuinely tried to comply with the law.”

“Thousands of taxpayers are likely to have been wrongly fined, yet very few challenge these fines. This is because the way in which HMRC’s guidance is worded makes taxpayers think they would stand little chance in a Tribunal. Taxpayers who feel they have been unfairly fined really should challenge HMRC.”

“HMRC has – quite literally – become a law unto itself where fines are concerned. The courts have made it clear that HMRC’s guidance on fines is at odds with the law, and that its definition of ‘reasonable excuse’ should not be taken at face value.”

The law says that a taxpayer should not be fined if they have a ‘reasonable excuse’ for not paying or paying late. But nowhere is ‘reasonable excuse’ properly defined. HMRC define it very narrowly, but the courts it seems are applying the normal ‘reasonableness’ test, which is much broader.

In one of the more recent cases says McGrigors, the Tribunal ruled that ‘having insufficient funds’ to pay the tax was reasonable enough. That is despite Tax Bulletin 34 saying ‘Taxpayers are expected to have set money aside to pay tax. The law says that not having the money to pay is not a reasonable excuse.’

With the July 31st tax payment deadline hovering over many stretched taxpayers, lack of funds as a potentially reasonable excuse will come as welcome news.

Other recently overturned HMRC fines highlighted by McGrigors include:

  • A return posted in time but arriving four days late with HMRC. The taxpayer was fined in accordance with HMRC rules but the court said they were incorrect to do so as the guidance that said postal delays would only be a reasonable excuse in exceptional circumstances was wrong.
  • A solicitor posted a stamp duty land tax return. On checking and finding out it had not been received the solicitor submitted the return and payment electronically but was fined for being late. On overturning the fine the judge said that “the Tribunal is not bound by HMRC’s construction of reasonable excuse”.
  • On another case the court overturned the fine because HMRC had not sent out a reminder.
  • One taxpayer found that they could not use the online tax paying service without extra software, which HMRC made no reference to. So a paper return was filed late and the subsequent fine was overturned.
  • One taxpayer mistakenly thought their accountant would file a P35 for them. This was found to be a ‘genuine mistake’ so the fine for failing to submit it was overturned.
  • Reliance on advice given by the HMRC helpline was also considered to be a reasonable excuse if it leads to a mistake in a return.

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