I note in your reply to Steve that you say you are not legally trained. I would like to add some comments from a UK qualified lawyer, from HMRC and from me.
Firstly HMRCs response to a FOIA question ( seven months after first asking ) regarding penalties being cancelled where being ignorant of the process was the excuse. Quote -
“Your request falls within scope of information held by HMRC as we do have data on penalty cancellations in relation to late submission of Non Resident Capital Gains Tax (NRCGT) returns. Whilst we record when we cancel a penalty on grounds of reasonable excuse, we do not record the detail of those reasons.” Really? How does that sit with the auditors?
Judge Moseland said that Welland had not proven that penalties had been cancelled on those grounds although he had asked for the information. HMRC are refusing to release this information. According to my lawyer, the Judge has the power to insist they provide this information and should have adjourned the case until she had the information and thereby could make a more informed decision.
In the case, Welland vs HMRC, Judge Moseland makes some huge assumptions in favour of the respondent. On the point of notifying those affected, she states that Parliament cannot have intended to give HMRC such an onerous duty. Unless she has consulted with Parliament on this, she cannot know its intention, neither can she know how onerous the task might become unless she has an in depth understanding of the systems HMRC already had in place. It is entirely possible that if the task became onerous , it was HMRCs own doing by, in part, dismissing advice given to them in their consultations.
On the Tribunal cases so far. The judges seem to major on whether tax is due or not. It had already been decided by HMRC that no tax was due and the point of the appeals was to object to the penalties applied. It would appear that the judges cannot agree. Judge Moseland states that she does not agree with the findings in the McGreevy case. There could be problems in the judicial system.
So why does Judge Moseland disagree? Judge Moseland has looked at the case presented to her from a purely legal point of view. I don’t think anyone could successfully argue that HMRC were acting illegally. ( A more in depth study would be required , particularly as those fined £700 had no opportunity to act as HMRC did not notify them of the impending 6 and 12 month penalties because HMRC were completely unaware until their “customer” belatedly filled in the relevant form. Will HMRC use the excuse, “ We didn’t know because no one told us!” ) Underhand, devious, and incompetent, quite probably, but not illegal. What is worrying is that Judge Moseland completely ignores any morals or ethics in coming to her conclusions. When judges do that it is a sign that the fabric of society is going to come under pressure. Capital punishment wasn’t illegal, yet it was abolished.
HMRC –“There is no definition in law of ‘reasonable excuse’. Our Self Assessment Manual provides staff with some examples of what might constitute a reasonable excuse as well as some that would not be accepted.” Lawyer – “HMRC are trying to have their opinion of a reasonable excuse upheld by law. Their argument is no stronger than the opinion that not knowing due to not being informed is a reasonable excuse.”
From the outset HMRC have failed to find a satisfactory way to bring in this system. They had available a system which could be modified as they knew the identity of those this would affect.
They ignored expert advice given in their consultations, such as, the 30 day period to fill in a form won’t work.
I find it ironic that HMRC is using lawyers at tax payers’ expense to defend a ludicrous situation of their own making and hound thousands of people who owe no tax.
Next. Find out who had their penalties overturned and why. Is it a level playing field or are these companies or people with influence? Find out how this in being applied to non UK citizens. I suspect non UK citizen cases are not being followed up. This may explain some of the 700 plus with penalties removed. We know of one where a letter from HMRC informing a person of £100 fine has not been followed up in over a year.