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Where Taxpayers and Advisers Meet
Tax Cases Highlight Potential Problems with Making Tax Digital
27/09/2018, by BKL, Tax Articles - HMRC Administration, Practice & Methods
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David Whiscombe looks at two tax cases which point to some of the practical and procedural problems faced by both taxpayers and HMRC, with the advent of Making Tax Digital.

Tax Case 1: Issuing “Automated” Notices to File


When a Tribunal finds in favour of a taxpayer because of a basic procedural failing on the part of HMRC, it is both refreshing and depressing.  Refreshing because it is in the best traditions of justice that an appeal body will not take it for granted that the procedures of a department of state comply with the law, but will on its own initiative consider points that may not have been put forward or even recognised by an unrepresented taxpayer.  Depressing because a department of state really ought to be capable of ensuring that its procedures comply with the law.


In Haigh v HMRC [2018] UKFTT 0399 (TC), Mrs Haigh had failed to file a tax return when asked to do so by HMRC.  Actually, the facts are not quite that simple.  HMRC had on 6 April 2016 issued a notice requiring Mrs Haigh to file a tax return.  One was filed in October 2016 but – whether by oversight, chauvinism or undocumented grant of authority – it had been signed not by Mrs Haigh but by her husband.  HMRC wrote to Mrs Haigh in December 2016, rejecting the return but saying (concessionally) that no penalties would be charged if it were to be refiled with the right signature within 21 days of the rejection.  In the event it was refiled in March 2017.

HMRC therefore sought an initial penalty of £100 (because the return was filed after the statutory filing date of 31 October 2016) and daily penalties of £430 (because the return was more than three months late).

The Tribunal Decision

The Tribunal found that there was no “reasonable excuse” for the delay.  Nor were there any “special circumstances”.  And it was outwith the Tribunal’s authority to consider whether the penalties were inappropriate, unfair or disproportionate.  So why did HMRC not win – or at least not fully win?

The answer lies in the statutory requirements regarding a notice to file a tax return.  Such notice is required to be given not “by HMRC” but “by an officer of the Board”.  The Tribunal interpreted this – correctly, we think – as a requirement that the notice should be given by a particular named individual.  Because HMRC had presented no evidence that this was the case (they presented only extracts from their computer records purporting to indicate that a notice to file was issued to Mrs Haigh at a particular address, together with a pro forma copy of the front page of a tax return) the Tribunal held that what HMRC had sent Mrs Haigh on 6 April was not a valid “notice to file”, so there could be no penalties for failing to comply with it.

However, Mrs Haigh did not escape penalties altogether.  The letter of December 2016 rejecting her tax return and asking her to refile a properly signed version was sent by an identifiable named officer and did meet the requirements to be a “notice to file”.  Mrs Haigh was therefore liable to a penalty for failing to comply with that notice within the three-month period allowed to do so: as a result, the initial penalty of £100 was valid, albeit for reasons quite different from those put forward by HMRC.


Moral: for taxpayers, when confronted by a penalty, check that every procedural requirement has been fulfilled.  For HMRC, read the legislation.

[Editorial Note: while the legislation has recently been extensively updated to accommodate Making Tax Digital, TMA 1970 ss 8, 8A and 12AA – notices to file general, trust and partnership tax returns respectively – still refer either to notices given by “an officer of the Board” or by “an office of Revenue and Customs”.

However, notices to provide the digital updates themselves, as set out in F(No.2)A 2017 ss 61 – 63 and Sch 12, particularly the new TMA 1970 Sch A1 and supporting regulations, refer to Commissioners’ powers, and to notices made “by the Commissioners”.]

Case 2: The Criteria for Digital Exclusion

Making Tax Digital (“MTD”) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.”  HMRC’s words, not ours.

Mandatory Online Filing

For some years it’s been obligatory to file VAT returns online.  The first phase of MTD builds on that by adding the requirement (from April 2019) that VAT registered businesses with an annual turnover above the VAT threshold (£85,000) must maintain records using software that is fully integrated with HMRC’s new digital gateway and able to send quarterly returns direct to HMRC.  Expansion of MTD into other areas of tax compliance will follow when (not if!) “the system has been shown to work well”.

Forcing taxpayers to keep all records electronically is perhaps all very well and good for the digitally literate.  But what of those who still think of mice as things that cats chase and to whom tablets are what the doctor prescribes when you’re poorly?

The MTD legislation addresses concerns of this kind by making special provision for the “digitally excluded”.  This inelegant phrase is defined in the same terms as those in which the VAT regulations exempt certain people from the existing obligation to file VAT returns online.

Thus, the recent Tribunal case of Glen Lyn Generations Ltd and Exmoor Coast Boat Cruises Ltd v HMRC [2018] UKFTT 0394, which concerned the scope of those VAT exemption conditions, takes on a wider relevance than it might otherwise have had.

The main circumstance in which exemption from online VAT filing applies is where “the Commissioners are satisfied that it is not reasonably practicable to make a return using an electronic return system … for reasons of disability, age, remoteness of location or any other reason”.


Mr Oxenham was a director and shareholder of both the companies involved and was responsible for filing their VAT returns.

HMRC did not dispute that Mr Oxenham was, at 52, of a generation that had not been exposed to computers at school or university and was not “computer literate”.  They nonetheless considered that it was “reasonably practicable” for returns to be made online: although meeting the statutory obligations could entail some degree of inconvenience, effort and expense, a distinction had to be drawn between what was not reasonably practicable and what was merely inconvenient.  Mr Oxenham’s lack of computer literacy did not mean that the online filing requirement was so onerous that a reasonable taxpayer would not be able to take steps to comply with it.  He could, for example, reasonably be expected to hire an agent to do the online filing for the companies.  As for his “age” being a bar, “age” should in HMRC’s view be read in the context of the exemption as applying to physical infirmities arising with age, rather than age per se.

The Tribunal held that it had “supervisory” jurisdiction in the matter.  That is, it was not entitled to remake the decision de novo: it was required only to determine whether HMRC had acted reasonably in making the decision and, if not, to remit the case to HMRC to have another go.

The Tribunal disagreed with HMRC’s analysis of the relevance of age, holding that “…the age of a person who is responsible for on-line filing can be a criterion in itself for the purposes of [the VAT rules] because the age of a taxpayer may be relevant to their ability to use a computer and deal with on-line filing” and that “it is [not] necessarily the case that someone who has had no, or very little exposure to computers during their formative years can readily learn to use a computer”.

The Tribunal Decision

Nonetheless, the Tribunal upheld HMRC’s decision.  It seems in this to have been influenced by two main factors.  First, the fact that both companies had historically filed Corporation Tax or VAT returns online made it difficult to say that it was not “reasonably practicable” for them to do so.  Second, Mr Oxenham had conducted over some time what the Tribunal described as a “moral crusade against the requirement to file on-line”: the Tribunal considered that that, rather than any question of reasonable practicability, underlay his objections.


The case underlines that the hurdle to secure exemption from online VAT filing (and, in due course, from meeting obligations under MTD) is a high one.  Nonetheless, the Tribunal’s recognition that “computer aptitude cannot be taken for granted, even in the twenty first century”, and that age per se may need to be taken into account, is welcome.

About The Author

BKL is a business name of Berg Kaprow Lewis LLP, Chartered Accountants and Tax Advisers, a limited liability partnership registered in England and Wales.

The information in this article is intended for guidance only. It is based upon our understanding of current legislation and is correct at the time of publication. No liability is accepted by Berg Kaprow Lewis LLP for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken.

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