COMPLIANCE
Sections 34 and 36 of TMA 1970 allow HMRC to raise assessments: 1) for any reason within four years from the end of the year of assessment to which it relates, and 2) where the loss of tax is brought about carelessly by the taxpayer, within six years of the end of the year of assessment to which it relates. The penalties – PAYE and RTI returns Before 2015, the penalties for failing to make PAYE-related returns for small employers were within the TMA at Section 98A. However, Paragraph 6C of Schedule 55 to Finance Act 2009 applies, from 6 March 2015, to make a person who fails during a tax month to make a return on or before the filing date, liable to a penalty of £100 for each RTI return that isn’t filed (where there are no more than nine employees).
● the determinations issued were according to best judgment ● the taxpayer displaced the figures in the determinations ● HMRC complied with the time limits for these determinations. The FTT needed to consider whether Hedges had been careless in failing to report the payroll details required under the law in the proper manner. Because ‘reasonable care’ isn’t defined in the legislation, they referred to previous FTT cases where the concept of ‘reasonable care’ had been a consideration. They specifically quoted Collis v HMRC [2011], which enabled them to conclude that Hedges hadn’t taken ‘reasonable care’ and would allow HMRC to consider Regulation 80 determinations. Having established that HMRC had complied with the legislative provisions in both issuing the Regulation 80 determinations and observing the time limit protocols, the FTT considered C & E Commrs v Pegasus Birds Ltd [2004]. This was to determine whether HMRC had used its best judgment. They concluded that it had, albeit
with some minor amendments to the computational elements in 2013, where the tax and penalties were deemed to be incorrect. They were revised downwards, noting that: ‘the tribunal should remember that its primary task is to find the correct amount of tax, so far as possible on the material properly available to it, the burden resting on the taxpayer. In all but very exceptional cases, that should be the focus of the hearing, and the tribunal should not allow it to be diverted into an attack on the commissioners’ exercise of judgment at the time of the assessment’. Conclusion Agents and employment taxes experts should hold periodic discussions with employer clients who operate their own payrolls to cover off this area. It should also ideally be considered during annual audit risk assessments and due diligence exercises under mergers and acquisitions processes. It’s the little things that can come back to bite you. n
What was the tribunal asked to do?
The FTT’s task was to determine whether: ● HMRC was entitled to issue Regulation 80 determinations
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| Professional in Payroll, Pensions and Reward |
Issue 83 | September 2022
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