It is a fundamental principle of English law that justice is conducted in public. As the expression has it, ‘not only must justice be done – it must be seen to be done’. We have expressed concerns in the past that in practice this can put people involved in tax appeals in a difficult position if they want to exercise their appeal rights. A recent case reinforces our concerns.
The taxpayer, who was a builder, lived with his ex-partner’s parents, and his ex-partner’s mother wrote up his books. Unfortunately, her husband suffered brain damage as a result of a stroke, and became violent and destroyed many things, including family photographs and the taxpayers’ business records. Not surprisingly in such tragic circumstances the business records were not a priority. However, the wife did eventually manage to reconstruct business records in sufficient detail to allow tax returns to be submitted. These were, not surprisingly, filed late and accordingly penalties were charged.
HMRC did not accept that there was a reasonable excuse or special circumstances to enable the penalties to be cancelled. They did suggest that the taxpayer could have appointed somebody else to keep his books. He said that he wanted to support the family during a difficult time and that getting somebody else involved was not the right thing to do.
The tribunal found, perhaps surprisingly, that there was not a reasonable excuse for the late filing, but it did accept that there were special circumstances which allowed it to cancel the penalties. It said, ‘in the Tribunal’s view the circumstances in this case can clearly be described as out of the ordinary, uncommon, abnormal, unusual and exceptional’.
The nightmare which this family went through is all set out, including their identities, in a published judgement of the court. This seems fundamentally wrong to me. While it might have been necessary for full circumstances to be discussed in the hearing itself surely there could have been some way of publishing the decision without disclosing all of the detail. I can well imagine that other people in similar distressing situations would prefer to pay a penalty rather than exercise their appeal rights and have personal information disclosed which would be unfortunate in the extreme.
I also wonder why this case ever got to a tribunal in the first place. Being seen to take such a hard line doesn’t reflect well on HMRC and there seems to be no fundamental point of principle here which needed to be established. Perhaps it simply slipped through the system without anybody really considering the implications (although this does appear to be happening too often); but it is hoped that more common sense is taken to such cases in the future.
The final point is that the taxpayer’s earnings were so low that once his books were written up it turned out that he didn’t have any tax to pay. Yet he was charged penalties of £2,900. Regardless of the circumstances of this particular case, there is something wrong with a tax system which allows penalties of this amount to be imposed where there is no loss of tax to the exchequer. The case for reform is overwhelming.