Member Article

Man scores goal against machine

How reliable are the computers? Many people know how hard it can sometimes be to complete online transactions, perhaps having to give up and start again. But what if your tax return, or part of it, disappears in the process?

Mr Banks, a taxpayer with two well-paid jobs, had a penalty awarded against him for omitting his employment income from his tax return, which he submitted online, showing no extra tax due at the end of the year. HMRC spotted the omission, assessed further tax of £3,241 and a penalty for carelessness of £486.

But Mr Banks objected. He had not been careless, and he appealed on principle: he had completed the forms online, the programme showed no more tax due, and he argued that it was not his fault that HMRC’s system had failed to register the details submitted, so he should not be penalised.

The tax tribunal, on the balance of probabilities, agreed with him. The burden of proof was on HMRC to show that Mr Banks had been careless, and their records were inadequate to meet this test.

HMRC argued that the taxpayer had omitted the details because he thought his employers had dealt with all the tax under the PAYE rules. It had checked its system and found no faults, so it denied the taxpayer’s claim that the system was ‘beset by well publicised technical challenges’ and upheld its decision on internal review.

The tribunal disagreed – it could not understand how the taxpayer might have missed the earned income in completing the tax return when it was the only income shown in the return. HMRC’s evidence was not strong enough to support a claim of taxpayer carelessness, and it had failed to explain how its system checked to ensure that the employment pages were completed when the ‘send’ button was pressed.

Most of HMRC’s well-publicised IT problems have been with the RTI system for PAYE, but few IT systems are problem-free. It is reassuring to know that the courts are there to stop the machines taking over completely, although less reassuring to read that the HMRC staff couldn’t explain to the taxpayer or the tribunal certain aspects of how the system worked.

This was posted in Bdaily's Members' News section by George Bull .