Last year a First Tier Tax Tribunal upheld an appeal by HOK Ltd against a £400 (£100 per month x 4) late filing penalty for failing to submit its end of year return for 2009/10.
HMRC argued that the penalty was correct despite the fact that it delayed issuing the penalty notice until the end of September rather than raising it earlier. Judge Geraint Jones, QC, however, criticised the Revenue for acting unfairly and using the penalty system as a cash-generating scheme and concluded that the department had not acted in good conscience. In consequence, he reduced the penalty to £100 as the taxpayer accepted that a late filing penalty was appropriate.
Geraint Jones was also the presiding judge in the HMD Response International First Tier Tribunal appeal of last year and again found cause to find fault with HMRC for imposing a late filing penalty of £500.
Needless to say, the above rulings together with a number of other similar judgements did not go down well with HMRC who have now confirmed that they are preparing an appeal, with the HOK decision being the most appropriate case.
HMRC has protested that it does not use late filing penalties as a money spinning racket and that it does not deliberately withhold from issuing penalties or reminders. The feeble excuse it has given for sending out penalty notices later rather is to allow a reasonable period for employers to inform the Revenue that they have no P35 to file.
Those employers that have incurred inflated late filing fines and are rubbing their hands in expectation of having a large proportion refunded may have to wait a while yet until the Revenue's appeal is heard.
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