Unsympathetic face of HMRC

Tribunal judge slams Revenue for its callous treatment of vulnerable taxpayer

The First Tier Tax Tribunal has set aside a tax bill of nearly £18,000 that was being sought from John Clark, a man with a mental age of just 12 years old, and shamed HMRC into the bargain.

Mr Clark, a painter and decorator from Dunfermline, Scotland, had been served with six tax Determinations for all years 2002/03 – 2007/08 following his failure to file tax returns on time. The returns were finally filed in July 2013 but not in time for the estimated assessments to be displaced by the actual figures; his income was actually less than his tax allowances for all years. He did however have mitigating circumstances in that he was dyslexic, had the intellectual level of a primary school child, had learning difficulties, suffered from severe depression and also endured a number of personal set backs.

Clark relied on his wife to attend to his paperwork and she had registered him as self-employed in the summer of 2003, even though the couple had separated in March of that year. She later died in 2013. He worked about 3 days per week but ceased in March 2004 and did not recommence again until 2013.  

When the couple split up, Mr Clark became the sole carer to his school-age daughter and had to live off his savings.

In early 2006, there was a fire at Clark’s house which caused extensive damage to the extent that he could not return to live there for almost a year. Certain contents including personal papers were also destroyed. In January 2009 the daughter left his house.

There was no recollection on Clark’s part of him having received the tax returns or tax demands but he told the tribunal that he wouldn’t have appreciated the significance of such documents anyhow. In June 2011 his daughter penned a letter to HMRC in an attempt to resolve his tax dispute but this was returned, marked “sent to wrong department.” Then on three separate occasions in August and September of the same year, Mr Clark personally attended the tax office in Dunfermline but was only afforded limited assistance by HMRC staff despite the fact his literacy problems should have been obvious. The dispute therefore remained unresolved.

Under cross-examination HMRC pressed Clark to explain how he had managed to deal with other matters during which time he could have lodged tax returns to displace the Determinations. He explained that he had had some help from his daughter and younger son after his wife had left him and took issue with the Revenue’s inference that he had been “selective” about when he sought others’ advice and that he had made a conscious decision not to pay tax.

According to HMRC they had raised the Determinations to their best judgement following careful research into the profits typically generated by various businesses, but without reference to actual business records.

In spite of all the mental difficulties, trials and tribulations Mr Clark suffered, HMRC refused to grant Special Relief and waive the £18,000 tax bill as it would not have been ‘unconscionable’ for them to do so.

The term, ‘unconscionable’ is not statutorily defined but the tribunal agreed its general meaning to be completely unreasonable, unreasonably excessive, inordinate or outrageous. They also gave credence to a previous judgement that described the term as meaning, “not in accordance with what is right or reasonable…….grossly unfair, especially to a weaker party…….acting without regard for what is right.”

The tribunal found in favour of Mr Clark and commented that HMRC’s reasoning was “too narrow, inadequate, and lacking in consideration of the appellant’s [Mr Clark] peculiar vulnerability. It ignores his inability to engage fully and satisfactorily with the tax authorities. It neither recognises nor makes any concession to his vulnerability.” HMRC had not taken into account Clark’s dyslexia, general learning difficulties, his reliance on other family members in absence of his wife and the likelihood that most of his tax documents would have perished in the house fire.

Just how far will the Revenue sink in their crusade to purge taxpayers of their every last penny? This case was unpalatable and the department should not have even contemplated embarrassing nay shaming themselves before a tax tribunal. Thank goodness that justice was done on this occasion.