The courts have backed HM Revenue & Customs for a second time for imposing thousands of pounds of self-assessment late-filing penalties on a taxpayer who owed no tax.
Barry Edwards had argued HMRC was unfair to him by asking for penalties and interest when his tax returns showed he had no tax to pay. Before the First Tier Tribunal, but lost his case and appealed to a higher court.
The Upper Tribunal heard that Edwards had received late-filing assessments of almost £4,000 for three tax years – £1,300 plus interest for 2010-11; £1,600 plus interest for 2011-12; and £980 plus interest for 2012-13.
But HMRC argued that if a taxpayer was asked to file a self-assessment return, they must do so regardless of if they owe any tax.
Because of this, Edwards should have filed his returns and as he did not, the penalties were raised.
Edwards had appealed on the grounds that the lower tribunal could not reduce the penalties even if they believed they were disproportionate to the amount of tax involved.
“There is a reasonable relationship of proportionality between this legitimate aim and the penalty regime which seeks to realise it,” said Tribunal judges Sir Christopher Nugee and Timothy Herrington in their published decision.
“The levels of penalty are fixed by Parliament and have an upper limit. In our view the regime establishes a fair balance between the public interest in ensuring that taxpayers file their returns on time and the financial burden that a taxpayer who does not comply with the statutory requirement will have to bear.
“In view of what we have said about the legitimate aim of the penalty scheme, a penalty imposed in accordance with the relevant provisions cannot be regarded as disproportionate in circumstances where no tax is ultimately found to be due.
“In this case, HMRC’s decision as regards special circumstances was not flawed. As Mr Edwards’s contention that it was disproportionate to impose penalties concerned in circumstances where no tax was due does not amount to a special circumstance, HMRC did not fail to take into account a relevant matter in making its decision.”