Personal finance: How to appeal a tax penalty

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HM Revenue & Customs (HMRC) can issue penalties to taxpayers for a variety of reasons, including the late submission of a tax return, late payment of tax, or failure to notify that tax was due.

When HMRC writes to taxpayers advising them of a penalty decision, it will normally advise them if it is possible to appeal and also on how to appeal.

1 Have a good reason

Taxpayers may have a “reasonable excuse” if events outwith their control have prevented them from fulfilling their obligations e.g. health issues or postal disruptions causing late submission.

Alternatively, the taxpayer may feel they can appeal the decision as a result of a similar tax case which suggests that a penalty should not be due.

2 Follow the process

An appeal should be submitted to HMRC in writing within 30 days of notification of the penalty being applied. HMRC will consider the appeal and will put any decision in writing.

If the taxpayer cannot reach agreement with HMRC regarding the appeal, HMRC should then offer a review. Any such application for a review should again be made to HMRC within 30 days of the date of the appeal refusal. The review will be undertaken by another officer not previously involved in the case and HMRC will advise of the outcome within 45 days.

3 One more go

If the penalty is still upheld after the review process, it is then possible to take the appeal forward to a Tribunal. HMRC will provide confirmation on how to apply to the Tribunal and again this should be done within 30 days.

4 Short cut

For most taxpayers the appeal and review procedure with HMRC should be sufficient. But it is possible to proceed with an appeal directly to the Tribunal without going through the review process. Taking a case to the Tribunal may involve a formal hearing or will be handled by correspondence only. Once the decision of the Tribunal has been made, formal notification will be given to the taxpayer and HMRC. If the taxpayer or HMRC wish to appeal the Tribunal’s decision, the next step would be for the case to be heard by the Upper Tribunal with subsequent hearings at the Court of Appeal should matters progress that far.

• Neil Mitchell is a tax partner at Mazars Scotland