Not again. We have yet another case before the tribunal (CED Limited v HMRC TC02633) in which HMRC has imposed a penalty because payments of PAYE were not made on time due to postal delays.
The taxpayer said that he always sent his cheque for the tax first class on the 18th of each month so that it would reach HMRC in the ordinary course of post by the 19th which was the due date. Where the 19th fell at a weekend, he made the payment so it would arrive on the Friday.
We have been here before and know that this procedure is OK, not least because of the Interpretation Act 1978 and the recent cases of Browns CTP Ltd (TC02244) and Trustee of de Britton Settlement (TC02524). However, HMRC still pursued this penalty to the tribunal. Its argument was that the taxpayer must be “mistaken” because HMRC did not process the cheques until after the due date so obviously they could not have been received by the due date.
This seems to be the wrong argument in any event. The issue was not whether the payments were late, but whether, if they were late, the taxpayer had a reasonable excuse for the late payment. In this case, HMRC could not prove that the payments were late anyway, but even if it had, the taxpayer had a reasonable excuse by posting the cheques at a time when he could reasonably expect them to arrive on or before the due date.
The tribunal did not think much of this argument and set aside the penalty. The judges said: “We were invited by HMRC’s representative to read the expression ‘Processing Date’ as if it had said ‘Date of Receipt’ because HMRC’s normal procedure is to present cheques on the date of receipt. We cannot accept that. There is no evidence to support it.”
HMRC acknowledged that the onus was on it to prove that the taxpayer had not sent the cheques as he claimed, and under the circumstances it is extraordinary that the matter ever got to the tribunal. The only explanation can be that HMRC did not believe the taxpayer and wanted his evidence tested under oath. But I thought the Taxpayers’ Charter required HMRC to treat the taxpayer as honest (unless it had some reason to believe otherwise). There was clearly no reason to believe that the taxpayer was not telling the truth – but even if HMRC did entertain some doubts, it could have asked him to submit an affidavit confirming his evidence. That would have been a bit rude – but it surely would have been conclusive and could have saved the enormous waste of time and money which was inevitably involved with the tribunal hearing.
Given the rather unnecessarily aggressive approach of HMRC to postal delays, it would seem to be a sensible precaution to obtain a certificate of posting or to send the payment by recorded delivery. That is a bit tedious, but it would put the matter beyond doubt and possibly avoid a whole load of aggravation with HMRC.
* This article was first published in TAXline, August 2013