HMRC Law

Who HMRC is in law — CRCA 2005 s.1(1) provides that 'Her Majesty may by Letters Patent appoint Commissioners for Her Majesty's Revenue and Customs' (the Act as published uses that form of the title). Under s.1(4), 'In exercising their functions, the Commissioners act on behalf of the Crown.' Section 2(1) lets the Commissioners appoint staff 'to be known as officers of Revenue and Customs', and s.2(3) requires an officer to 'comply with directions of the Commissioners'.

What the Commissioners are responsible for — CRCA 2005 s.5(1) makes the Commissioners responsible for 'the collection and management of revenue' that the Commissioners of Inland Revenue and the Commissioners of Customs and Excise were responsible for before that section commenced, and for 'the payment and management of tax credits' for which the Commissioners of Inland Revenue were responsible. By s.5(4), 'revenue' 'includes taxes, duties and national insurance contributions'. Section 9(1) adds an ancillary power: the Commissioners 'may do anything which they think' necessary or expedient in connection with, or incidental or conducive to, the exercise of their functions.

Confidentiality and wrongful disclosure — CRCA 2005 s.18(1) says 'Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.' Section 18(2) lists exceptions, including a disclosure made 'in pursuance of an order of a court' and one made 'with the consent of each person to whom the information relates', and s.18(3) makes the rule subject to any other enactment permitting disclosure. Under s.19(1) it is an offence to contravene s.18(1) by disclosing revenue and customs information relating to a person whose identity is specified in the disclosure or can be deduced from it. Section 19(3) gives a defence where the person reasonably believed the disclosure was lawful, or that the information had already and lawfully been made available to the public.

Information powers (Finance Act 2008, Schedule 36, Part 1) — Paragraph 1(1) lets an officer of Revenue and Customs, by notice in writing, require a person to provide information or produce a document 'if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position or for the purpose of collecting a tax debt of the taxpayer'. Paragraph 2 gives a similar power to require information about another person (a 'third party notice'), and para 3(1) says an officer 'may not give a third party notice without' the agreement of the taxpayer or the approval of the tribunal. In Schedule 36, 'tribunal' means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal. Further paragraphs deal with other cases, such as notices to financial institutions (para 4A), which this page does not cover.

Inspection of premises (Schedule 36, Part 2) — Paragraph 10(1) lets an officer enter a person's business premises and inspect the premises, business assets and business documents on them 'if the inspection is reasonably required for the purpose of checking that person's tax position'. Paragraph 10(2) says the powers 'do not include power to enter or inspect any part of the premises that is used solely as a dwelling'. Under para 12(1), an inspection under para 10, 10A or 11 may be carried out only at a time agreed by the occupier or, if para 12(2) is satisfied, at any reasonable time. Paragraph 12(2) is satisfied if the occupier 'has been given at least 7 days' notice of the time of the inspection' or if the inspection is carried out by, or with the agreement of, an authorised officer of Revenue and Customs. In the second case the officer must provide a written notice, which under para 12(4) 'must state the possible consequences of obstructing the officer in the exercise of the power'.

Appealing an information notice (Schedule 36, Part 5) — A taxpayer given a taxpayer notice may appeal against the notice or any requirement in it (para 29(1)), but not in respect of information or documents that form part of the taxpayer's statutory records (para 29(2)) or where the tribunal approved the giving of the notice (para 29(3)). A person given a third party notice may appeal on the ground that it would be unduly onerous to comply (para 30(1)). Notice of appeal must be given in writing, 'before the end of the period of 30 days beginning with the date on which the information notice is given', to the officer who gave the notice, and must state the grounds (para 32(1)-(2)). The tribunal may confirm, vary or set aside the notice or a requirement in it (para 32(3)).

Penalties for not complying (Schedule 36, Part 7) — A person who 'fails to comply with an information notice' is 'liable to a penalty of £300' (para 39(1)(a) and (2)). If the failure continues after a penalty is imposed, the person is liable to further penalties 'not exceeding £60 for each subsequent day on which the failure or obstruction continues' (para 40(2)). Liability to a penalty under para 39 or 40 'does not arise' if the person satisfies HMRC or, on an appeal notified to the tribunal, the tribunal that there is a reasonable excuse for the failure or the obstruction of an officer of Revenue and Customs (para 45(1)). Paragraph 40A separately provides for a penalty 'not exceeding £3,000' where, in complying with an information notice, a person provides inaccurate information or a document containing an inaccuracy and one of conditions A, B or C is met (careless or deliberate inaccuracy; knowing of the inaccuracy and not informing HMRC at the time; or discovering it later and failing to take reasonable steps to inform HMRC).

Penalties for errors in documents (Finance Act 2007, Schedule 24) — Paragraph 1 makes a penalty payable by a person who gives HMRC a document of a kind listed in the Table in that paragraph where the document contains an inaccuracy that 'amounts to, or leads to' an understatement of a liability to tax, a false or inflated statement of a loss, or a false or inflated claim to repayment of tax, and the inaccuracy was careless or deliberate on that person's part. Under para 3(1), an inaccuracy is 'careless' if it is 'due to failure by P to take reasonable care', and the Schedule separates 'deliberate but not concealed' from 'deliberate and concealed' inaccuracies. The amount is worked out under later paragraphs of the Schedule, which this page does not summarise. A person may appeal against a decision that a penalty is payable, its amount, a decision not to suspend it, or a decision setting conditions of suspension (para 15), and the appeal is treated in the same way as an appeal against an assessment to the tax concerned (para 16(1)).

Late returns and late payment (Finance Act 2009, Schedules 55 and 56) — Schedule 55 para 1(1) makes a penalty payable by a person who fails to make or deliver a return, or another specified document, on or before the filing date. For the returns to which paragraphs 3 to 6 apply, para 3 provides for 'a penalty under this paragraph of £100', and para 4 provides for a penalty of £10 for each day the failure continues during the period of 90 days beginning with the date specified in HMRC's notice, if the failure continues after the end of the period of 3 months beginning with the penalty date, HMRC decide that such a penalty should be payable, and HMRC give notice specifying the date from which it is payable. Schedule 55 contains further penalties for particular kinds of return that are not covered here. Schedule 56 para 1(1) makes a penalty payable by a person who fails to pay an amount of tax specified in the Schedule's Table on or before the date specified there. Under both Schedules a person may appeal against a decision that a penalty is payable and against its amount (Sch 55 para 20; Sch 56 para 13).

Reasonable excuse and special reduction — Liability to a penalty under Schedule 55 or 56 'does not arise' if the person satisfies HMRC or, on appeal, the First-tier Tribunal or Upper Tribunal that there is a reasonable excuse (Sch 55 para 23(1); Sch 56 para 16(1)). For this purpose 'an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control' (Sch 55 para 23(2)(a); Sch 56 para 16(2)(a) is to the same effect), and relying on another person is not a reasonable excuse unless the person took reasonable care to avoid the failure. Separately, Sch 55 para 16(1) lets HMRC reduce a penalty where 'HMRC think it right because of special circumstances', but 'special circumstances' does not include ability to pay (para 16(2)(a)).

Enquiries into returns (Taxes Management Act 1970, ss.9A and 28A) — An officer of Revenue and Customs may enquire into a personal or trustee return under section 8 or 8A only by giving the taxpayer notice of enquiry within the time allowed (s.9A(1)). If the return was delivered on or before the filing date, that time runs 'up to the end of the period of twelve months after the day on which the return was delivered' (s.9A(2)(a)); the other cases, including returns delivered late and amended returns, are dealt with by s.9A(2)(b) and (c) and use the quarter days (31 January, 30 April, 31 July and 31 October). An enquiry extends to 'anything contained in the return, or required to be contained in the return, including any claim or election included in the return' (s.9A(4)(a)). Section 28A provides that an enquiry is completed when the officer gives a final closure notice, which must state the officer's conclusions and either say that no amendment of the return is required or make the amendments required (s.28A(1B) and (2)). The taxpayer may apply to the tribunal for a direction requiring an officer to issue a partial or final closure notice within a specified period (s.28A(4)). Section 9A applies to returns under sections 8 and 8A; this page does not cover enquiries into company tax returns.

Appealing an assessment, amendment or closure notice (Taxes Management Act 1970, ss.31 and 31A) — Section 31(1) gives a right of appeal against an amendment of a self-assessment made during an enquiry under s.9C, a conclusion stated or amendment made by a closure notice, an amendment of a partnership return under s.30B(1), and any assessment to tax that is not a self-assessment. Notice of appeal must be given 'in writing', 'within 30 days after the specified date', to the relevant officer (s.31A(1)), and must specify the grounds of appeal (s.31A(5)). The specified date is the date the notice of amendment, closure notice or notice of assessment was issued (s.31A(2)-(4)). For a simple assessment, the right of appeal 'does not apply unless and until' the person has raised a query under s.31AA and been given a final response (s.31(3A)), and the specified date is then the date the person is given notice of that final response (s.31A(4A)). If notice of appeal is not given in time, s.49 allows late notice if HMRC agree or, where they do not agree, the tribunal gives permission; HMRC 'shall agree' if the appellant asked in writing, HMRC are satisfied there was a reasonable excuse for not giving notice in time, and the request was made without unreasonable delay after the excuse ceased (s.49(2)-(6)).

Review or tribunal (Taxes Management Act 1970, ss.49A to 49I) — Once notice of appeal has been given to HMRC, the appellant may require HMRC to review the matter (s.49B), HMRC may offer a review (s.49C), or the appellant may notify the appeal to the tribunal (s.49D). If the appellant requires a review, HMRC must within 30 days beginning with the day HMRC receive the notification (or a longer period that is reasonable) notify the appellant of HMRC's view of the matter (s.49B(2) and (5)). If HMRC offer a review, the appellant has 30 days beginning with the date of the offer document to accept; if the offer is not accepted in that time, HMRC's view is treated as an agreement in writing settling the matter, unless the appellant notifies the appeal to the tribunal under s.49H, within that period or afterwards only if the tribunal gives permission (s.49C(4), (6) and (8); s.49H(2) and (3)). A review may conclude that HMRC's view is upheld, varied or cancelled, and HMRC must notify the conclusions and reasoning within 45 days beginning with the relevant day, or another agreed period (s.49E(5) and (6)); the relevant day is the day HMRC notified the appellant of its view, where the appellant required the review, or the day HMRC received notification of the appellant's acceptance, where HMRC offered the review (s.49E(7)); if they do not, the review is treated as having upheld HMRC's view (s.49E(8)). After the conclusions, the appellant may notify the appeal to the tribunal within 30 days beginning with the date of the conclusions document, and after that period only if the tribunal gives permission (s.49G(2), (3) and (5)(a)). The HMRC Charter describes a statutory review as undertaken by 'an impartial review officer in HMRC who was not involved in the original decision'.

The tribunal — The Tribunals, Courts and Enforcement Act 2007 s.3(1) establishes the First-tier Tribunal, and s.7(1) lets the Lord Chancellor, by order, make provision for its organisation into chambers. The First-tier Tribunal and Upper Tribunal (Chambers) Order 2010 art.2 lists 'the Tax Chamber', and art.7 allocates to it all functions (with stated exceptions) related to an appeal, application, reference or other proceeding in respect of 'a function of the Commissioners for Her Majesty's Revenue and Customs or an officer of Revenue and Customs'. GOV.UK describes the tribunal as independent of the government and HMRC, and says it hears both sides before making a decision.

The HMRC Charter — CRCA 2005 s.16A(1) says 'The Commissioners must prepare a Charter', and s.16A(2) says it 'must include standards of behaviour and values to which Her Majesty's Revenue and Customs will aspire when dealing with people in the exercise of their functions'. The Commissioners must regularly review the Charter (s.16A(3)) and, at least once every year, report on the extent to which HMRC have demonstrated its standards and values (s.16A(4)). The Charter on GOV.UK says that if you do not feel the service you have received has met its standards you can make a complaint, and that you should mention the Charter and explain which aspects you feel HMRC has not met.

Complaints and the Adjudicator's Office — GOV.UK separates complaints from appeals: you should complain if you are unhappy with the service you received, for example delays in processing, poor communication or behaviour, or mistakes in handling your case, and ask for an appeal or review for decisions such as bills, penalties or a decision about tax relief. A complaint goes through a 'first tier' review and then, if you disagree with the outcome, a 'second tier' review; GOV.UK says the decision from the second tier review is final and you cannot ask HMRC for another review. If you disagree with the outcome of the second tier review you can ask the Adjudicator's Office to review your complaint; the service is free and independent of HMRC, and you can only ask once you have had both HMRC reviews. The Adjudicator's Office says it considers whether the organisation 'has applied its rules, standards, guidance and codes of practice fairly and consistently'. If you disagree with the Adjudicator's Office, GOV.UK says you can ask your MP to refer your complaint to the Parliamentary and Health Service Ombudsman.