For more than three years, employment businesses, agencies and other employment intermediaries have had to file returns giving the details of individuals that they believe have a legitimate reason for working on a self-employed basis.
These establishments must file the returns every quarter. Failure to file a return on time results in a late-filing penalty, the amount of which varies depending on the number of offences within a 12-month period.
If a business continues to not submit a report, then penalties of up to £600 are imposable for every day that the return is late.
Expion Silverstone Ltd, a recruitment company, did not turn in its returns on time for the first three quarters of 2016-17. As a result, HMRC issued three penalties for £250, £500 and £1,000.
Under the Taxes Management Act of 1970, it is up to an HMRC officer to make a penalty determination an prove the justification of the penalty.
However, in the case of Expion Silverstone Ltd, the only proof that HMRC provided was a computer printout that a tribunal deemed inefficient because the Revenue is not an actual HMRC officer. The tribunal then asked that HMRC provide the following information: the name of the HMRC officer, how and when the penalty determination took place, how HMRC’s computer sent a notification to the company and how Expion recorded penalty determinations on its records.
HMRC had two months to comply with the request but did not do so. In its response, HMRC appeared to indicate that no actual officer was involved in the penalty determinations but that they generated automatically. As a result, Expion won its appeal against the penalties.