Most people would assume that if:
– they had a choice between two courses of action, and
– their choice had a direct bearing on the actions of someone else,
then it would be their responsibility to let that other person know how they intended to act.
However, that does not apply to the tax office!
In Ross v HMRC the taxpayer had filled his tax return, owing £807.40, and elected for HMRC to collect it through the payroll by adjusting his PAYE code. This is an option that is clearly included on the tax return.
Ross thought he had fulfilled his obligations for another year and forgot about it until a £40 penalty notice arrived. This was appealed against but the tax office rejected his appeal on the grounds that there was insufficient PAYE liability to enable the additional SA tax to be collected through the tax code. Ross requested a review stating that the election to have the tax collected through the tax code had been made ahead of the statutory time limit of the 30 December and the tax could be collected in the following tax year using a ‘K-code’, if necessary.
HMRC advised that the tax code would not be adjusted, saying that it was optional as to whether this would be done. It does not appear to be disputed that the tax office did not consider it necessary or relevant to inform the taxpayer that they had decided not to apply this option in his case. Despite the fact that under PAYE he could have paid the tax spread over 12 months, he was penalised for not paying it until after his appeal letter had been dealt with.
The tribunal agreed with HMRC that it acted correctly by not adjusting the tax code and it was “reasonable and proper” to expect the taxpayer to have paid his tax on time. Ross had a responsibility to pay his own tax liability without further prompt or reminder and the fact that his tax liability was under £3,000 is not relevant in this instance as HMRC has the option whether or not to code out any liability due.
The moral of this story is that, as far as the law is concerned, it is your responsibility to know how HMRC is proposing to act when they have a choice, not their responsibility to inform you of their intentions.