A recent tribunal report left me asking that question. A local 5-a-side football league in Scotland got into a muddle with its PAYE filing. Why, you might reasonably ask, would an amateur league need to think about PAYE? The rules of the league require qualified referees: they are treated as employees of the league and need paying. We are not talking large sums here: the going rate for a 5-a-side referee seems to be about £20 a match. So the league needed to operate PAYE.
A combination of late payments of PAYE and late end of year return ended up producing penalties totalling £1,443, a very significant amount for a small local league. The league found navigating the HMRC’s systems difficult and thought at times that the penalties had been withdrawn: not an unreasonable conclusion perhaps as the penalties did not show up on the relevant online account.
There were conversations between the league and HMRC about appeals against penalties but the league misinterpreted what was being said and didn’t make timely appeals in writing. In the end the matter was referred to the tax tribunal. That tribunal took a very hard line and refused to admit late appeals against the penalties, so that the question of whether or not there was a reasonable excuse or special circumstances to reduce/eliminate the penalties wasn’t even aired.
Now I know nothing about this particular case over and above what is reported but I can’t seriously believe that anybody can be happy with the outcome. Whatever the rights and wrongs of what happened, it can’t be sensible public policy for a community group like this to be faced with this sort of level of penalty, particularly given that all of the tax due was paid. Who is to blame? You might blame the club for not understanding the rules, HMRC for not making things clearer or the tribunal for not taking a sympathetic approach. The real problem is that the system is to blame.
I’m not usually one to look back through rose tinted glasses at the good old days, but I can’t help feeling that a generation ago none of this would have happened. The inspector might have had a quiet word with the club to help them understand the rules but would not have wasted his own and everybody else’s time by pursuing penalties in such a trivial case. Of course the problem with that approach is that it relies on discretion. Nowadays discretion is almost impossible within the public service. The need to be even handed, and to be seen to be even handed has become an overriding mantra, particularly with the threat of judicial review against any exercise of discretion by a public official. So we are probably stuck where we are. But wouldn't it be great if a new section could be introduced into the Taxes Management Act which says 'common sense takes precedence over all other provisions of this act'. It won’t happen of course, but it’s nice to dream occasionally.
For more information please get in touch with Andrew Hubbard or your usual RSM contact.