I'm in a difficult position with respect to HMRC.
My story: just before the deadline for submitting an income tax return for the tax year 2013-2014, this January (2015) I got a letter from HMRC telling me I had missed the filing date and was subject to a £100 penalty. I was puzzled and rang them. While I was speaking to them I noticed the return date for the problem return: 2011-2012.
It had taken HMRC two years to tell me about the missed return. On the phone they claimed it was because they did not have my address. They have been writing to me regularly at my home address since well before the end of the 2012 tax year and I have since made two successful, on time tax returns.
Ok, you say, so I have to make the return and pay the £100 fine, my bad, no? Well, no. Because the return was over a year late, I had accumulated additional penalties of £1,500, so the bill was £1,600. I didn't owe them a penny in tax for that year, in fact they owed me a small tax refund. I made the mistake because I used return filing software for the first time in 2012 and hadn't noticed that I had only made a test submission (which was fine), not the "live" submission. This seemed an absurd, Kafka-esque situation, and I was confident that my appeal against the penalties would succeed.
HMRC have now rejected my appeal, saying I did not have a valid excuse for not filing on time so the penalties would stand. So my question is simple: were HMRC required to tell me specifically about my late filing and the penalties accumulating, or is it acceptable for them to wait for a year after the maximum penalty has accumulated and only then tell me about it? I had no reason not to submit, and the return was still sitting there when I returned to the software; within minutes of notification I had successfully filed the return.
I intend to ask for a review of their decision and to appeal to a tribunal if that review is unfavourable to me, but I would like to know what folks think about the basis of my appeal, which is that I had a genuine belief that I had submitted the return and I should have been told about the additional penalties in good enough time to avoid incurring them in the first place.
[As an aside, HMRC have been told to crack down on tax avoidance because of the hoo-hah about huge corporations not paying any income tax. It is too hard to get money from such high-profile targets, so people like me who cannot afford to avoid a penny in tax are now in the firing line.]