Analysis
Elizabeth Mariner (the appellant) instructed a professional tax advisor to complete and file her 2011 income tax return with HMRC. She was making losses on a let property. The return set these losses against her income from other sources. HMRC did not accept that the losses could be ‘set-off’ in this way. A penalty for underpaid tax as the result of the careless or negligent completion of a return was issued to Ms Mariner.
Evidence was provided that in the previous year HMRC had received Ms Mariner’s return from her tax advisor and had written to the advisor to request that he alter the return as Ms Mariner’s property letting losses could not be set against her other income. Several letters were exchanged and the return subsequently altered. No penalty was issued for the error made on the 2010 return.
Ms Mariner, in appealing the penalty, argued that she had used a professional advisor to complete the 2011 return and in doing so she had exercised reasonable care. In the alternative, she had a reasonable excuse for the incorrect return as she had no knowledge of the correspondence between her advisor and HMRC regarding the 2010 return and she was relying on the professional’s advice.
HMRC argued that as a correction had been requested as a result of the same error on the 2010, Ms Mariner should have ensured that this error was not repeated. It had been, therefore she should be held responsible for the submission of a carelessly or negligently completed return and the penalty should stand.
The tribunal considered that the success of the appeal should be determined on whether Ms Mariner knew about the dispute over the 2010 return.
Held (allowing the appeal):
(1) In Wald v HMRC [2011] UKFTT 183 (TC) it was determined that a taxpayer would remain responsible for errors due to negligence in a return completed by an accountant. Recourse could be sought separately against that accountant. However, Wald could be distinguished here on the basis that Ms Mariner’s tax advisor was engaged in a professional capacity rather than as a ‘mere agent or functionary’ as was the case in Wald.
(2) Applying AB v HMRC [2007] STC (SCD) 99 a taxpayer should not be considered careless or negligent where she realised she needed professional advice to assist with her tax affairs, she took that advice and then relied on it, unless there was an obvious error in the advice received. Here, Ms Mariner engaged a professional to advise her, she had no knowledge of the correspondence between her advisor and HMRC and therefore there was nothing to make her doubt her advisor’s recommendations. Ms Mariner could not be held careless or negligent for relying on that advice.
(3) Appeal allowed and the penalty of £434.94 set aside.
JUDGMENT GERAINT JONES QC: [1] In respect of the fiscal year ended 5 April 2011 the appellant, Mrs Mariner, filed her tax return through the agency of her tax adviser, Faith in Finance Ltd (in the guise of Mr Embleton). [2] Subsequently the respondent issued a penalty in the sum of £434.94 alleging that the …Continue reading "Mariner v HMRC [2013] UKFTT 657 (TC)"