Onus on HMRC to provide P35 not filed onlineThursday, May 12th, 2011
Where HMRC’s computer systems cannot find any trace of a P35 having been filed online, can an employer who claims to have filed it be penalised?
In a decision given on 14 April in the case Ballysillan Community Forum v Revenue & Customs, the First-tier Tax Tribunal ruled that, where an employer claims that a P35 was filed online, the burden of proof falls on HMRC to demonstrate that it was not, in fact, filed.
The details of this case are simple. One employee claims she filed the P35 for tax year 2009/10 and received an on-screen acknowledgement, and two of her colleagues confirm her account. HMRC claims that no P35 was received as the Return does not exist in its computer files. HMC issued two penalty notices for failure to file a P35. The employer appealed against the penalties.
The tribunal judge made it clear immediately in his ruling that it is for HMRC to prove that the P35 was not received. The European Court of Human Rights (Jussila v Finland 2006) ruled that a penalty charged by the revenue authorities of a member country is in the nature of a criminal penalty and, as a result, any proceedings involve the right to a fair trial, requiring the authority to prove to criminal standards that the offence actually occurred. It was, therefore, HMRC’s responsibility to prove that the P35 had not been filed.
HMRC’s only evidence was a document to show that the wording that the employee’s claimed was displayed on their computer screen would not have been generated by online filing. Otherwise, HMRC’s case was that its computers do not get it wrong (sic) and, as there was no record of the filing, it cannot have occurred.
The judge ruled that HMRC had not met the high criminal standard of proof and that the employer’s appeal succeeded. However, to make it clear that the decision was not based solely on the higher burden of proof standard, he stated that he had accepted the evidence given by the employees and, even if HMRC had been required to satisfy the lower “balance of probabilities” test, it would have failed to do so.