Armstrong: the meaning of consent for digital communications
The decision of the First-tier Tribunal in Armstrong v HMRC [2018] UKFTT 404 (TC) shows the difficulties which can arise when moving from a paper-based system to a digital tax solution, particularly where it involves taxpayers consenting to receive electronic notices from HMRC regarding their tax affairs.
In that decision, Judge Richard Thomas highlights serious flaws in the system that HMRC has in place to deal with making tax digital (MTD). His judgment recognises the complexities of the situation and sets out his belief that the legislation in place (from TMA 1970 to SI 2003/282, which he refers to as the ‘e-comms regulations’) is not adequate for the electronic communication, and filing, that HMRC is using.
Ms Armstrong ceased self-employment in January 2016. She claimed that she was unaware of the requirement to notify HMRC and hence continued to be issued with self-assessment tax returns. She was unaware of electronic messages sent by HMRC to her informing her of late payment penalties for the tax year 2015/16.
Judge Thomas found in favour of Ms Armstrong, cancelling the late filing penalties, and noted that the email messages received by her did not in fact inform her of the assessments: ‘the appellant was unaware that the notice of assessment of the two penalties (a single notice included both penalties) had been issued and thus she had received no notice of the assessments’ (para 15).
The meaning of consent for electronic communications and its application to MTD: The online messaging system, which runs alongside the online filing system, is at the forefront of the MTD strategy. The judge drew attention to what he considered to be defects in the legislation in place to deal with this and concluded that HMRC had not met the burden of proving that the taxpayer received the notices. He stated:
‘I am satisfied from this evidence ... that what the appellant gave her consent to was to be treated by HMRC in the way that the terms and conditions promise, as that is reasonably understood by someone who is not a tax expert. In my view that person would realise from reading those terms and conditions that they would get a notice to file a return sent to their secure mailbox, replacing the paper notices to file, that they would get reminders that returns and payments of tax are becoming due and that they would get statements of their tax position from time to time … What they would not necessarily realise is that if they came to be in the small minority of late filers, that not only would HMRC send any penalty notices to the secure inbox, but also that any email they sent to alert a person to that notice of penalty would be as bland and uninformative as the emails that the appellant has put in evidence’ (para 84, emphasis added).
In other words, the taxpayer had not explicitly consented to receive penalty notices via her secure inbox and therefore HMRC had not, within the specific terms of the regulations, validly issued them. As such, the penalties were improperly raised and had to be cancelled.
Practical implications: This is more likely to affect unrepresented taxpayers who have signed up to the personal tax account, but rarely check it, and ignore any email alerts. It is also important to note that FTT decisions do not create binding precedent, and it is possible that HMRC will appeal the decision.
Armstrong is one of a number of recent tribunal decisions which cast doubt on fundamental aspects of the law relating to the administration of taxes. Given the changes to the tax system which will flow from MTD, it is imperative that flaws in the legislation are ironed out before digital becomes the default.
In the meantime, individuals should:
keep a close eye on any notifications they receive;
log in to their personal tax account now and again just to make sure; and
ensure they notify HMRC of any otherwise undeclared income.
Home >Articles > Armstrong: the meaning of consent for digital communications
Armstrong: the meaning of consent for digital communications
The decision of the First-tier Tribunal in Armstrong v HMRC [2018] UKFTT 404 (TC) shows the difficulties which can arise when moving from a paper-based system to a digital tax solution, particularly where it involves taxpayers consenting to receive electronic notices from HMRC regarding their tax affairs.
In that decision, Judge Richard Thomas highlights serious flaws in the system that HMRC has in place to deal with making tax digital (MTD). His judgment recognises the complexities of the situation and sets out his belief that the legislation in place (from TMA 1970 to SI 2003/282, which he refers to as the ‘e-comms regulations’) is not adequate for the electronic communication, and filing, that HMRC is using.
Ms Armstrong ceased self-employment in January 2016. She claimed that she was unaware of the requirement to notify HMRC and hence continued to be issued with self-assessment tax returns. She was unaware of electronic messages sent by HMRC to her informing her of late payment penalties for the tax year 2015/16.
Judge Thomas found in favour of Ms Armstrong, cancelling the late filing penalties, and noted that the email messages received by her did not in fact inform her of the assessments: ‘the appellant was unaware that the notice of assessment of the two penalties (a single notice included both penalties) had been issued and thus she had received no notice of the assessments’ (para 15).
The meaning of consent for electronic communications and its application to MTD: The online messaging system, which runs alongside the online filing system, is at the forefront of the MTD strategy. The judge drew attention to what he considered to be defects in the legislation in place to deal with this and concluded that HMRC had not met the burden of proving that the taxpayer received the notices. He stated:
‘I am satisfied from this evidence ... that what the appellant gave her consent to was to be treated by HMRC in the way that the terms and conditions promise, as that is reasonably understood by someone who is not a tax expert. In my view that person would realise from reading those terms and conditions that they would get a notice to file a return sent to their secure mailbox, replacing the paper notices to file, that they would get reminders that returns and payments of tax are becoming due and that they would get statements of their tax position from time to time … What they would not necessarily realise is that if they came to be in the small minority of late filers, that not only would HMRC send any penalty notices to the secure inbox, but also that any email they sent to alert a person to that notice of penalty would be as bland and uninformative as the emails that the appellant has put in evidence’ (para 84, emphasis added).
In other words, the taxpayer had not explicitly consented to receive penalty notices via her secure inbox and therefore HMRC had not, within the specific terms of the regulations, validly issued them. As such, the penalties were improperly raised and had to be cancelled.
Practical implications: This is more likely to affect unrepresented taxpayers who have signed up to the personal tax account, but rarely check it, and ignore any email alerts. It is also important to note that FTT decisions do not create binding precedent, and it is possible that HMRC will appeal the decision.
Armstrong is one of a number of recent tribunal decisions which cast doubt on fundamental aspects of the law relating to the administration of taxes. Given the changes to the tax system which will flow from MTD, it is imperative that flaws in the legislation are ironed out before digital becomes the default.
In the meantime, individuals should:
keep a close eye on any notifications they receive;
log in to their personal tax account now and again just to make sure; and
ensure they notify HMRC of any otherwise undeclared income.
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