Peter Boote Ltd v Revenue & Customs [2011] UKFTT 288 (TC) (04 May 2011)

[2011] UKFTT 288 (TC)

TC01150

Appeal number: TC/2011/00719

Appeal against penalty imposed as a result of the late submission of a P35 return – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

PETER BOOTE LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: J. Blewitt (TRIBUNAL JUDGE)

The Tribunal determined the appeal on 18 April without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 24 January 2011 and HMRC’s Statement of Case submitted on 11 February 2011.

DECISION

1. By Notice of Appeal dated 24 January 2011 the Appellant appeals against an employer’s penalty in the sum of £500 imposed as a result of the late submission of a P35 return for the period 2009/2010.

2. The imposition of such a penalty is set down by statute; section 98A (2) (a) Taxes Management Act 1970 applies in this case which provides that a penalty of £100 can be imposed for each 50 employees for every month (or part thereof) that the return remained outstanding.

3. The filing date in this case was 19 May 2010. The return was submitted online on 13 October 2010.

4. On 27 September 2010 a first interim penalty notice in the sum of £400 was issued to the Appellant which was calculated from 20 May 2010 to 19 September 2010. A final penalty notice in the sum of £100 was issued on 21 October 2010 in respect of the period outstanding from 20 September to 13 October 2010.

5. By letter dated 12 October 2010, Mr Boote, Director of the Appellant Company, appealed to HMRC against the penalty of £400. The grounds relied upon were that:

(1) In previous years the Appellant’s accountant had submitted the return and he assumed the same would happen this year. However the Appellant changed his accountant who assumed that the Appellant would submit the return as he takes responsibility for the salaries.

(2) The Appellant only became aware that the return had not been submitted when the penalty notice was issued.

(3) The Appellant runs a small business and is struggling to keep up with payments. As a result the Appellant has not taken holiday and cannot afford the loss of income.

6. HMRC responded by letter dated 23 November 2010. HMRC’s view was that no reasonable excuse existed; it being the responsibility of the Appellant to ensure that the return was filed prior to the deadline.

7. The Appellant formally requested a review of HMRC’s decision to impose penalties on 2 December 2010. The Appellant reiterated that the late submission of the return was a result of a misunderstanding between himself and his accountant and that had he been notified soon after the deadline the Appellant would have rectified the situation.

8. By letter dated 18 January 2011, HMRC informed the Appellant that following review the penalties would be upheld. HMRC took the view that no reasonable excuse existed on the basis that it is the employer’s obligation to make End of Year Returns by the due date and reliance on an agent cannot is not a reasonable excuse.

9. On 24 January 2011 the Appellant appealed to the Tribunal. The grounds of appeal relied upon can be summarised as follows:

(1) The Appellant believes that HMRC waiting 4 months before notifying him that the filing date was missed is unfair and had earlier notification been given the Appellant would have submitted the return without incurring a penalty;

(2) Within a week of notification the Appellant’s accountant filed the return;

(3) The additional £100 was added because it was another month before the penalty notice was received;

(4) The reason for late submission of the return was due to the Appellant changing accountants and assuming the new accountant would file the return as the previous accountant had;

(5) It appears that HMRC is not trying to get P35s filed on time in order to make money from penalty notices;

(6) The amount of the penalty is disproportionate to the obligation missed.

10. The obligation to make End of Year Returns prior to the deadline of 20 May following the end of a tax year is set down by statute by virtue of Regulation 73 of the Income Tax (PAYE) Regulations 2003 and paragraph 22 of Schedule 4 of the Social Security (Contributions) Regulations 2001.

11. The penalties imposed as a result of failure to meet tax obligations are provided for by statute and this Tribunal has no discretion to mitigate those penalties unless it is considered that there is a reasonable excuse, in which case the penalties can be set aside. I do not accept the Appellant’s submission that the amount of the penalties constitutes a reasonable excuse or that this Tribunal has any jurisdiction to consider the issue of proportionality on the basis that the penalties are set by statute.

12. There is no obligation upon HMRC to issue reminders to taxpayers or notify taxpayers that a P35 has not been received prior to the issue of penalty notices. There is also no statutory obligation upon HMRC to issue penalty notices closer to the deadline date. It is well publicised on HMRC’s website that penalties can be imposed for the late submission of returns and that a reminder will not necessarily be sent. I do not accept that the lack of notification by HMRC until the penalty notice was received can amount to a reasonable excuse.

13. I have no doubt that the Appellant rectified the situation as soon as he became aware that the filing date had been missed, however I find as a fact that this does not amount to a reasonable excuse.

14. I accept that the reason the deadline was missed was due to a change in accountant and an assumption by each party that the other would file the return. However it is a well established principle of case law that the responsibility lies firmly on the taxpayer to ensure that all obligations are met and reliance on a third party, or a mistaken belief that the return had been filed by that third party cannot amount to a reasonable excuse for failing to comply with such obligations.

15. I do not accept the Appellant’s assertion as to HMRC deliberately trying to make money from penalties imposed; the process for submission of an End of Year Return is provided for by statute and publicised by HMRC. The obligation to meet the deadline rests with the taxpayer. This cannot, in my view, provide the Appellant with a reasonable excuse for failing to ensure that the deadline was met.

16. I find as a fact that the penalties were lawfully imposed and that there is no reasonable excuse.

17. The appeal is dismissed and penalties upheld.

18. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL JUDGE

RELEASE DATE: 4 MAY 2011

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