[2011] UKFTT 430 (TC)
TC01283
Appeal number: TC/2011/1521
INCOME TAX
– PENALTY FOR LATE FILING OF END OF YEAR PAYE RETURN – Whether Appellant had
reasonable excuse for default – No – Appeal dismissed.
FIRST-TIER TRIBUNAL
TAX
KELLSWATER
REFORMED PRESBYTERIAN CHURCH Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
Michael Tildesley OBE (TRIBUNAL JUDGE)
The Tribunal determined the
appeal on 21 June 2011 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 16 February 2011, and
HMRC’s Statement of Case submitted on 28 March 2011. The Appellant did not
reply to the Statement of Case
© CROWN COPYRIGHT
2011
DECISION
1. The
Appellant appeals against the imposition of penalties in the total sum of ₤400
for its failure to submit an employer’s annual return (P35) for the tax year
ending 5 April 2010, which was required to be filed on line by 19 May 2010.
2. Since
August 2009 virtually all employers under an amendment to regulation 205 of the
Income tax (PAYE) Regulations 2005 have been required to file on line the end
of year return for 2009/10 and subsequent years. The amendment meant that the
option of filing a paper return was no longer available to employers. In order
to make an annual return on line, an employer must register to use HMRC PAYE
Online for employer’s service.
3. The
Appellant has not registered to use the employer’s service and as a result has
failed to submit a return for the year ended 5 April 2010. HMRC has imposed a
penalty of ₤400 for four months from 20 May 2010 to 19 September 2010.
Under sections 98A(2) and (3) of the Taxes Management Act 1970, the Appellant
was liable to a fixed penalty of ₤100 for each month or part month that
it was in default with its return. HMRC has suspended penalties for the period
from 19 September 2010 until this Appeal has been resolved.
4. The
Appellant has put forward the following grounds of Appeal:
(1)
The Appellant was a small congregation of around 50 people. No-one has
any experience of an on-line taxation service. The Appellant has only been an
employer for eight months when the penalty was imposed.
(2)
The Church did not possess a computer. The Treasurer had to rely on his
own computer when attempting to register to use the employer’s service. The Treasurer’s
operating system was unable to deal with parts of the software supplied by HMRC
to assist employers with the registration process.
(3)
The Appellant would have provided a paper return but this was not
permitted by HMRC. The Appellant considered HMRC’s practice of insisting on
electronic returns discriminatory, disproportionate inconsistent with the practices
of other government departments.
5. The
Tribunal has limited jurisdiction in penalty Appeals which reflects the purpose
of the legislation of ensuring that employers file their returns on time. The
Tribunal has no power to mitigate the penalty. The Tribunal can either confirm
the penalty or quash it if satisfied that the Appellant has a reasonable excuse
for his failure. The Appellant has the obligation of satisfying the Tribunal on
a balance of probabilities that it has a reasonable excuse for not filing the
return on time.
6. In
considering a reasonable excuse the Tribunal examines the actions of the
Appellant from the perspective of a prudent employer exercising reasonable
foresight and due diligence and having proper regard for his responsibilities
under the Tax Acts.
7. The
Appellant’s reason for not filing the return on time was essentially that it
did not have the technical wherewithal to complete a return on-line. In
February 2010 HMRC issued the Appellant with the Employer’s Bulletin, which
gave detailed information regarding on-line filing with the helpline numbers.
The Bulletin also gave guidance on the limited exemptions for employers from on
line filing, and the procedures for making applications for exemption. The
Appellant provided no evidence of any steps taken to seek the assistance of
HMRC with on-line filing or whether it applied for exemption. The Tribunal
considers that the Appellant has closed its mind to finding a solution to the
problems posed by on-line filing, and become entrenched in its view that HMRC’s
requirements were unreasonable.
8. The
Tribunal finds that the actions of the Appellant were not those of prudent
employer exercising reasonable foresight and due diligence and having proper
regard for its responsibilities under the Tax Acts. A prudent employer would
have availed itself of the help offered by HMRC in respect of on-line filing,
and explored options of seeking technical expertise outside the Congregation.
The Tribunal holds that the Appellant did not have a reasonable excuse for not
filing the end of year return by the required date.
9. The
Tribunal dismisses the Appeal and confirms the penalty in the sum of ₤400.
The Tribunal, however, is concerned about escalation of the dispute and the
real possibility of more penalties against the Appellant. The Tribunal requests
HMRC to take the initiative and help the Appellant to find a solution to its
difficulties, and if the Appellant is co-operative to exercise restraint on the
imposition of additional penalties.
10. 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.
MICHAEL TILDESLEY
TRIBUNAL JUDGE
RELEASE DATE: 30 JUNE 2011
