[2011] UKFTT 553 (TC)
TC01398
Appeal number: TC/2011/01202
P35
return – reasonable excuse - proportionality
FIRST-TIER TRIBUNAL
TAX
PICKQUICK
CARRIERS LTD Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
RACHELL SHORT (TRIBUNAL JUDGE)
The Tribunal
determined the appeal on 25 May 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 14 February
2011, HMRC’s Statement of Case submitted on 7 March 2011 and the Appellant’s
Reply dated 24 March 2011.
© CROWN COPYRIGHT
2011
DECISION
1. The
Tribunal decided that the appeal should be DISMISSED
Facts
2. This
is an appeal against a penalty for late filing of a P35 under s 98A (2) (a)
Taxes Management Act 1970 amounting to £400.
3. The
Appellant’s on line P35 for the 2009 – 2010 tax period was due on 19 May 2010
but was not filed until 2 December 2010. HMRC issued a penalty notice on 27
September 2010 for late submission of the return under s 98A (2) (a) Taxes
Management Act 1970 for the four months from 19 May to 19 September 2010.
4. The
Appellant previously traded as Pickwick Carriers but was purchased by Pickwick
Carriers Limited on 31 July 2009.
5. The
Appellant employed a book-keeper who it relied on to make its tax returns.
Arguments
6. The
Appellant argues that it has a reasonable excuse under s 118(2) Taxes
Management Act 1970 for not filing the return on time because it was the first
time that the P35 had been filed on -line and it had had notification from its
book- keeper that the return had been filed.
7. The
Appellant was unaware that the return had not been filed until they received
the penalty notice from HMRC of 27 September 2010.
8. This
was the first time that the Appellant had been required to make an on- line P35
return.
9. The
Appellant has also argued that the fine is disproportionate given the
relatively small (£3750.95) amount of tax due for this period and the fact that
the tax was paid on time.
10. HMRC argue that
it is the responsibility of a taxpayer to ensure that returns are made on time.
The fact that the Appellant’s agent failed to make the return on time does not
remove responsibility from the Appellant.
11. HMRC have no
obligation to issue reminders to taxpayers of their obligations to make P35
returns. Penalty notices are not intended to operate as reminders.
Decision
(a) Reasonable Excuse
12. In order to successfully appeal against this penalty
the Appellant has to demonstrate that it has a “reasonable excuse” for not
making the return under s 118(2) Taxes Management Act 1970.
13. There is no statutory
definition of a reasonable excuse but there are a number of decided cases as
well as HMRC’s own guidance. It is generally accepted that save in extreme
cases where an agent has acted in a criminal or fraudulent manner, reliance on
a third party does not constitute a reasonable excuse for these purposes.
There is no evidence to suggest that the Appellant’s agent has been engaged in
such behaviour here. The Tribunal therefore agrees with HMRC that the failure
of the Appellant’s book- keeper to make the return on time is not a reasonable
excuse.
(b) Disproportionality
14. The Appellant
has also raised the separate argument that the £400 penalty levied here is
disproportionate given that that tax due had already been paid and that the
amount of tax due is small.
15. Neither the
Appellant nor HMRC have submitted detailed arguments on this question.
16. The Tribunal has
taken the approach that in order to consider whether this penalty is
disproportionate it is important to be clear what offence the penalty is
directed at. In this case the penalty under s 98A (2) (a) TMA 1970 relates
not to the payment of the tax, but to the lateness of the return. To this
extent the fact that the tax has already been paid, and that a relatively small
amount of tax was due, is not relevant.
17. The relevant
question is whether the penalty is proportionate to the lateness of the return,
which in this case was four months late. The relevant legislation (s 98A Taxes
Management Act 1970) imposes a £100 penalty for every month for which a return
is late.
18. On the basis of
decisions such as Enersys Holdings UK Ltd ([2010] UKFTT 20 TC) this
level of penalty in relation to the lateness of the return cannot be said to be
“wholly unfair” and cannot be said to be disproportionate either in respect of
the manner in which it is calculated, which is on a straightforward month by
month basis, or in respect of HMRC’s need to ensure that returns are made in a
timely manner.
19. The Tribunal has
considered the alternative argument that the question of proportionality
relates not just to the lateness of the payment, but should also take account
of the broader question whether the legislation as a whole is proportionate in
levying a penalty for failure to submit a return when the relevant tax has been
paid and the amount of tax is small.
20. The Tribunal’s
conclusion on that point is that HMRC have two discrete obligations, of which
the collection of tax is only one. The provision of information about taxpayers
on whose behalf tax has been paid is an equally important part of their
statutory role. The fact that tax has been paid does not necessarily remove the
need for HMRC to enforce their information collection powers, even when the
amount of tax due is small. In this case we do not think that the fact that
the tax has been paid alleviates the offence or impacts on the proportionality
of the penalty.
21. For these
reasons the Tribunal has concluded that this appeal should be dismissed.
22. 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.
RACHEL SHORT
TRIBUNAL JUDGE
RELEASE DATE: 17 AUGUST 2011
Amended pursuant to rule 37 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009 on 17 October 2011.
