[2013] UKFTT 239 (TC)
TC02653
Appeal number: TC/2012/06875
INCOME TAX – PENALTY
AND SURCHARGE – HMRC conceded the Appeals on surcharges and second late
filing penalty for 2001/02 and late filing penalties for 2003/04 – first late
filing penalty for 2001/02 cancelled – surcharges for 2003/04 confirmed –
Appeal allowed in part
FIRST-TIER TRIBUNAL
TAX CHAMBER
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MR TONY C DRAPER
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE MICHAEL TILDESLEY OBE
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The Tribunal determined the
appeal on 28 February 2013 on the papers. The Appeal was originally listed for
hearing as a basic case. The Appellant, however, requested that his Appeal be
dealt with in his absence. On 25 September 2012 HMRC consented to the Appeal
being determined on the papers. The Tribunal has considered the Notice of
Appeal dated 3 July 2012, HMRC’s Statement of Case and bundle of documents submitted
on 25 September 2012, the Appellant’s Reply dated 15 October 2006 and HMRC’s
response dated 7 February 2013.
© CROWN COPYRIGHT
2013
DECISION
1.
The Appellant appealed against HMRC’s decision to impose late filing
penalties and surcharges for unpaid tax in respect of the tax years 2001/02 and
2003/04.
2.
The position regarding the Appellant’s tax returns, late filing
penalties and surcharges for the years 2000/01 to 2006/07 are set out below.
|
Year
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Return issued
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Return received
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Tax due (₤)
(Overpayment)
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Late filing penalty
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Surcharge
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2000/01
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6.4. 01
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29.1.02
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(975.73)
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None
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None
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2001/02
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6.4.02
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5.12.07
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242.48
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₤100 (7.3.03) ₤100 (6.8.03)
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₤12.12(24.8.07) ₤12.12 (24.8.07)
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2002/03
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6.4.03
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5.12.07
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(54.00)
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Penalty capped at nil tax liability
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None
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2003/04
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6.4.04
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5.12.07
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1,684.50
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₤100 (2.2.07) ₤100 (2.2.07)
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₤84.22(9.1.08) ₤84.22 (9.1.08)
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2004/05
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31.1.08
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3.3.08
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(254.00)
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Penalty capped at nil tax liability
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None
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2005/06
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31.1.08
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3.3.08
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(784.52)
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Penalty capped at nil tax liability
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None
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2006/07
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6.4.07
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5.12.07
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(376.41)
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None
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None
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3.
As can be seen from the above table the dispute related to the late
filling penalties and surcharges for the years 2001/02 and 2003/04. Following
directions issued by the Tribunal on 7 February 2013 HMRC clarified its
position in relation to the dispute which was as follows:
(1)
2001/02: the late filing penalty notices of ₤100 each of 7
March and 6 August 2003 were sent to the Appellant’s address in Mandeville Road, which at the time was recorded on his self assessment record. The notice
issued on 6 August 2003 was returned undelivered. The notice of 7 March 2003
was not so returned. HMRC conceded that the notice on 6 August 2003 was not
validly served, in which case the second filing penalty should be quashed.
Likewise the two surcharge notices of ₤12.12 each issued on 24 August
2007 were not validly served, in which case both surcharges should be
cancelled.
(2)
2003/04: From January 2005 to July 2007 HMRC did not have a
permanent address for the Appellant. In those circumstances HMRC accepted that the
late filing penalty notices for ₤100 each of 2 February 2007 were not validly
served and that the penalties should be cancelled. HMRC, on the other hand,
believed that the surcharge notices issued on 9 January 2008 were validly
served.
4.
The outstanding matters that, therefore, remain were the late filing penalty
of ₤100 issued on 7 March 2003, and the two surcharges of ₤84.22
each issued on 9 January 2008.
5.
Under section 93 of the TMA 1970, a tax payer is liable to a fixed
penalty of ₤100 if he fails to make his return by the due date as
required by a notice served under section 8 of the 1970 Act. Section 59C of the
1970 Act makes a taxpayer liable to a surcharge equal to five per cent of the
unpaid tax if he fails to pay by the required date. If the tax remains unpaid
on the day following the expiry of six months from the due date, the taxpayer
is liable to a further surcharge equal to five per cent of the unpaid tax.
6.
In the Appellant’s case, the 2001/02 notice to file return was sent to
his address at Mandeville Court. The notice to file was not returned
undelivered and required the Appellant to file his return by 31 January 2003.
The Appellant sent his return on 5 December 2007, which was almost four years
late. In respect of the 2003/04 tax year, the Appellant was obliged to pay the
outstanding tax of ₤1,684.50 by the 28 February 2005. The Appellant has not
paid the outstanding tax of ₤1,684.50, in which case he was liable to the
surcharge and the further surcharge equal to five per cent of ₤1,684.50,
equating to ₤84.22 for each surcharge.
7.
Sections 93(8) and 59C(9) of the 1970 Act provide the Appellant with a
defence of reasonable excuse against the imposition of late filing penalties
and surcharges. Reasonable excuse, however, is strictly construed, and must
exist throughout the period of default. Section 118(2) states that for the
purposes of the 1970 Act:
“a person shall be deemed not to have failed to do
anything required to be done within a limited time if he did it within such
further time, if any, as the Board or the Tribunal or officer may have allowed,
and where a person had a reasonable excuse for not doing anything required to
be done he shall be deemed ….. not have failed to do it if he did it without
unreasonable delay after the excuse had ceased”.
8. Thus
the Tribunal has limited jurisdiction in penalty appeals which reflects the
purpose of the legislation of ensuring that tax payers file their returns and
pay their tax 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 onus is upon the
Appellant to prove on a balance of probabilities the matters upon which it
asserts to discharge the penalty.
9.
The Appellant asserted that he sent his tax returns on time. The
Appellant stated that he had changed addresses many times during 2002 to 2006
due to work commitments. When the Appellant moved to Spain in 2006 he sent
everyone a correspondence address in the UK to enable the onward forwarding of
mail to him. In September 2007 he received a demand for unpaid tax in the sum
of ₤9,578.64. The Appellant contacted HMRC which asked him to re-send the
returns for 2001/02, 2002/03 and 2003/04 by 10 October 2007 because it could
not locate the original ones. HMRC received the re-submitted returns on the 22 October
2007 which were returned to the Appellant together with other blank forms.
10.
The Appellant believed that the problems with his tax were caused when
he worked for DJL Contracts which did not pass onto him the tax vouchers under
the Construction and Industry Scheme (CIS). The Appellant was, of the view,
that HMRC requested the new returns because his original ones did not include
the tax vouchers. The Appellant had tried to obtain copies of the vouchers but
DJL Contracts did not comply with his request. DJL contracts have subsequently
gone bankrupt.
11.
The Appellant pointed out that his tax bill had been reduced from
₤9,578.64 to less than ₤2,000 which was due to HMRC setting off tax
overpayments in other years against the tax due. The Appellant, however, stated
that he had not received details of the revised computation of the tax due. The
Appellant requested the removal of all penalties and surcharges. The Appellant
indicated that in 2011 he suffered a serious injury and was unable to work. The
Appellant was relying on financial assistance from family and friends and
experiencing severe financial hardship as he was unable to claim benefits
because of his residence outside the UK.
12.
HMRC disputed that the Appellant had always sent his tax returns on
time. HMRC’s records showed a different picture with no returns for 2001/02
onwards being submitted until December 2007. HMRC contended that the Appellant
has provided no information or evidence to support his assertion about filing
the returns on time. Further the Appellant has offered no reasonable excuse or
explanation for his failure to comply with his tax obligations.
13.
The Tribunal considers there was significant doubt about whether the
late filing penalty notice issued on 7 March 2003 and sent to Mandeville Road was validly served. HMRC has already accepted that the notice issued on 6
August 2003 and sent to the Mandeville Road address was not validly served. The
Tribunal also considers that the Appellant has a defence under section 118(2) of
TMA 1970 in that he was given further time by HMRC to resubmit his 2001/02
return which he appeared to have complied with. The Tribunal, therefore,
decides to cancel the late filing penalty of ₤100 issued on 7 March 2003.
14.
The Tribunal finds that the Appellant has not paid the outstanding tax
due on the 2003/04 return. HMRC’s 2003/04 tax computation revealed that the
full amount of tax credited under the CIS scheme had been accounted for leaving
an outstanding balance of ₤1,683.60 which represented the amount due
under Class 4 National Insurance Contributions. The surcharge notices were
validly served, having been sent after the Appellant got in contact with HMRC
in September 2007. The Appellant has offered no explanation for not paying the
outstanding tax on time, particularly in view of his assertion that he had sent
the 2003/04 return by the due date. The Tribunal finds that the Appellant did
not have a reasonable excuse for not making on time the balancing payment of
₤1,683.60 for 2003/04. The Tribunal upholds the default surcharges in the
total amount of ₤168.44.
Decision
15.
The Tribunal allows the Appellant’s appeals against the late filing penalties
for 2001/02 and 2003/04, and the surcharges for 2001/02. The Tribunal,
therefore, quashes the late filing penalties totalling ₤400 and the
surcharges in the amount of ₤24.24. The Tribunal dismisses the
Appellant’s appeal against the surcharges imposed for non payment of the
outstanding tax in 2003/04 by the due date and confirms the amount of
surcharges as ₤168.44.
16.
As a result of the Tribunal’s decision, the Appellant’s statement of
account for the disputed period subject to interest adjustments is as follows
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Tax Year
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Outstanding
Tax (₤)
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Description
of the Debt
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2001/02
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242.48
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Tax due
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2003/04
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1,684.50
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Tax due
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84.22
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Surcharge (1)
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84.22
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Surcharge (2)
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Total due
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2,095.42
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Available for Set Off
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(1,468.93)
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Tax over-payments for 2002/03,2004/05, 2005/06, and
2006/07
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Amount due
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626.49
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17.
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 OBE
TRIBUNAL JUDGE
RELEASE DATE: 17 April 2013
