Advantage Business Finance Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 January 2019 |
| Neutral Citation | [2019] UKFTT 30 (TC) |
| Date | 09 January 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 0030 (TC)
Judge Heidi Poon
Penalties – Late filing of ATED return – FA 2009, Sch. 55 – Whether retrospective notices met the requirement under para. 4(1)(c) for the daily penalties to be imposable – No – Whether para. 17(3) capping provision applied – No – Whether the 6-month late filing penalty fixed or tax-geared – Fixed contrary to Jackson [2018] TC 06329 – Whether reasonable excuse or special circumstances – No – No jurisdiction to consider proportionality – Appeal allowed in part.
The First-tier Tribunal (FTT) partly allowed a taxpayer company's appeal against late filing penalties because HMRC's retrospective notice of daily late filing penalties did not meet the requirements.
Advantage Business Finance Ltd (the appellant), was required to make an annual tax on enveloped dwellings (ATED) return as required by FA 2013, s. 159. As the return due on 30 April 2016 was not submitted until 30 January 2017, HMRC issued the appellant with the following penalties:
- On 27 October 2017, an initial fixed £100 late filing penalty pursuant to FA 2009, Sch. 55, para. 3.
- On 22 December 2017:daily penalties totalling £900 covering the period from 1 August 2016 to 29 October 2016 purportedly pursuant to FA 2009, Sch. 55, para. 4; anda 6-month penalty of £300 pursuant to FA 2009, Sch. 55, para. 5.
The appellant appealed against the daily and 6-month penalties.
On the issue of the daily penalties, the FTT noted that FA 2009, Sch. 55, para. 4(1)(c) provided that “HMRC give notice to P specifying the date from which the penalty is payable”. The FTT found that HMRC's letter of 22 December 2017 notifying the appellant that daily penalties had been imposed could not be construed as giving the necessary notice because it was retrospective. And this was contrary to the requirement of a notice under para 4(1)(c), which was intended to be prospective so that the taxpayer could take remedial action during the daily penalty period. The FTT accordingly cancelled the daily penalties of £900.
On the issue of the 6-month penalty, the appellant referred to the FTT case of Jackson [2018] TC 06329, which found that whether a 6 or 12-month penalty was £300 or 5% of the tax liability they were determined by reference to the tax liability and hence the capping provision in FA 2009, Sch. 55, para. 17(3) applied.
The FTT in this case disagreed with the conclusions drawn in Jackson. It noted that the “interaction” anticipated by para. 17 was between a tax-geared penalty under Sch. 55 and any other tax-geared penalties or late payment surcharges imposable outwith Sch. 55 provisions. The FTT found in this case, the 6-month late filing penalty was determined at £300, because it was greater than 5% of the tax liability in question, and as such, the penalty remained a fixed penalty. Since it was a fixed penalty, para. 17(3) was not engaged. The 6-month late filing penalties were accordingly confirmed.
The FTT also found there to be no grounds of reasonable excuse or special circumstances and no jurisdiction to consider proportionality.
In summary, the daily penalties were cancelled, the fixed penalty confirmed and accordingly the appeal allowed in part.
On the issue of the 6-month late filing penalty, Judge Heidi Poon rejected the conclusion reached by the FTT in Jackson [2018] TC 06329. While Jackson found that 6-month and 12-month late filing penalties were always determined by reference to a tax liability, Judge Poon found that they could be determined either as “fixed” at the lowest minimum of £300, or as “tax-geared” at 5% of the tax liability in question, whichever was the greater. And as in this case the 6-month penalty was determined at £300 it was a fixed penalty and therefore the penalty capping provisions in FA 2009, Sch. 55, para. 17 did not apply.
[1] The appeal is against penalties imposed under Schedule 55 to the Finance Act 2009 (“Sch 55”) in relation to the late filing of the Annual Tax on Enveloped Dwellings (“ATED”) return for the year ended 31 March 2017.
[2] The penalties under appeal total £1,200 and consist of:
- Daily penalties totalling £900 under para 4 of Sch 55;
- The fixed six-month penalty of £300 under para 5 of Sch 55.
[3] The appellant has accepted and settled the fixed penalty of £100 for the initial late filing of the return, and this element is not a matter under appeal.
[4] The appellant company, Advantage Business Finance Ltd, is the owner of a property in Fulham, London, and is required to make an annual ATED return in compliance with the requirement under s 159 of the Finance Act 2013 (“FA 2013”).
[5] The relevant dates in respect of the ATED return for 2016–17 are as follows:
- On 15 January 2016, the appellant purchased the Fulham property.
- On 30 April 2016, the ATED return for the year 2016–17 was due.
- On 30 January 2017, the ATED return for 2016–17 was filed.
[6] As the return was filed more than six months after the due date of 30 April 2016, HMRC imposed penalties under Sch 55 with the following communications:
- On 27 October 2017, the fixed penalty notice of £100 was issued.
- On 22 December 2017, HMRC sent a letter to notify the charge of:daily penalties in the sum of £900 covering the period from 1 August to 29 October 2016;a 6-month late filing penalty in the sum of £300, which the letter states is for the period from 1 November 2016 to 30 January 2017.
[7] It is common ground that no tax liability arose in relation to the 2016–17 ATED return. No late payment penalty under Schedule 56 to FA 2009 is therefore in point.
[8] Mr David Brockhurst, as a director of the appellant company, appealed against the penalties. From the Companies House records made available, Mr Brockhurst is a solicitor and was appointed as a director on 23 February 2015. Mrs Nicola Brockhurst is an accountant, and was appointed as a director of the appellant on 20 January 2017.
[9] In respect of the appeal and review process, the relevant events are as follows:
- On 26 March 2018, Mr Brockhurst appealed against the £1,200 penalties, following a payment request dated 23 March 2018.
- On 20 April 2018, HMRC rejected the appeal.
- On 7 May 2018, Mr Brockhurst requested a review of HMRC's decision, referring to the decision of Jackson [2018] TC 06329.
- On 29 May 2018, HMRC's review conclusion upheld the penalties.
[10] By notice dated 25 June 2018, Mr Brockhurst appealed to the Tribunal, attaching a statement of grounds of nearly three pages long. The substantive grounds...
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