Burford
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 February 2021 |
| Neutral Citation | [2021] UKFTT 47 (TC) |
| Date | 17 February 2021 |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 47 (TC)
Judge Natsai Manyarara, Mr Leslie Brown
Income tax – Whether a notice to file pursuant to s 8 of the TMA 1970 requiring taxpayer to file a return was validly issued – Yes – R & C Commrs v Rogers [2020] BTC 533 considered and applied – Whether late payment penalty correctly assessed and applied – Yes – Appeal dismissed.
[1] The Appellant is appealing against penalties that HMRC have imposed under Schedule 56 of the Finance Act 2009 (“Schedule 56”) for the late payment of tax relating to the 2016–17 tax year. The penalties charged on the Appellant were (i) a 30-day late payment penalty in the amount of £101 (dated 13 March 2018) and (ii) a six-month late payment penalty in the amount of £101 (dated 28 August 2018).
[2] On 6 April 2017, HMRC issued a notice to file to the Appellant for the 2016–17 tax year. The filing date was 31 October 2017 for a paper return, or 31 January 2018 for an electronic return. The Appellant filed his tax return electronically on 22 January 2018 and this showed that the amount of tax due was £2,025. The Appellant did not however pay the outstanding tax liability by 31 January 2018 (“the legislative due date”).
[3] An outstanding debt letter was sent to the Appellant on 9 February 2018 and a statement of account was issued to the Appellant on 6 March 2018. As payment was not made by the legislative due date, HMRC issued a notice of penalty assessment on 13 March 2018, for the 30-day late payment penalty. On 29 March 2018, the Appellant's agents appealed against the penalty. Following exchanges of correspondence between the Appellant's agents and HMRC, the Appellant's agents notified the appeal to the Tribunal on 21 June 2018.
[4] As payment had still not been made six months after the legislative due date, HMRC issued a notice of penalty assessment on 28 August 2018 (“the six-month penalty”). The Appellant paid the outstanding tax due on 22 November 2020.
[5] On 14 June 2019, the appeal was stayed pending the outcome of the decision of the Upper Tribunal (“UT”) in R & C Commrs v Rogers [2020] BTC 533 (“Rogers & Shaw”). The basis of HMRC's application for a stay was that the Appellant's appeal raised the issue of the validity of a notice submitted under s 8 of the Taxes Management Act 1970 (hereinafter referred to as “TMA”).
[6] The Appellant's grounds for appealing against the penalties (as set out in the agent's email to HMRC dated 5 June 2019 and the Appellant's Statement of Case), can be summarised as follows:
- A notice under s 8 TMA must be issued in order for a penalty to be lawful. HMRC have not demonstrated that a notice to file under s 8 TMA was issued to the Appellant.
- Paragraph 11(1)(a) of Schedule 56 provides that HMRC must assess the penalty. The penalty is computer generated at the maximum amount permitted by para 3(2) of Schedule 56 and it has therefore not been assessed. HMRC have not illustrated why it was not necessary to assess the penalty. The penalty is therefore unlawful.
- The assessment on which the 5% is calculated is a simple assessment based on the figures in the tax return submitted pursuant to s 7 TMA. Section 59B TMA refers to assessments other than simple assessments.
- The case of Rogers & Shaw did not deal with the situation where a tax return has been submitted pursuant to s 7 TMA.
- It is not possible for the Appellant to pay the outstanding tax liability for 5 April 2017.
[7] By a letter dated 8 February 2018, the Appellant's agents (Crown Accountants) said this:
The fact that payment of tax was not made by the due date is not disputed. Nor is reasonable excuse being claimed.
The grounds of that appeal is that the penalty is unlawful.
[8] HMRC's case can be summarised as follows (as set out in the Skeleton Argument dated 12 January 2021):
- The Appellant contends that he submitted his tax return pursuant to s 7 TMA and that late payment penalties do not therefore apply. Section 7 TMA relates to the requirement to give notice of liability to income tax and capital gains tax. HMRC's records show that a s 8 notice to file was issued to the Appellant on 6 April 2017 and the Appellant subsequently made and delivered his return to HMRC on 22 January 2018. The Appellant was not giving notice of liability to income tax but he was making and delivering a tax return in compliance with the notice to file issued to him.
- At the time the notice to file was issued, the Appellant's registered address was 25 Clematis Street. The Appellant does not dispute that this is the correct address and the notice to file was not returned undelivered. The Appellant does not dispute that the s 8 notice to file was received. There is therefore strong evidence to discharge the burden of proof to show that a s 8 notice to file was effectively served.
- It is not necessary for a specific officer of HMRC to be identified as having taken the decision to send a s 8 notice. It is permissible for HMRC to use a computer to perform the task of identifying which taxpayers meet the criteria for a notice to file to be issued.
- The Appellant did not pay his tax liability by 31 January 2018. Penalties were therefore due, in accordance with Schedule 56. The legislation does not define the method of assessment of the penalty. It is clear that what is required is for HMRC to conclude that an amount of tax or penalty is due, to calculate the amount owed and to notify the taxpayer of that assessment. The SA370 notice issued to the Appellant's agents on 13 March 2018 states the period in respect of which the penalty is assessed and this is the same notice that was issued to the Appellant. The penalty was correctly assessed and notified to the Appellant.
- The Appellant's agent has confirmed that reasonable excuse is not being claimed.
- HMRC have considered the Appellant's circumstances and the conclusion reached is that no special circumstances apply.
- The penalties are proportionate.
[9] The documents before us included the following:
- HMRC's Skeleton Argument dated 12 January 2021;
- Documents Bundle consisting of 147 pages; and
- Supplementary Bundle consisting of 250 pages (pages A1 to E190).
[10] At the commencement of the appeal hearing, both representatives confirmed that they had the same documents. During his submissions however, Mr Woon-Sam said that he did not have a copy of the Documents Bundle. There was no suggestion that this had not been served on the Appellant by HMRC and indeed Mr Woon-Sam confirmed, on at least two occasions before the hearing started, that he had received the Documents Bundle. Mr Woon-Sam submitted that he was content for the hearing to continue and that he accepted Mr Evans' submissions in relation to the documents included in the Documents Bundle. The hearing proceeded by way of submissions only.
[11] Mr Evans made the following submissions:
- The appeal concerns penalties for the late payment of tax. The issues are whether the notice to file was validly issued; whether the penalties were correctly applied; and whether the Appellant has established a reasonable excuse.
- A notice to file was issued to the Appellant on 6 April 2017, pursuant to s 8 TMA The Appellant submitted his tax return on 22 January 2018, in which he confirmed his employment income and the dividends he received.
- The Appellant previously did not dispute that a notice to file was received but the argument now presented on the Appellant's behalf is that the tax return was submitted pursuant to s 7 TMA, which relates to the requirement to give notice of liability to income tax or capital gains tax. The Appellant was however making and delivering a return, pursuant to the notice to file issued on 6 April 2017, under s 8 TMA.
- The UT, in Rogers & Shaw, provided guidance on the evidence that the First-tier Tribunal (FTT) should consider when deciding if a s 8 notice was served. The UT held that s 8 does not impose a requirement that an officer of the Board is identified in the notice as the giver of the notice. It is permissible for a computer to perform the task. Section 103 of the Finance Act 2020 resolved any doubts about the conclusions reached by the UT in Rogers & Shaw. The interpretation of s 103 has been considered by the FTT in Paul [2020] TC 07892.
- The microfiche record shows which documents were generated and issued to the Appellant by HMRC. The microfiche record shows that a notice to file was issued to the Appellant at his address. The only document issued to the Appellant on 6 April 2017 was the notice to file. The Return Summary also shows that the notice to file was issued on 6 April 2017 and this can be reconciled with the microfiche record. The Appellant has not disputed that the address held on HMRC's record is not his address and no correspondence was returned to HMRC undelivered.
- There is strong evidence to discharge the burden of proof that a notice to file was validly issued.
- Cap Gemini are HMRC's IT provider and the issue data sheet shows that a late payment penalty was triggered on 2 March 2018. The penalty type and amount are clearly identified and the name and address of the taxpayer are also set out.
- The payment deadline is set out at s 59B TMA. The Self-Assessment (SA) system notes show that tax was paid on 30 November 2020. The Appellant failed to pay tax by the due date of 31 January 2018 and this led to the late payment penalties. The legislation does not define the method of assessment of a penalty. What is required is for HMRC to conclude that an amount of tax is due. Paragraph 11 of Schedule 56 does not impose a requirement that an officer of the Board makes the assessment.
- Paragraph 3(2) of Schedule 56 shows that the amount of the penalty is 5% of the unpaid tax. Paragraph 3(3) of Schedule 56 relates to the six-month penalty, which was issued on 28 August 2018.
- The penalties were calculated correctly. A notice to file was issued, tax remained...
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