Cotswold Financial Planning Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 June 2021 |
| Neutral Citation | [2021] UKFTT 198 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 198 (TC)
Judge Abigail McGregor
Income tax – Sch. 36 information notice – Non-compliance – Daily penalties– Reasonable excuse.
[1] This is an appeal by Cotswold Financial Planning Limited (“CFPL”) against daily penalties for failure to comply with an information notice issued under Schedule 36 to Finance Act 2008.
[2] Based on the documents in the document bundle, I find the following facts.
[3] HMRC opened an enquiry into CFPL's corporation tax returns for the years ended 31 December 2016 and 2017 under paragraph 24(1) of Schedule 18 to Finance Act 1998 on 29 March 2018. By way of the same letter, HMRC also notified CFPL that it was conducting a compliance check of the company's PAYE and NICs position for the same periods, but also including the year ended 31 December 2015. This letter identified remuneration trusts referred to in the relevant sets of accounts as the areas being checked.
[4] As part of that enquiry, HMRC informally requested information and documents from CFPL, via its agent, with a deadline of 6 July 2018.
[5] During the course of 2018, CFPL's agent challenged the validity of HMRC's checks into CFPL's tax affairs. CFPL did not provide any of the information or documents in response to the informal request.
[6] On 7 December 2018, HMRC issued a taxpayer notice under Sch 36 to Finance Act 2008, without the approval of the Tribunal, formally requesting a list of documents and information, with a deadline of 31 January 2019.
[7] On 22 December 2018, CFPL produced some of the documents requested and made an appeal against elements of the information notice to HMRC.
[8] On 11 January 2019 HMRC provided its response to the appeal; upholding the information notice in its entirety and dismissing CFPL's appeal. The response offered a review of the decision if requested within 30 days.
[9] CFPL's agent accepted the offer of a review on 31 January 2019.
[10] On 15 March 2019, HMRC provided its review conclusion, again upholding the information notice in its entirety. The letter gave a further 30 days for compliance with the information notice and also detailed CFPL's option to appeal to the tribunal (which they did not do at that stage).
[11] On 10 April 2019, some further documents on the list in the information notice were provided by CFPL to HMRC.
[12] On 16 May 2019, HMRC set out in a letter what remained outstanding for the information notice. The letter gave a new deadline of 16 June 2019 and highlighted that a penalty of £300 would arise without further warning if this deadline was not complied with. The letter also referred to the possibility of daily penalties of up to £60 per day if the notice was not complied with by the time the initial penalty is issued.
[13] On 22 May 2019, CFPL produced all the remaining documents and information requested, save for the trust deed of the Buckingham Administrators Limited Remuneration Trust dated 28 April 2014 (the Trust Deed).
[14] Enclosed with the 22 May 2019 letter were two letters from CFPL's agent (also dated 22 May 2019) to Buckingham Administrators Limited in Belize and Costa Corporate Services Limited, also in Belize, requesting a copy of the Trust Deed.
[15] On 27 June 2019, HMRC issued a letter identifying the Trust Deed as the only remaining item and enclosing a fixed penalty of £300 for the failure to comply with the information notice. The penalty notice set a new deadline of 29 July 2019 and stated that if the company did not meet this deadline, daily penalties of up to £60 a day could be charged from the date of the penalty notice.
[16] CFPL appealed against that penalty to HMRC on 1 July 2019. The grounds of that appeal were that the document was not in the possession or power of CFPL and that they had made “numerous and serious attempts to obtain the Trust Deed from the relevant parties and will continue to do so”.
[17] On 16 August 2019, HMRC provided its view of the matter, being that the Trust Deed was in the power of CFPL and that CFPL had not provided any evidence to demonstrate what it had done to obtain the documents (other than a letter dated 22 May 2019 written to the Trustees) or considered whether persons other than the Trustees might be able to provide the documents to CFPL.
[18] On 28 November 2019, HMRC provides its response to the statutory review, being that, until CFPL could show that the request for the Trust Deed had been refused, HMRC considers the document to be in CFPL's power. The penalty was upheld in the review.
[19] On 28 February 2020, HMRC issued daily penalties covering the period from 28 June 2019 to 27 February 2020 at a rate of £10 per day, amounting to a total of £2,440.
[20] On 12 March 2020, CFPL appealed to HMRC against the penalty notice. In the same letter, CFPL also enclosed a copy of the Trust Deed.
[21] On 21 May 2020, HMRC:
- Provided its view of the matter that the penalty notice was validly issued, and
- confirmed that the information notice had been complied with in full and no further penalties would be raised.
[22] On 10 June 2020, CFPL requested a review of the matter.
[23] That review was concluded on 22 October 2020 and the daily penalties were upheld.
[24] CFPL submitted an appeal against the daily penalties notice to the Tribunal on 29 October 2020.
[25] Further findings of fact are made within the discussion below where they are relevant to particular elements of the appeal.
[26] The information notice was issued by HMRC under the powers given in Schedule 36 to Finance Act 2008. Paragraph 1 of Schedule 36 provides:
(1) An officer of Revenue and Customs may by notice in writing require a person (“the taxpayer”)–
- to provide information, or
- to produce a document,
if the information or document is reasonably required by the officer for the purpose of checking the taxpayer's tax position.
[27] Paragraph 6 sets out the requirements for the notice:
(1) In this Schedule, “information notice” means a notice under paragraph 1, 2, 5 or 5A.
(2) An information notice may specify or describe the information or documents to be provided or produced.
(3) If an information notice is given with the approval of the tribunal, it must state that it is given with that approval.
(4) A decision of the tribunal under paragraph 3, 4 or 5 is final (despite the provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007).
[28] Paragraph 7 sets out the compliance requirements including:
(1) Where a person is required by an information notice to provide information or produce a document, the person must do so–
- within such period, and
- at such time, by such means and in such form (if any), as is reasonably specified or described in the notice.
[29] Part 4 of Schedule 36 sets out restrictions on the scope of information notices, including:
[18] An information notice only requires a person to produce a document if it is in the person's possession or power.
[30] Paragraph 29 sets out appeal rights against information notices and restrictions on such rights:
29–
(1) Where a taxpayer is given a taxpayer notice, the taxpayer may appeal against the notice or any requirement in the notice.
(2) Sub-paragraph (1) does not apply to a requirement in a taxpayer notice to provide any information, or produce any document, that forms part of the taxpayer's statutory records.
(3) Sub-paragraph (1) does not apply if the tribunal approved the giving of the notice in accordance with paragraph 3.
[31] Paragraphs 39 and following deal with penalties and provide (to the extent relevant to this appeal):
(1) This paragraph applies to a person who–
- fails to comply...
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