Crawford
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 July 2018 |
| Neutral Citation | [2018] UKFTT 392 (TC) |
| Date | 12 July 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0392(TC)
Judge Barbara Mosedale
The appellant did not appear and was not represented at the hearing but written submissions were provided by Raffingers.
Ms L McLaughlin, HMRC officer, appeared for the respondents
Penalties – Late filing and late payment – Whether tribunal should follow Goldsmith [2018] TC 06284 – No – Whether tribunal should follow Patel [2018] TC 06426 – Case stayed in part; Otherwise appeal determined, part allowed part dismissed – TMA 1970, s. 8, s. 59C and 93 – FA 2009, Sch. 55 and 56.
The First-tier Tribunal (FTT) partly allowed, partly dismissed and partly stayed a taxpayer's appeal against late filing penalties and late payment surcharges and penalties.
Mr Crawford (the appellant) had his employment with Credit Suisse abruptly ended in December 2008. This caused him great stress and anxiety and he became depressed. In early 2009 he moved to a cottage he owned in France. His UK home was left in the hands of builders to carry out major renovation work with him only returning for occasional visits. During this time the appellant did not recall setting up a mail forwarding arrangement and did not tell HMRC of his change of address. The appellant admitted being very careless with his post and put this down to his stress and depression. In September 2012 the appellant returned to his UK home. The appellant made a successful claim for unfair dismissal and received payments from Credit Suisse in both 2009–10 and 2010–11. He assumed at the time that the payments would have had the correct amount of tax deducted under PAYE. He now accepted that there were under-deductions of tax and blamed this on Credit Suisse for failing to properly operate PAYE.
The appellant filed his tax returns for 2009–10 and 2010–11 late and paid the corresponding tax late. HMRC accordingly issued late filing penalties under TMA 1970, s. 93 for 2009–10 and FA 2009, Sch. 55 for 2010–11, and late payment surcharges under TMA 1970, s. 59C for 2009–10 and late payment penalties under FA 2009, Sch. 56 for 2010–11.
The appellant appealed against the penalties.
At the hearing HMRC withdrew the late filing penalties for 2010–11. The FTT's understanding was that this was because the original notice to file had been cancelled and then the return was submitted not long after the notice to file was reinstated (according to HMRC).
The appeal in respect of the 2010–11 late filing penalties was accordingly allowed.
The FTT found that the appellant was sent a notice to file a 2009–10 tax return. This was based on HMRC's computer records showing that a blank return was posted to the appellant's UK home (which was his last known place of residence as required by TMA 1970, s. 115(2)) and in accordance with the Interpretation Act 1978, s. 7, as the contrary had not been proved, it was deemed to have arrived.
The appellant submitted that HMRC should not have issued him with notices to file a return to collect a PAYE underpayment.
The FTT noted that in Goldsmith [2018] TC 06284 it was decided that:
- it could consider whether the statutory requirements of TMA 1970, s. 8(1) were met; and
- they were not met because HMRC could have collected the underpaid tax through a different and less onerous means and should have done so.
However, the FTT chose not to follow the Goldsmith decision and instead it found that:
- while the appellant was in time to challenge the validity of the notice to file;
- it did not think it had the jurisdiction to consider HMRC's exercise of discretion; but did not reach a conclusion on this, because even if it did have jurisdiction;
- it was not satisfied that HMRC had acted unlawfully – while HMRC had the choice of how to collect the underpayment (either by self-assessment or discovery assessment), it could see no arguable case for saying that by choosing the self-assessment route HMRC was unlawful.
The FTT did find that it had jurisdiction to consider the purposes for which a notice to file was issued. It noted that per TMA 1970, s. 8 HMRC could issue a self-assessment tax return “for the purpose of establishing the amounts in which a person is chargeable” to income tax/CGT. It noted that in Goldsmith the FTT appeared to assume that “establish” meant calculate, but by looking in more depth at the meaning of “establish” it found that it should be read as “calculating and assessing”. It also seemed to the FTT that a notice to file issued simply to assess a known liability to tax would also be within the meaning of “establish”. The FTT therefore again disagreed with Goldsmith and did not follow it, finding instead that the appellant had been served with a valid notice to file.
Finally, with regard to the late filing penalty for 2009–10, the FTT found that the appellant did not have a reasonable excuse for the late filing. The FTT did not accept that the appellant's mental health had caused him to be careless about his post or ignore the notice to file. In particular, there was no medical evidence to establish that his mental health issues were so severe he was unable to act rationally. There was also no reasonable excuse caused by him not expecting to have to complete a return.
The appeal in respect of the 2009–10 late filing penalties was accordingly disallowed.
The FTT accepted that the surcharges were validly issued. The FTT did not accept that: the appellant's mental health; him not expecting to have to pay the tax; or a lack of funds amounted to a reasonable excuse.
The appeal in respect of the 2009–10 late payment surcharges was accordingly disallowed.
The FTT decided to stay the appeal against the late payment surcharges for 2010–11 pending the final determination of Patel [2018] TC 06426. HMRC had not proved that they served a notice to file for 2010–11 (after withdrawing the original notice) and without that it was doubtful whether an obligation to pay arose as the return submitted would have been a voluntary return and therefore not a self-assessment within the meaning of TMA 1970, s. 8.
Judge Barbara Mosedale in this case decided not to follow Judge Richard Thomas's recent decision in Goldsmith [2018] TC 06284. In particular Judge Mosedale decided that a notice to file could be validly issued simply to assess a known liability to tax, rather than to calculate a person's liability.
[1] Although the start of the hearing was slightly delayed to give the appellant time to attend, he did not attend and nor did any one else on his behalf.
[2] I was satisfied that he knew of the time and place of the hearing as he had been sent a correct notice of hearing letter and in any event his representatives had written to the Tribunal referring to the notice of hearing letter.
[3] The question was therefore whether it was in the interests of justice to proceed in his absence. The appellant and his advisers had consistently informed the Tribunal that they would not attend this, nor the earlier adjourned, hearings and that they wished it to proceed in his absence. Moreover, I had the benefit of his written representations. I decided it was in the interests of justice to proceed with the hearing.
[4] The appellant appealed against various late filing and late payment penalties as follows:
| Penalty | Amount in £ | Date imposed | |
| 2009/10 | |||
| 1st penalty late filing | 100 | 15/2/11 | S 93 TMA |
| 2nd penalty late filing | 100 | 22/8/11 | Ditto |
| 1st Surcharge | 875 | 6/11/12 | S 59C TMA 70 |
| 2nd Surcharge | 875 | 6/11/12 | Ditto |
| 2010/11 | |||
| Daily penalties | 900 | 8/1/13 | Sch 55 FA 2009 |
| 6 month late filing | 1,408 | 22/1/13 | Ditto |
| 6 month late filing | 300 | 8/1/13 | Ditto |
| 12 months late filing | 1,708 | 19/2/13 | Ditto |
| 30 day late payment | 1,708 | 22/1/13 | Sch 56 FA 2009 |
| 6 months late payment | 1,708 | 22/1/13 | Ditto |
| 9,682 |
“TMA” = Taxes Management Act 1970; “FA 2009” = Finance Act 2009.
[5] The appeal was lodged on 15 April 2013 against two HMRC decisions dated 20 May 2013. The appeal was stayed behind the case of Donaldson in which the validity of daily penalties was challenged, as it was of relevance to this appeal which was in part against daily penalties. The appeal was released from the stay after the Court of Appeal dismissed the appeal in Donaldson v R & C Commrs [2016] BTC 28. Originally listed for hearing in late 2017, it was adjourned until March 2018.
[6] At the hearing, Ms Laughlin withdraw the late filing penalties levied on the appellant in respect of tax year 2010/11. In other words, she withdrew the first four penalties listed under 10/11 in the above table totalling £4,316 leaving £5,366 in dispute.
[7] The reason she withdrew them was an entry on Mr Crawford's SA notes. “SA Notes” are HMRC's internal computer based recording system of interaction by HMRC and the taxpayer in respect of the taxpayer's self-assessment. The relevant entries in the SA Notes were (as they often are) somewhat cryptic. On 14 June 2012, there was a reference to cancellation of an “SA penalty”; on 20 June a reference to cancellation of “SA return” and an SA789 being posted to Mr Crawford; on 26 September of the same year it referred to the “NIL return” being in error as taxpayer had substantial potential tax liability.
[8] My understanding is that Ms McLaughlin read these notes as meaning that the notice to file for 2010/11, shown in HMRC's records as issued on 6 April 2011, had been cancelled in June 2012 and then reinstated in September 2012. In these circumstances, she did not wish to defend the late filing penalties in respect of the return for 2010/11 which was actually filed in early 2013, which was not long after (HMRC say) the notice to file was reinstated.
[9] As the late filing penalties for 10/11 were withdrawn, I have no decision to make on them. The appeal is allowed in respect of them. That...
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