Edwards v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 May 2019 |
| Neutral Citation | [2019] UKUT 131 (TCC) |
| Date | 01 May 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 131 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
The Hon. Mr Justice Nugee, Judge Timothy Herrington
Michael Ripley, Counsel, instructed by Brown Rudnick LLP, Solicitors, appeared for the appellant
Joshua Carey, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax – Late filing penalties – Whether to allow a ground of appeal not raised in the notice of appeal – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 20(1)(f) – Whether FTT erred in finding notice to file self-assessment return sent – Whether proportionality of penalties in comparison to the amount of tax due amounted to special circumstances – FA 2009, Sch. 55, para. 3, 4, 5, 6, 16.
The Upper Tribunal (UT) upheld a First-tier Tribunal (FTT) decision on late filing penalties. The UT ruled that the FTT had not erred in finding that the taxpayer had received notices to file, and as the penalty regime was proportionate, the fact that the taxpayer had been charged penalties of £1,300, £1,600 and £980 for three years when no tax was due did not amount to special circumstances.
The appellant (Mr Edwards) was charged with late filing penalties in respect of his personal tax returns for 2010–11, 2012–13 and 2013–14. The penalties were charged under FA 2009, Sch. 55, para. 3, 4, 5 and 6. No income tax was due from Mr Edwards for any of the years in question.
Mr Edwards appealed against the penalties.
The FTT dismissed the appeals because:
- The question as to whether any particular taxpayer should be required to file a tax return is entirely a matter for HMRC and accordingly Mr Edwards's contention that he should not have been required to file a tax return in the first place was not a relevant issue in considering whether the penalties had been lawfully raised.
- HMRC did issue notices to Mr Edwards to file a tax return for the years in question and also served the necessary notices in order for the daily penalties imposed to be valid.
- The FTT's powers on an appeal do not include any general power to reduce a penalty on the grounds that the penalty concerned was disproportionate in comparison with the amount of tax involved.
Mr Edwards was granted permission to appeal against the decision on the grounds that the FTT erred in relation to its findings summarised in (3) above. Mr Edwards subsequently applied to add a further ground of appeal, namely, that the FTT was not entitled to find as a fact that notices to file self-assessment returns had been sent to him for the relevant tax years. HMRC opposed that application on the basis that the proposed further ground had not been a ground of appeal before the FTT as required by FA 2009/273, r. 20(1)(f) until the hearing itself and it was not arguable that there was any perversity as to the conclusion reached by the FTT on the issue in question.
Using the test in Manduca v R & C Commrs [2015] BTC 519, for whether an appellant should be permitted to raise on appeal a point that was not raised before the FTT, the UT permitted Mr Edwards to argue the notice to file issue. This was because:
- the point was fairly and squarely before the FTT and it was dealt with at the hearing without any objection from HMRC;
- HMRC did include in the bundle of documents it provided for the FTT hearing evidence that related to the notice to file issue;
- the point involved a short point of law and it was not necessary for any further evidence to be adduced to deal with that point; and
- Mr Edwards had an arguable case.
On the notice to file issue, the UT found deficiencies in the manner in which the FTT reasoned its decision, but it could not say that those deficiencies were such that they amounted to a material error of law on the basis of which it should set aside the FTT's decision. It was clear to the UT that there was sufficient evidence before the FTT as a whole from which it could properly have drawn an inference, on the balance of probabilities, that notices to file were sent to Mr Edwards. As well as computer entries relating to Mr Edwards's self-assessment record, HMRC also provided a copy of Mr Edwards's SA Notes, and Mr Edwards acknowledged that he would have thrown away any notice to file that he received, had received the penalty notices, and had failed to remember that he had in fact filed his tax returns. Given this, the UT could not say that the evidence before the FTT contradicted its findings nor could it say that the only reasonable conclusion that could have been drawn from the evidence was that no notices to file were sent to Mr Edwards. The UT therefore determined the notice to file issue in favour of HMRC.
On the proportionality Issue, the UT viewed that there was a reasonable relationship of proportionality between the legitimate aim of seeking to incentivise taxpayers to comply with a requirement to file a return, regardless of whether it was subsequently determined that any tax was due, and a penalty regime seeking to realise it. The levels of penalty were fixed by Parliament and had an upper limit. In the UT's view the regime established a fair balance between the public interest in ensuring that taxpayers filed their returns on time and the financial burden that a taxpayer who did not comply with the statutory requirement would have to bear. Therefore, a penalty imposed in accordance with the relevant provisions of FA 2009, Sch. 55 could not be regarded as disproportionate in circumstances where no tax was ultimately found to be due. It followed that such a circumstance could not constitute a special circumstance for the purposes of FA 2009, Sch. 55, para. 16 with the consequence that it was not a relevant circumstance that HMRC had to take into account when considering whether special circumstances justified a reduction in a penalty. Therefore, in this case, HMRC's decision as regards special circumstances was not flawed.
The UT dismissed the appeal.
The taxpayer's representative pointed to the FTT's decision in Qureshi [2018] TC 06372, which on apparently similar evidence found that HMRC had not proved, on the balance of probabilities, that the necessary notices to file had been sent to the taxpayer. However, the UT noted that in this case there was other evidence available to the FTT, such as oral evidence the taxpayer had given at the FTT hearing and HMRC records recording interactions with the taxpayer.
[1] This is the appeal of the appellant (“Mr Edwards”) from the decision (“the Decision”) of the First-tier Tribunal (“FTT”) (Judge Philip Gillett and Helen Myerscough) released on 18 October 2017. The FTT dismissed Mr Edwards's appeal against penalties charged by the Respondents (“HMRC”) for the late filing of individual tax returns. The matters under appeal were late filing penalties pursuant to Schedule 55 of the Finance Act 2009 as follows:
- Tax year 2010/11 – penalties totalling £1,300 (plus interest) comprising an automatic late filing penalty of £100 imposed on 14 February 2012, a further penalty (calculated at £10 per day in relation to the period to 14 May 2012) totalling £900 imposed on 7 August 2012 and a further penalty of £300 imposed on 7 August 2012 for failure to file a return within 6 months of the first penalty;
- Tax year 2012/13 – penalties totalling £1,600 (plus interest) comprising an automatic late filing penalty of £100 imposed on 18 February 2014, a further penalty (calculated at £10 per day in relation to the period to 27 June 2014) totalling £900 imposed on 18 August 2014, a further penalty of £300 imposed on 18 August 2014 for failure to file a return within 6 months of the first penalty and a further penalty of £300 imposed on 24 February 2015 for failure to file a return within 12 months of the first penalty; and
- Tax year 2013/14 – penalties totalling £980 (plus interest) comprising an automatic late filing penalty of £100 imposed on 18 February 2015 and a further penalty (calculated at £10 per day in relation to the period to 27 June 2014) totalling £880 imposed on 28 July 2015.
[2] HMRC's tax calculations for the years in question show that no income tax was due from Mr Edwards for any of the years in question.
[3] Although, as we discuss in more detail later, there is a dispute between the parties as to what issues were properly before the FTT, the FTT dismissed Mr Edwards's appeal against all of the penalties set out above on the following basis:
- The question as to whether any particular taxpayer should be required to file a tax return is entirely a matter for HMRC and accordingly Mr Edwards's contention that he should not have been required to file a tax return in the first place is not a relevant issue in considering whether the penalties have been lawfully raised;
- HMRC did issue notices to Mr Edwards to file a tax return for the years in question and also served the necessary notices in order for the daily penalties imposed to be valid; and
- The FTT's powers on an appeal do not include any general power to reduce a penalty on the grounds that the penalty concerned is disproportionate in comparison with the amount of tax involved.
[4] Mr Edwards applied for permission to appeal against the Decision on the grounds that the FTT erred in relation to its findings summarised at [3](1) and (3) above. On 28 December 2017 Judge Herrington refused permission in relation to the first of those grounds but granted permission in relation to the second.
[5] Subsequent to permission having been granted, Mr Edwards secured pro bono representation before the Upper Tribunal, having represented himself before the FTT. He then applied to add a further ground of appeal, namely, that the FTT was not entitled to find as a fact that notices to file self-assessment returns had been sent to Mr Edwards for any of the relevant tax years.
[6] HMRC opposed that application on the basis that...
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Niasse
...received a notice to file. By contrast, as the Upper Tribunal (Nugee J and Judge Herrington) identified at [56] of Edwards v R & C Commrs[2019] BTC 516 if the taxpayer is disputing having received a notice 2, the Tribunal is unlikely to accept weak evidence consisting only of a record that ......
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New Claire Wine Ltd
...produced by Officer Barnsdale and derived from the server. I had pointed out that we had not been referred to Edwards v R & C Commrs[2019] BTC 516 (“Edwards”) but in addressing those arguments I would almost certainly reference Edwards at paragraph 50. [33] Because she had commitments elsew......
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Marano
...similar items to be despatched. In the context of sending out SA returns by post, the UT made a similar comment in Edwards v R & C Commrs [2019] BTC 516 (“Edwards”) at [12]. We find as a fact that although the penalty was issued on 3 March 2015, it was sent on or after 6 March 2015 to 76, N......
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Smith
...therefore be reduced because of special circumstances under FA 2009, Sch. 55, para. 16. This was in reliance of Edwards v R & C Commrs [2019] BTC 516. Mr Smith's appeal was dismissed, and the penalties confirmed. Comment The taxpayer had signed up to paperless contact with HMRC. However, he......