Hansard
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 June 2018 |
| Neutral Citation | [2018] UKFTT 292 (TC) |
| Date | 04 June 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0292 (TC)
Judge Richard Thomas, Elizabeth Pollard
The appellant was neither present nor represented.
Ms Loretta McLaughlin, HMRC Solicitor's Office and Legal Services, appeared for the respondents
Income tax – Penalties for failure to deliver returns – Penalties for failure to pay income tax and class 4 NICs – Whether automatic assessments under FA 2009, Sch. 55, para. 5 and 6 valid where return not delivered and tax liability not known at time of making – Whether re-assessments under para. 5 and 6 in correct figures – Whether FA 2009, Sch. 55 and 56 apply to class 4 NICs – Whether certain assessments properly served – Appeals allowed in part.
The First-Tier Tribunal (FTT) reduced a substantial element of the late filing and late payment penalties for the taxpayer in the absence of the taxpayer and his representative.
This was an appeal by Mr Duncan Hansard (DH) against assessments by the respondents (“HMRC”) of penalties for the late delivery of tax returns for the tax years 2010–11 and 2011–12 and for late payment of tax for the same years.
The reason the FTT was only now dealing with penalties for tax years that began more than 8 and 7 years ago respectively was that the appeals, like thousands of others, were stayed behind a case that was finally determined by the Court of Appeal in 2016, Donaldson v R & C Commrs [2016] BTC 28, leave to appeal being refused by the Supreme Court.
When the appeals finally came before the FTT for hearing and were due to begin, neither the appellant, nor his authorised representative, Parkins Chartered Accountants, were present. The clerk phoned the appellant on the mobile number given but got no reply. He spoke to Mr Parkin and was told that there would be no attendance as they did not think it was worth it. A more detailed explanation was given in an email by Mr Parkin. This explained that a response had been received from HMRC about other years and that Mr Parkin had assumed that the hearing would be cancelled to enable compromise negotiations to begin about the years in question. Mr Parkin would have suggested a 50% reduction in penalties.
To assume that a hearing would be cancelled without having had any notification to that end or making any contact with the Tribunal was wholly unwarranted and a rash course of action. Since no application was made by either party to postpone the hearing, and since the appellant had clearly been notified of the proceedings, the FTT had to decide whether it was in the interests of justice to proceed.
The FTT noted that the burden of proof was clearly on HMRC to show that the penalties were duly incurred and that from the bundle of papers supplied by HMRC they could ask questions of HMRC. Accordingly the FTT considered it was in the interests of justice to proceed, and did so. The FTT dealt with the case in detail in a report running to 29 pages so that justice was seen to be done. The FTT detailed the process for the issue of tax returns for both 2010–11 and 2011–12. They then described the relevant law. The grounds for appeal were: The appellant was suffering from depression following marital difficulties; He was working in mines and in remote parts of the world where there was no phone signal.
This was explained further in the appeal letter of 8 July 2013. That said that “during the period involved” their client was getting divorced which led to depression and his not being able to deal with his business affairs. The appellant's letter of 26 August 2013 explained that after 22 years of marriage he discovered his wife was being unfaithful and that led to separation with consequential cost and distress. He was unable to cope with day to day issues in the normal way, and was unable to work, concentrate and to socialise. He asked his accountant to carry out “these works” (preparing tax returns) in 2010 but he did not follow this up. His accountants had now finalised his accounts, but he had been in Africa since “the above events”.
HMRC sympathised with the appellant's problems but said that the evidence that depression affected the appellant's ability to deliver his returns or pay his tax on the due dates was simply too vague as to dates and times, and unsupported by medical evidence, to count as a reasonable excuse.
While it was possible for reliance on a third party such as an accountant to be a reasonable excuse, it could only be one if the appellant took reasonable care to ensure that there was no failure by him. By his own admission he failed to “follow up” once he had asked his accountants to do the necessary work for him.
The FTT discussed the late filing penalties under FA 2009, Sch. 55 in full detail and further discussed the late payment penalties under FA 2009, Sch. 56.
The Tribunal also considered special circumstances – HMRC had addressed the question whether there were special circumstances in relation to each of the penalties, but have found none. The FTT could not say that this decision was flawed. The FTT decided:
Under FA 2009, Sch. 55, para. 22(1) the FTT affirmed the decision of HMRC to assess a penalty of £100 for the tax year 2010–11 for the appellant's failure to deliver his tax return by the due date.
Under FA 2009, Sch. 55, para. 22(1) the FTT cancelled the decision of HMRC to assess a penalty of £900 for the tax year 2010–11 for the appellant's failure to deliver his tax return by a date three months after the due date.
Under FA 2009, Sch. 55, para. 22(1) the FTT cancelled the decision of HMRC to assess a penalty of £300 for the tax year 2010–11 for the appellant's failure to deliver his tax return by a date six months after the due date.
Under FA 2009, Sch. 55, para. 22(1) the FTT cancelled the decision of HMRC to assess a penalty of £1,020 for the tax year 2010–11 for the appellant's failure to deliver his tax return by a date six months after the due date.
Under FA 2009, Sch. 55, para. 22(1) the FTT affirmed the decision of HMRC to assess a penalty of £100 for the tax year 2011–12 for the appellant's failure to deliver his tax return by the due date.
Under FA 2009, Sch. 56, para. 15(1) the FTT cancelled the decision of HMRC to assess a penalty of £1,002 for the tax year 2010–11 for the appellant's failure to pay income tax and Class 4 NICs by a date 30 days after the due date.
Under FA 2009, Sch. 56, para. 15(1) the FTT cancelled the decision of HMRC to assess a penalty of £1,002 for the tax year 2010–11 for the appellant's failure to pay income tax and Class 4 NICs by a date 30 days and 5 months after the due date.
Under FA 2009, Sch. 56, para. 15(1) the FTT cancelled the decision of HMRC to assess a penalty of £1,002 for the tax year 2010–11 for the appellant's failure to pay income tax and Class 4 NICs by a date 30 days and 11 months after the due date.
Under FA 2009, Sch. 56, para. 15(1) the FTT cancelled the decision of HMRC to assess a penalty of £120 for the tax year 2011–12 for the appellant's failure to deliver his tax return by a date 30 days after the due date.
This case was unusual in that neither the taxpayer or agent appeared at the hearing. Under normal circumstances there would have been a delay but the FT decided to proceed in the interests of justice. Consequently they were at some lengths to ensure that all points were covered even though there were no really special circumstances. It is a demonstration of the fairness of the system that they went into full discussion of the case.
[1] This was an appeal by Mr Duncan Hansard against assessments by the respondents (“HMRC”) of penalties for the late delivery of tax returns for the tax years 2010–11 and 2011–12 and for late payment of tax for the same years. Or at least that is how the Tribunal dealt with the case – the actual position as it stood before the hearing was rather more complicated.
[2] The reason the Tribunal is only now dealing with penalties for tax years that began more than 8 and 7 years ago respectively is that the appeals, like thousands of others, was stayed behind a case that was finally determined by the Court of Appeal in 2016, Donaldson v R & C Commrs [2016] BTC 28, leave to appeal being refused by the Supreme Court.
[3] There is a slight irony here. The only appeals that HMRC did not reject as being out of time were appeals against penalties for late payment of tax where the Donaldson case had no relevance.
[4] When the appeals finally came before us for hearing and were due to begin, neither the appellant, nor his authorised representative, Parkins Chartered Accountants, were present. Our clerk phoned the appellant on the mobile number given but got no reply. He spoke to Mr Parkin and was told that there would be no attendance as they did not think it was worth it. A more detailed explanation was given in an email by Mr Parkin. This explained that a response had been received from HMRC about other years and that Mr Parkin had assumed that the hearing would be cancelled to enable compromise negotiations to begin about the years in question. Mr Parkin would have suggested a 50% reduction in penalties.
[5] To assume that a hearing would be cancelled without having had any notification to that end or making any contact with the Tribunal was wholly unwarranted and a rash course of action. Since no application was made by either party to postpone the hearing, and since the appellant had clearly been notified of the proceedings, we had to decide whether it was in the interests of justice to proceed.
[6] We had the grounds of appeal which had been elaborated in earlier correspondence by Mr Hansard, by his accountants at the time Turnerwarran and by Parkins. We noted that the burden of proof was clearly on HMRC to show that the penalties were duly incurred and that from the bundle of papers supplied by HMRC we could ask questions of HMRC. Accordingly we considered it was in the interests of justice to proceed, and we did so.
[7] From...
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Slocock
...in paragraph 4(1)(c) because the date given is before end of the relevant period. Paragraph 5 and 6 penalties [141] In Hansard [2018] TC 06522 at [82] to [94] I cancelled these penalties because HMRC put forward no evidence to show that an officer of HMRC considered, as they were required t......
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Smith
...best of their knowledge and belief what the penalty should be. Judge Thomas then cross-referred to one of his earlier decisions, Hansard [2018] TC 06522 where he had come to the same conclusion; and in the alternative, found that the position was the same as in Armstrong because the necessa......
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Trustees of the Paul Hogarth Life Interest Trust 2008
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Steele
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