Jagger
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 October 2018 |
| Neutral Citation | [2018] UKFTT 623 (TC) |
| Date | 17 October 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0623 (TC)
Presiding Member: Peter R Sheppard, Member: Susan Stott
The appellant appeared in person
Richard Kelly, Officer of HMRC, appeared for the respondents.
Income tax – Whether reasonable excuse for the late submission of self-assessment tax returns for 2010–11, 2012–13, no – Initial late filing penalties levied under FA 2009, Sch. 55, para. 3 confirmed – Whether daily penalties under para. 4 were correctly imposed, yes – Whether penalties levied under para. 5 and 6 were correctly imposed, no because of para. 17(3).
The First-tier Tribunal (FTT) partly allowed a taxpayer's appeal against late filing penalties, finding that the interaction rules restricted the 6 and 12-month penalties to nil because the taxpayer had no tax liability.
Mr Jagger (the appellant) appealed against late filing penalties issued in respect of his 2010–11 and 2012–13 self-assessment tax returns. He had no tax liability for either year. The appellant submitted that: he had posted the returns on time; he had not received the penalty notices; and paying the penalties would cause him extreme difficulty and financial strain.
In respect of the appellant's complaint that the level of the penalties would cause him difficulty the FTT pointed out that the level of the fines is laid down in legislation and it had no power to amend them unless they were incorrectly imposed, or they were inaccurately calculated.
The FTT found that because:
- the appellant had not submitted any evidence to support his claim that he had submitted the returns on time; and
- a reasonable excuse had to be a reasonable excuse as to why the return was not submitted on time, and not receiving penalty notices was no such excuse,
it had no alternative but to conclude that the appellant had not established a reasonable excuse for the late submission of the returns.
The FTT then considered whether the penalties had been levied in accordance with legislation.
Based on HMRC's records, the FTT found that the £100 initial late filing penalties charged under FA 2009, Sch. 55, para. 3 and the daily penalties charged under para. 4 had been correctly levied.
However, in respect of the 6-month and 12-month penalties charged under para. 5 and 6, the FTT found that:
- in accordance with para. 5 and 6 the penalties had to be the greater of 5% of any liability to tax which would have been shown in the returns and £300;
- which meant that in order to determine the penalties that applied it was necessary to consider two amounts and determine which was greater and therefore each of the penalties was determined by first referring to a liability to tax (of nil in this case);
- and because para. 17(3) said:Where a person is liable for a penalty under more than one paragraph of this Schedule which is determined by reference to a liability to tax, the aggregate of the amounts of those penalties must not exceed [the relevant percentage] of the liability to tax.
As the tax liability for each year was nil, 100% of a nil liability to tax is nil and therefore the aggregate of the penalties determined by a liability to tax could not exceed nil.
The FTT accordingly allowed the appeal in respect of the 6-month and 12-month penalties, but dismissed the appeal in respect of the initial and daily penalties.
The appellant had not appealed on the basis that the penalties had been correctly imposed in accordance with the legislation, but luckily for the taxpayer the FTT decided to look at the issue. The same decision regarding the correct interpretation of the penalties' legislation had been reached in Jackson [2018] TC 06329.
[1] This considers an appeal against penalties totalling £3,200 imposed by the respondents (HMRC) under Schedule 55 Finance Act 2009 for the late filing by the appellant of his Self-Assessment Tax returns for 2010/2011 (£1,600); and 2012/2013 (£1,600). In the appellant's Notice of Appeal the amount stated as being appealed against is “£3,807.70”. It is clear that penalties totalling £3,200 had been levied on the appellant by HMRC for the stated years. These are detailed below. This leaves a balance of £607.70 which needs explanation. In a letter attached to the Notice of Appeal the appellant refers to a statement he received from HMRC in March 2015 which advised him that £3,878.03 was outstanding. In the bundle of papers before the Tribunal was a Self-Assessment statement dated 7 February 2018 which shows an outstanding balance of £3,491.43 which includes penalties of £1,500 from 2010/2011 and penalties of £1,600 from 2012/2013, interest on unpaid penalties for 2010/2011 of £232.19; and interest on unpaid penalties for 2012/2013 of £153.61; and sundry other items. At the hearing it was said that the amount then outstanding was £3,436.33. There was no clear explanation of how the amount of £3,807.70 was made up. The Tribunal proceeded on the basis that should it allow any appeal against a penalty in whole or in part this should lead to a reduction of the interest said to be due.
[2] Towards the end of the hearing the appellant advised that during the morning before the hearing he had telephoned the HMRC helpline. During that call he was advised that his 2008/2009 self-assessment tax return was still outstanding. The appellant considered he had already sent this return to HMRC twice. Mr Kelly confirmed that there were no penalties outstanding in respect of that tax year. During the discussions it became evident that the appellant had been given two different Unique Taxpayer Reference numbers (UTR). Mr Kelly had no information with him to make comment. The Tribunal was concerned that HMRC's SA notes that had formed part of the considerations at the hearing related to only one of the UTR's. SA notes on the other UTR may reveal telephone calls which the appellant submits he made, but did not appear on the record, particularly a call in December 2013 to advise a change from self-employment to employed status. If another set of SA notes relating to the other UTR exists these might explain some of the missing tax returns which the appellant is adamant he has sent.
[3] The Tribunal therefore directed that HMRC check their records to confirm there were two UTR's issued to the appellant and if so whether they have records for the second UTR which were not presented to the Tribunal and which might help to confirm whether or not returns had been received, whether or not telephone calls had been logged, and whether or not the penalties should have been levied. HMRC were directed to report their findings to the Tribunal, with a copy to the appellant at the latest by four weeks after the date of those directions.
[4] HMRC responded to the directions by confirming that for some unexplained reason the taxpayer had been issued with two UTR's. The one for which Mr.Kelly had the records for at the hearing covered the period from 2009 onwards. The other UTR covered the period before 2009.
[5] HMRC reported that they had checked their records for both UTRs and confirmed that the appellant's 2008/2009 return has not been received. However the records also show that there are no outstanding penalties for the 2008/2009 year. They reported that there was only one telephone call recorded on the SA notes and this showed that the appellant contacted HMRC on 17 January 2011 and was advised that the 2008/2009 and 2009/2010 tax returns had been sent back to him in November 2010 because they were incomplete. The appellant had advised that his net profit was below the personal allowance for 2008/2009 and 2009/2010.
[6] As no penalties are outstanding for the 2008/2009 tax year HMRC consider there is no appealable matter for the 2008/2009 year. That being the case the Tribunal has proceeded to consider the appeal against the penalties for the late submission of the appellant's tax returns for 2010/2011 and 2012/2013 only.
- Finance Act 2009 Schedule 55
- Taxes Management Act 1970, in particular section7, 8,12AA, 31,49, and 115
- Interpretation Act 1978 in particular section 7.
- Civil Evidence Act 1995, in particular sections 8 and 9
- Hinchcliffe (HMIT) v Crabtree (1971) 47 TC 419
- Collis [2011] TC 01431
- R & C Commrs v Hok Ltd [2012] BTC 1,711
- Clean Car Co Ltd [1991] BVC 568
- Skorobogatovas [2017] TC 05781
- Biazussi [2017] TC 06171
- Hesketh [2018] TC 06266
- Tinkler [2016] TC 04960
- Carr [2018] TC 06258
- Perrin v R & C Commrs [2018] BTC 513
- Sudall [2017] TC 05868
- Donaldson v R & C Commrs [2016] BTC 28
- Rowland v R & C Commrs (2006) Sp C 548
[7] Schedule 55 of the Finance Act 2009 (“the Schedule”) makes provision for the imposition by HMRC of penalties on taxpayers for the late filing of tax returns.
[8] If a person fails to file an income tax return by the “penalty date” (the day after the “filing date” ie the date by which a return is required to be made or delivered to HMRC), paragraph 3 of the Schedule provides that the person is liable to a penalty of £100.
[9] Paragraph 4 of the Schedule provides:
(1) A person is liable to a penalty under this paragraph if (and only if)–
- The failure continues after the end of the period of 3 months beginning with the penalty date,
- HMRC decide that such a penalty should be payable, and
- HMRC give notice to the person specifying the date from which the penalty is payable.
(2) The penalty under this paragraph is £10 for each day that the failure continues during the period of 90 days beginning with the date specified in the notice given under sub-paragraph (1)(c).
[10] Paragraph 5 of the Schedule provides:
A person is liable to a penalty under this paragraph if (and only if) – the failure continues after the end of the period of 6 months beginning with the penalty date.
The penalty under this paragraph is the greater of –
- 5% of any liability to tax which would have been shown...
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Priory London Ltd
...it clear that no penalties should apply under paras 5 and 6. Despite HMRC not accepting our analysis, the Tribunal in the recent Jagger [2018] TC 06774 case (copy attached) has confirmed that this is the correct position. In summary, we consider that penalties of £12,800 are clearly disprop......
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Advanced Scaffolding (Bristol) Ltd
...the penalty was the greater of 5% of the tax in question and £300, the FTT did not accept the conclusion in the FTT decision of Jagger [2018] TC 06774. In that case the FTT decided that, although the penalty under Sch. 55, para. 5 and 6 (which were very similar to those in para. 10 and 11) ......