Lennon
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 April 2018 |
| Neutral Citation | [2018] UKFTT 220 (TC) |
| Date | 17 April 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0220 (TC)
Judge Nigel Popplewell
Income tax – Individual tax return – Penalties for late filing – Whether properly imposed – No – Purpose for which the notices to file were served – To establish chargeability – No – Goldsmith [2018] TC 06284 and Wandsworth London Borough Council v Winder [1984] UKHL 2, [1985] AC 461 considered – Tribunals jurisdiction to consider validity of notices – Yes – Whether reasonable excuse – No – Whether special circumstances – No – Appeal allowed.
The First-tier Tribunal (FTT) allowed a taxpayer's appeal against late filing penalties. The FTT found that the returns were issued to collect tax already calculated and “assessed” by P800s and not for the purpose of establishing the taxpayer's taxable income and the amount of tax payable, and therefore did not meet the statutory requirements of s. 8(1) TMA 1970, and accordingly the penalties were invalid.
This is an appeal against the following penalties, visited on the appellant under Sch. 55 FA 2009 for the late filing of an individual tax return for the tax year 2014–2015.
- A late filing penalty of £100 (late filing penalty).
- Daily penalties of £900 (the daily penalties).
- A 6 month late filing penalty of £300 (6 month penalty).
Mr Lennon (the appellant) (L) was in the PAYE system during the 2014–2015 tax year and had five separate employments during that year. The total income from all of those employments brought him into the higher rate tax band. Because of the number of changes of employment he had during that year, his employers were unable to collect all the tax due from the appellant. HMRC sent a calculation to the appellant on 27 October 2015 showing that he owed £321.12 for the tax year 2014–2015.
Because HMRC were unable to collect this underpayment through coding out, they issued a voluntary payment letter on 29 October 2015. A further voluntary payment letter was issued to the appellant on 21 January 2016. The voluntary payment letters referred to the tax calculation (a P800 tax calculation) and indicated that “If you don't pay the amount that you owe or come to an arrangement with us, we will have to consider collecting the amount from the Self-Assessment Tax System. If we need to use self-assessment you will have to fill in a self-assessment tax return …”.
A notice to file for the tax year 2014–2015 was issued to the appellant on 21 April 2016. The filing date for this return was 28 July 2016 for a non-electronic return or 28 July 2016 for an electronic return. The appellant's electronic return for this year was received on 28 March 2017. It was processed on 28 March 2017.
The FTT noted that HMRC had to show that the penalties were incurred for a failure to deliver by the due date a return under s. 8(1)(a) TMA 1970, i.e. a return “for the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, and the amount payable by him by way of income tax for that year”. It considered that it was able to question whether the statutory requirements of s. 8(1) TMA 1970 had been met as HMRC did not need a return to establish the appellant's income or the amount of tax payable, as the PAYE system had done that, and the P800 had “assessed” it. Because the returns did not fall within s. 8(1) TMA 1970 the FTT ruled that the penalties were invalid.
In case the FTT was wrong in its decision, it also ruled that the appellant did not have a reasonable excuse for his failure to file his returns on time – while the appellant said he did not receive the notices to file the presumption was that the notices had been served and there were special circumstances enabling the penalties to be reduced to nil. HMRC had failed to properly notify the daily penalties as required by FA 2009, Sch. 55, para. 4(1)(c) and therefore the daily penalties were invalid anyway.
For similar situations in the future the simple assessment rules introduced by s. 167 and Sch. 23 FA 2016 will be advantageous for both HMRC and the taxpayer. For HMRC they will not have to send increasingly beseeching letters asking for voluntary payment and they will not, if those requests are unsuccessful, have to set up a self-assessment record and police the filing of returns to establish a liability to pay. For the taxpayer they will not have to get involved with self-assessment and making returns, and thus will not face late filing penalties nor retrospective interest and late payment penalties.
[1] This is an appeal against the following penalties, visited on the appellant under Schedule 55 Finance Act 2009 for the late filing of an individual tax return for the tax year 2014–2015.
- A late filing penalty of £100 (late filing penalty).
- Daily penalties of £900 (the daily penalties).
- A 6 month late filing penalty of £300 (6 month penalty).
[2] From the papers before me I find the following facts:
- During the 2014–2015 tax year, the appellant earned employment income from five separate employments which were subject to tax deduction at source under the PAYE regime.
- The appellant was in the PAYE system during the 2014–2015 tax year and has five separate employments during that year. The total income from all of those employments brought him into the higher rate tax band. Because of the number of changes of employment he had during that year, his employers were unable to collect all the tax due from the appellant.
- HMRC sent a calculation to the appellant on 27 October 2015 showing that he owed £321.12 for the tax year 2014–2015. Notwithstanding that neither the calculation itself nor any covering letter which might have accompanied this calculation has been tendered in evidence by HMRC, the appellant accepts, in the notice of appeal that HMRC … issued him [i.e. the appellant] with a tax calculation on 27 October 2015. I therefore find as a fact that a tax calculation was sent to the appellant on that date identifying the amount of £321.12 as the income tax underpaid by the appellant from his employments in the tax year 2014–2015.
- Because HMRC were unable to collect this underpayment through coding out, they issued a voluntary payment letter on 29 October 2015. A further voluntary payment letter was issued to the appellant on 21 January 2016. The evidence of the issue of these letters is copies of two computer printouts which suggest that a document (VPL1 and VPL2) was sent to the appellant on those dates. I surmise that VPL stands for voluntary payment letter, and find as a fact that, as indicated by HMRC in their Statement of Case, the voluntary payment letters were indeed sent to the appellant on the dates in question.
- The voluntary payment letters refer to the tax calculation (a P800 tax calculation) and indicate that If you don't pay the amount that you owe or come to an arrangement with us, we will have to consider collecting the amount from the Self-Assessment Tax System. If we need to use self-assessment you will have to fill in a self-assessment tax return ….
- A notice to file for the tax year 2014–2015 was issued to the appellant on 21 April 2016. The filing date for this return was 28 July 2016 for a non-electronic return or 28 July 2016 for an electronic return.
- The appellant's electronic return for this year was received on 28 March 2017. It was processed on 28 March 2017.
- As the return had not been received by the due filing date, HMRC issued a notice of penalty assessment on or around 12 August 2016 for the £100 late filing penalty.
- As the return had still not been received six months after the penalty date, HMRC issued a notice of penalty assessment on or around 21 February 2017 in the amount of £300.
- On 24 January 2017 the appellant's agent appealed against the penalties.
- Following further exchanges of letters between HMRC and the appellant's agent, on 23 May 2017 that agent requested a review of HMRC's decision to impose the penalties.
- HMRC carried out a review and issued their review conclusion on 15 August 2017. The outcome of the review was that HMRC's decision should be upheld.
- On 29 August 2017 the appellant's agent notified the appellant's appeal to the tribunal.
[3] Although the appeal is against the daily penalties, and the original decision by HMRC to assess the appellant to these, HMRC in their Statement of Case have indicated that they are not putting forward a case for the daily penalties “and therefore that aspect of the appeal wins”. So this decision deals only with the late filing penalty and the 6 month penalty.
[4] A summary of the relevant legislation is set out below:
(1) Under section 8 of the Taxes Management Act 1970 (“TMA 1970”), a taxpayer, chargeable to income tax and capital gains tax for a year of assessment, who is required by HMRC to submit a tax return, must submit that return by 31 October immediately following the year of assessment (if filed by paper) and 31 January immediately following the year of assessment (if filed on line).
(2) Where a notice to file a return is given to a taxpayer after the 31 October immediately following the year of assessment, the filing date is three months after the date of that notice.
(3) Failure to file the return on time engages the penalty regime in Schedule 55 Finance Act 2009 (“Schedule 55”) (and references below to paragraphs are to paragraphs in Schedule 55).
(4) Penalties are calculated on the following basis:
- failure to file on time (i.e. the late filing penalty) – £100 (paragraph 3).
- failure to file for 6 months (i.e. the 6 month penalty) – 5% of payment due, or £300 (whichever is the greater) (paragraph 5).
(5) If HMRC considers a taxpayer is liable to a penalty, it must assess the penalty and notify it to the taxpayer (paragraph 18).
(6) A taxpayer can appeal against any decision of HMRC that a penalty is payable, and against any such decision as to the amount of the...
To continue reading
Request your trial
-
Thornton and Others (t/a A* Education)
...Developments Ltd v R & C Commrs [2015] BTC 533 – Wandsworth London Borough Council v Winder [1985] AC 461 – Wandsworth. In Lennon [2018] TC 06453 – Morgan [2013] TC 02720 – FA 2009, Sch. 55 – TMA 1970, s. 113, s. 114, s. 118(2) – Clean Car Co Ltd [1991] BVC 568 – Barrett [2015] TC 04514 – P......
-
Groves
...[2018] UKFTT 0311 (TC) Judge Nigel PopplewellGroves FA 2009, Sch. 55 – TMA 1970, s. 8 – Lennon [2018] TC 06453 – Wood [2018] TC 06339 – Patel [2018] TC 06426 – Donaldson v R & C Commrs [2016] BTC 28. The appellant concerns whether HMRC issued a valid notice to file. The Appeal was allowed. ......
-
Revenue and Customs Commissioners v Rogers and another
...whether a notice to file under section 8(1)(a) TMA 1970 has been lawfully given to the appellant by an officer of the Board (see Lennon [2018] TC 06453) at [21–40]. (8) If no valid notice to file has been lawfully given then there can be no failure to make or deliver a return etc undersecti......
-
Trustees of the Paul Hogarth Life Interest Trust 2008
...866 (TC), Goldsmith [2018] TC 06284 and Crawford [2018] TC 06594. HMRC has been granted leave to appeal in Goldsmith. See also Lennon [2018] TC 06453, Wood [2018] TC 06339 and Smith [2018] TC 06639. One suspects that if this trend continues, HMRC may seek to make technical amendments to the......