Patrick
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 October 2015 |
| Neutral Citation | [2015] UKFTT 508 (TC) |
| Date | 15 October 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Richard Thomas
Income tax – Permission to give late notice of appeal – Taxes Management Act 1970 (“TMA 1970”), s. 49(2) – Penalty under Finance Act 2009 (“FA 2009”), Sch. 55, para. 3 – Whether assessment of penalty notified – No – Permission granted – Effect of non-notification on validity of penalty assessment – None – Whether reasonable excuse – No – Whether special reduction justified – No – Assessment confirmed.
Procedure – Withdrawal of case under Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 17 in default paper case – Whether possible after consideration on paper and before final decision issued – Yes – Meaning of withdrawal of “case” in r. 17 – Whether tribunal may make a decision after r. 17 Withdrawal – Yes – Effect of TMA 1970, s. 54 agreement.
The First-tier Tribunal (FTT) gave permission for a taxpayer's late appeal against a £100 late filing penalty; however, it upheld the penalty assessment. Although HMRC did not notify the taxpayer of the late filing penalty assessment, the assessment was still valid and the taxpayer had neither a reasonable excuse for the late filing nor were there special circumstances.
Mr Patrick (the appellant) was issued with a notice to file a tax return for 2012–13 on 6 April 2013 and therefore his tax return should have been submitted by 31 January 2014. As the return was not submitted until 27 October 2014, HMRC assessed the appellant to penalties under FA 2009, Sch. 55, para. 3 (a fixed £100 late filing penalty), para. 4 (daily penalties because the failure continued beyond three months) and para. 5 (a tax-geared penalty because the return was still outstanding six months after the filing date). This decision dealt with the appellant's application for permission to make a late appeal against the £100 penalty under TMA 1970, s. 49(2)(b) on the basis that he did not receive the penalty notice and only found out about the penalties when the Debt Management and Banking Unit of HMRC got involved.
The case was unusual and convoluted. When the judge first read the papers for this default paper case he thought the appeal was limited to an appeal against penalties under FA 2009, Sch. 55, para. 4 and para. 5. He stayed the appeal against the para. 4 penalty, given the decision of the Upper Tribunal to grant leave to appeal R & C Commrs v Donaldson TAX[2014] BTC 531 to the Court of Appeal. With regard to the para. 5 penalty the FTT found that the appellant did not have a reasonable excuse, but as the assessment did not seem to be validly made it directed that parties could make submission on the issue. The Tribunal administration centre advised the FTT that the appellant had withdrawn his appeals and the papers had been put away, but following further analysis of the rules the FTT concluded that the appellant had not withdrawn his appeals, but had “withdrawn his case in relation to the appeals”, i.e. that he had a reasonable excuse for not filing his return on time. In accordance with Vaultdawn Ltd (as listed in the Schedule to this Decision Notice) TAX[2015] TC 04565 the FTT found that it could have gone on to make a decision, however as an HMRC letter showed that the FA 2009, Sch. 55, para. 4 and para. 5 penalties, had been determined by agreement pursuant to TMA 1970, s. 54, the FTT did not give any decision on these.
The FTT considered whether to allow a late appeal against the £100 late filing penalty and if it did give permission, to move straight on to the appeal. The FTT accepted that on the balance of probabilities the appellant had not received the notice of assessment of the £100 late filing penalty as the notice was not “properly” addressed as it was not addressed to the appellant's last known address as required by TMA 1970, s. 115(2)(a). The FTT found that this provided the appellant with a reasonable excuse for not appealing within 30 days of the date of the notice and in accordance with TMA 1970, s. 49(3) it said it would grant permission for the late appeal, however in case it was wrong it also reviewed the other questions considered relevant in Re Petition of IR Commrs for Judicial Review TAX[2006] BTC 846 and again concluded that permission should be granted for the appeal against the para. 3 penalty to be given out of time.
The appellant argued that because the notice of assessment was not received the penalty should be cancelled. However the FTT found that this did not prevent the assessment being valid. The FTT then considered whether the appellant had a reasonable excuse, but found that he did not. The only grounds for appeal put forward were that he did not receive any communication about the penalty, but this did not mean that he did not receive the notice to file and given that he had many years of experience of self-assessment and had previously been charged late filing penalties, the FTT found that he did not have a reasonable excuse. The FTT finally considered whether there were special circumstances that would allow the penalty to be reduced, but although it found that it could look at the matter afresh, because by HMRC not giving reasons why they considered that there were no special circumstances their decision was flawed, it found there to be no special circumstances.
The First-tier Tribunal (FTT) accordingly gave permission for the appellant's late appeal against the £100 late filing penalty, however it upheld the penalty assessment.
This is essentially a very simple £100 late filing penalty “reasonable excuse” case, however what it more interesting (and not completely clear from the decision) is why the taxpayer withdrew his case in relation to the other late filing penalty appeals, especially given that in respect of the £300 penalty it appeared that the FTT was inclined to find in his favour.
[1] This decision deals with an application by the appellant for permission (“the application”) under s 49(2)(b) Taxes Management Act 1970 (“TMA”) to give to the Commissioners for Her Majesty's Revenue and Customs (“HMRC”) a notice of appeal against the assessment of a penalty of £100 under paragraph 3 of Schedule 55 Finance Act 2009 (“Schedule 55”). Schedule 55 imposes penalties for failures to file returns by the due date and applies (in theory at least) to a wide variety of taxes, and in practice, as a result of a Commencement Order, to income tax returns under s 8 TMA as in this case.
[2] I have given permission for the late appeal to be given and I have then gone on to consider the appeal, and have held that although the penalty assessment was not notified to the appellant this is not relevant to the validity of the assessment, and in the absence of a reasonable excuse or special circumstances, I have upheld the penalty assessment.
[3] Some explanation is required for the delay in issuing this decision, given that this is a “Default Paper” case and that I considered the papers in this case in April. Default Paper cases are those described as such in, and which have been allocated to be considered without a hearing under, rule 23(2)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) (In this decision from here onwards “the TC Rules” refers to SI 2009/273, and a reference to a rule with a number but no more is a reference to that numbered rule of the TC Rules). It is expected that in a Default Paper case the papers will be read and considered and that a decision will be arrived at on the day allocated, and that the decision will be written up (usually in “summary” form – see rule 35(3)(a)) and sent to the Tribunal administration centre for distribution to the parties on the day or the next day.
[4] On 24 April 2015 I considered five Default Paper cases. In four of them I was able to send a decision to the Tribunal administration centre the next day. But this case took a rather convoluted turn. When I first read the papers the case seemed to be limited to an appeal against penalties charged under paragraphs 4 and 5 of Schedule 55. So far as paragraph 4 is concerned I decided (in the sense that I resolved) to direct that that appeal should be stayed because that type of penalty will be considered by the Court of Appeal following the decision of the Upper Tribunal to grant leave to appeal in R & C Commrs v Donaldson TAX[2014] BTC 531.
[5] So far as the paragraph 5 penalty is concerned I came to the view on 24 April that the appellant did not have a reasonable excuse. However because in a penalty appeal the burden is on HMRC to show that the penalty has been correctly imposed, I also considered that HMRC had not discharged that burden because the assessment seemed to me to be invalidly made. No argument to that effect had been made by the appellant in his grounds of appeal, and, for obvious reasons, none had been made by HMRC. In those circumstances, I decided that it was appropriate to direct that the parties could, if they wished to, make submissions on the issue, and to enable them to do that I included in the directions an extract of the decision I had prepared on this point setting out my reasoning.
[6] For reasons I do not need to go into, the directions were not issued until 11 June 2015 and they gave the parties until 10 July 2015 to respond. After that date had passed I was informed by the Tribunal administration centre that the appellant had withdrawn his appeals and the papers had been put away. The letter from the appellant's representative (dated 17 October 2014 but enclosed with an email of 8 July 2015) said:
On behalf of our above client we now wish to withdraw from this case after further consideration
[7] I took the view that this was a withdrawal under rule 17, and I asked the Tribunal administration centre to inform the parties that my view was that a withdrawal could not be made at the stage in the proceedings which had been reached. The parties were given a further period...
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