Research & Development Partnership Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 November 2009 |
| Neutral Citation | [2009] UKFTT 328 (TC) |
| Date | 30 November 2009 |
| Court | First Tier Tribunal (Tax Chamber) |
[2009] UKFTT 328 (TC)
John Brooks (Chairman), George Miles (Member)
John Dyer of Marriotts Business Consultants for the Appellant
Caryl Thompson Officer of HM Revenue and Customs for the Respondents
Penalty - failure to provide information and documents - reliance on accountant to provide information and documents - whether reasonable excuse - yes - appeal allowed - Finance Act 1998, Finance Act 1998 schedule 18 subsec-or-para 29Sch. 18, para. 29
The tribunal allowed an appeal by a taxpayer against penalties imposed for failure to provide information and documents in connection with an inquiry into its tax returns where it was reasonable for the taxpayer to rely on its accountant to provide the information sought where that information had to be supported by detailed reference to the research and development (R&D) legislation.
HMRC opened enquiries into the taxpayer's returns for the accounting periods to 30 April 2005 and 30 April 2007. HMRC, by letter to the taxpayer's accountants, sought information and documents relating in particular to the taxpayer's R&D activities and its R&D tax relief claim. After further correspondence penalty notices were issued when the accountants failed to provide the information sought. A fixed penalty of £50 and daily penalties at a rate of £30 a day, amounting to £1,440, were imposed in respect of the accounting period to 30 April 2005 and a fixed penalty of £50 was imposed in respect of the accounting period to 30 April 2007.
The taxpayer submitted that the accountants' overwhelming tax enquiry workload and the complex nature of a claim for R&D tax relief amounted to a reasonable excuse for the failure to provide the documents and information sought by notice under FA 1998, Finance Act 1998 schedule 18 subsec-or-para 27Sch. 18, para. 27.
Whether the taxpayer had a reasonable excuse for the failure to provide the documents and information required.
The First-tier Tribunal (John Brooks and George Miles) (allowing the appeal) said that it first had to determine whether reliance on a third party, which was specifically precluded from being a reasonable excuse for VAT purposes by VATA 1994, Value Added Tax Act 1994 section 71s. 71 could, in the absence of any corresponding direct tax provision, amount to a reasonable excuse in a direct tax context.
In the direct tax context reliance on a third party was capable of being a reasonable excuse (Rowland v R & C CommrsSCD(2006) Sp C 548 followed). However, in determining whether a person had a reasonable excuse for failing to perform a particular task it was proper to have regard to the nature of the task.
Whilst much of the information sought by HMRC was straightforward and easily understood so that it would not be reasonable to rely on a third party with specialist knowledge to provide that information, the taxpayer was also required to produce a detailed explanation of its R&D tax relief claim with reference to the relevant legislation. As the provisions of the R&D legislation could not be described as straightforward and easily understood to those not generally acquainted with tax law, it was reasonable for the taxpayer to rely on its agent to provide that information to HMRC. Further, it was reasonable for the taxpayer to expect its agent to provide the other documents and information required by the notice together with and at the same time as it was to provide the explanation of the R&D claims to HMRC. Accordingly the taxpayer had a reasonable excuse for its failure to comply with the notices issued in respect of the periods to 30 April 2005 and 30 April 2007. Therefore, the penalties would be set aside.
1. The Research and Development Partnership Limited appeals against fixed and daily penalties imposed under Finance Act 1998 schedule 18 subsec-or-para 29paragraph 29, Schedule 18 of the Finance Act 1998 in respect of the failure to comply with Notices, issued under Finance Act 1998 schedule 18 subsec-or-para 27paragraph 27 of that schedule, requiring the Appellant to provide documents and information to HM Revenue and Customs ("HMRC") for the purposes of enquiries into its tax returns for the accounting period to 30 April 2005 and the accounting period to 30 April 2007.
2. A fixed penalty of £50 and daily penalties at a rate of £30 a day, amounting to £1,440, were imposed in respect of the accounting period to 30 April 2005 and a fixed penalty of £50 was imposed in respect of the accounting period to 30 April 2007.
3. The facts which led to the imposition of these penalties are not disputed.
4. By a letter dated 11 August 2008, sent to the Appellant and copied to its accountants, Marriotts Business Consultants ("Marriotts"), HMRC opened an enquiry into the Appellant's tax return for the accounting period to 30 April 2005 which had been submitted to HMRC on 19 February 2008, some 17 months late.
5. A letter, also dated 11 August 2008, from HMRC to Marriotts (and copied to the Appellants), sought information and documents relating to the research and...
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