Revenue and Customs Commissioners v Rogers and another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 December 2019 |
| Neutral Citation | [2019] UKUT 406 (TCC) |
| Date | 30 December 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 406 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Zacaroli, Judge Jonathan Richards
Aparna Nathan QC and Joshua Carey instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the appellants
Richard Vallat QC and Rebecca Murray instructed by Pinsent Masons appeared for the respondents
Income tax – Penalties for late filing – Whether tribunal has jurisdiction to consider validity of notice to file in penalty appeal – Yes – Whether notice to file had to be issued by identified flesh and blood officer – No – Whether procedural unfairness in FTT taking a point without inviting submissions – Yes – Appeal allowed and decision remade – Whether either taxpayer had a reasonable excuse – No – TMA 1970, s. 8 – FA 2009, Sch. 55.
The Upper Tribunal (UT) overturned the First-tier Tribunal (FTT) decisions on penalties for the late filing of self-assessment returns in Rogers [2018] TC 06542 and Shaw [2018] TC 06547. The UT held that: the FTT does have jurisdiction to consider the validity of a notice to file in a penalty appeal; a notice to file does not have to be issued by an identified officer; HMRC had been denied procedural fairness; and neither taxpayer had a reasonable excuse.
HMRC charged Mr Rogers and Mr Shaw (the taxpayers) with penalties for the late filing of their individual self-assessment returns. Both respondents appealed and in Rogers [2018] TC 06542 and Shaw [2018] TC 06547, the FTT allowed the default paper appeals. The FTT decided that:
- For HMRC to establish that a taxpayer is prima facie liable to a late filing penalty HMRC have to show that a taxpayer has been required to submit a return in a notice given by an officer of the Board as required by TMA 1970, s. 8(1).
- For a notice to be given by an officer of the Board a named flesh and blood officer either has to sign the notice or it has to be made clear in some other way that a particular named officer was giving that notice.
- HMRC had not discharged their burden of proving that notice was given by an officer of the Board and therefore there could be no late filing penalty.
HMRC appealed both decisions to the UT, which allowed the appeals.
The UT considered these unrelated cases together as they dealt with the same issues. The UT held that:
- In agreement with the FTT, and the UT decision in R & C Commrs v Goldsmith [2019] BTC 527, the FTT does have jurisdiction, in an appeal against FA 2009, Sch. 55 penalties, to consider whether a valid notice to file under TMA 1970, s. 8 has been issued.
- TMA 1970, s. 8 does not impose a requirement that an officer of the Board is identified in the notice as the giver of the notice. Rather, it imposes a requirement that the giving of a notice must have been under the authority of an officer of HMRC.
- By the FTT determining that any notice under TMA 1970, s. 8 was invalid, it had decided the appeals on a basis for which neither taxpayer had argued and against which HMRC had been given no opportunity to respond (or to provide evidence) which was procedurally unfair.
The UT decided that as the FTT's errors of law were material to their decisions it would set the decisions aside and remake them.
In remaking the decisions, the UT allowed HMRC to give witness evidence concerning the process for issuing s. 8 notices. The UT decided that even though a computer selects which taxpayers receive notices and a third party sends out the hard copy notices, because HMRC officers formulate the criteria for deciding which taxpayers are to be required to submit returns, this means notices are given under the authority of an officer of HMRC. Based on the evidence the UT concluded that valid notices to file were given to both Mr Rogers and Mr Shaw.
The UT rejected that either of the taxpayers had a reasonable excuse.
Mr Shaw's submission was that he had filled in all the information in his return ahead of the deadline but he had failed to complete the final submission stage and it was reasonable for him not to know about his failure because HMRC emails went into his “spam” folder. The UT decided that as Mr Shaw had been submitting online returns for 10 years he should have realised that he had not completed the online filing process and as he had opted to receive digital notices from HMRC he should have checked his spam settings to ensure he received the notices.
Mr Rogers submitted that having received a letter about his tax credit position he assumed that he did not need to submit a tax return. The UT did not consider this to be a reasonable excuse as the letter only dealt with his tax credit position and not his income tax position and there was no suggestion that there was no need to submit a return.
The UT accordingly allowed HMRC's appeal and remade the FTT's decisions so that both taxpayers were liable to the penalties charged by HMRC.
The UT also gave the following guidance to the FTT on how to address any future concerns that it has on the validity of notices to file personal tax returns, especially considering that the FTT deals with lots of default paper penalty appeals:
- In order to impose a penalty for late filing of a tax return under FA 2009, Sch. 55, HMRC must prove that a notice under TMA 1970, s. 8 had been served.
- If HMRC fail to provide any evidence to the effect that a s. 8 notice was served, they will have failed to demonstrate a crucial fact on which their entitlement to a penalty hinges and the FTT will necessarily set aside the penalties charged for alleged failure to comply with that notice.
- Where HMRC have given some evidence that a s. 8 notice was served, it will be a matter for the FTT to determine whether that evidence is sufficiently strong to discharge HMRC's burden of proof. The FTT's assessment of the evidence should take into account the extent to which the taxpayer disputes receiving a s. 8 notice. On its own, evidence that HMRC's systems record a s. 8 notice as having been sent is, on its own, relatively weak. However, it could be regarded as sufficient if the taxpayer does not dispute receiving a notice to file, but is unlikely to be accepted if the taxpayer disputes receiving the notice and HMRC's systems only record the notice having been sent to an unspecified address. Further corroborating evidence could be that a s. 8 notice was actually sent to the taxpayer at the correct address or evidence that the taxpayer set about trying to submit a tax return before the deadline.
- HMRC do not need to anticipate every conceivable challenge that might be made to the validity of a s. 8 notice. Where HMRC have given some evidence that a s. 8 notice was served, and there is no suggestion from the taxpayer that such a notice was invalid, HMRC can proceed on the basis that no challenge is being made to the validity of those notices. If the FTT has its own concerns on the validity of a s. 8 notice, the FTT should write to the parties, before releasing its decision, to explain the nature of those concerns and to invite the parties to make submissions on the point and to adduce further evidence as necessary.
This decision provides useful clarification that notices to file can be issued by computer rather than a named HMRC officer. It also provides guidance to the FTT about how to deal with concerns it may have on the validity of notices to file personal tax returns, including that if the FTT raises its own concerns about the validity of notices it should allow HMRC the opportunity to make submissions on the point.
[1] The Respondents (“HMRC”) appeal against two decisions of the First-tier Tribunal (Tax Chamber) (the “FTT”). The decision in Mr Rogers' appeal was reported at [2018] TC 06542; Mr Shaw's appeal was reported at [2018] TC 06547. Both appeals were concerned with penalties for the late filing of self-assessment returns. We record our gratitude to Mr Vallat QC, Ms Murray and Pinsent Masons for acting on a pro bono basis for the taxpayers before this Tribunal (the taxpayers having been unrepresented before the FTT).
[2] The overall scheme of the legislation was not in dispute (although specific aspects of it were). Section 8 of the Taxes Management Act 1970 (“TMA”) contains a power for taxpayers to be given notice requiring them to file a self-assessment return in the following terms:
(1) 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, he may be required by a notice given to him by an officer of the Board–
- to make and deliver to the officer, …, a return containing such information as may reasonably be required in pursuance of the notice, and
- to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required.
[emphasis added as the taxpayers argue that it is highly significant that the notice must be given “by an officer of the Board”]
[3] Schedule 55 of the Finance Act 2009 (“Schedule 55”) imposes penalties for the late filing of returns. Paragraph 1 of Schedule 55 provides, so far as relevant, as follows:
(1) A penalty is payable by a person (“P”) where P fails to make or deliver a return, or to deliver any other document, specified in the Table below on or before the filing date.
(2) Paragraphs 2 to 13 set out–
- the circumstances in which a penalty is payable, and
- subject to paragraphs 14 to 17, the amount of the penalty.
[4] Therefore, the documents and returns whose late or non-submission are penalised are set out in the “Table”. Row 1 of that Table specifies the following document or return in relation to income tax or capital gains tax:
- Return under section 8(1)(a) of TMA 1970
[5] It follows that a failure to submit a “return under section 8(1)(a) of TMA 1970” on time or at all...
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