Salmon
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 May 2013 |
| Neutral Citation | [2013] UKFTT 306 (TC) |
| Date | 17 May 2013 |
| Court | First Tier Tribunal (Tax Chamber) |
[2013] UKFTT 306 (TC)
Anne Redston (Tribunal Presiding Member)
Income tax - HMRC enquiry into 2010 SA return - unrepresented taxpayer - HMRC seeking to amend returns for the previous two years - HMRC issuing a protective assessment for 2007-08 - taxpayer failing to pay by surcharge trigger date - whether conditions for discovery assessment met - whether tax was due so as to trigger a surcharge for late payment - tribunal's jurisdiction considered - whether tribunal can set aside surcharge if no underlying tax - held, no - whether tribunal has jurisdiction to consider reasonable excuse - yes - whether taxpayer has reasonable excuse - yes - appeal allowed and surcharge set aside
The First-tier Tribunal decided that it could exercise jurisdiction under the Taxes Management Act 1970 ("TMA 1970"), Taxes Management Act 1970 section 59C subsec-or-para 9s. 59C(9)(a) even where there was no underlying tax since the taxpayer had reasonable excuse for not paying the relevant surcharge by the trigger date. He was unrepresented, had no adviser to suggest that an appeal against a protective assessment and postponement of tax due might have been a sensible course of action, and HMRC did not provide professional assistance on the matter. Furthermore, the taxpayer failed to realise that among the many pages of information he received from HMRC was a requirement to pay what he understood to be a provisional figure, by a fixed date, and that failure to pay by that date would trigger a surcharge.
The taxpayer appealed against a surcharge of £147.05 imposed by HMRC for his late payment of self-assessment tax for the 2007-08 fiscal year.
On 4 January 2012, HMRC opened an enquiry into the taxpayer's return for the year 2009-10. On 8 March 2012, they issued a protective assessment to collect further tax for 2007-08 because there was additional tax due that was not previously shown on his tax return. They advised the taxpayer to pay the assessed amount and warned him that if it was not paid within 28 days of the date it should be paid, they would impose a surcharge. On 20 March 2012, the taxpayer wrote to HMRC saying that he was trying to get some advice on the matter.
On 23 April 2012, HMRC issued a self-assessment statement of account, showing the amount due plus interest. On 21 May 2012, HMRC issued a five per cent surcharge of £174.65, being five per cent of the tax unpaid at 6 May 2012. On the same day, HMRC issued an updated statement of account showing the surcharge. On 1 June 2012, the taxpayer paid the extra tax assessed for 2007-08.
The taxpayer contended that he was an individual taxpayer trying to operate the self-assessment system to the best of his ability. All relevant facts were declared by him at the time, and that had never been disputed by HMRC. The information relating to the surcharges was hidden. The statement of account issued by HMRC did not include any due date on its face. Surcharges were only explained on the reverse of such statement, and HMRC never highlighted that vital information.
HMRC contended that the information about the surcharges was clearly stated on the notice of further assessment sent out on 8 March 2012. In any event, the charging of a surcharge was not dependent on the notification or otherwise on any such statement of account. The taxpayer incurred the surcharge due to his failure to correctly attend to his payment obligations.
Whether the taxpayer had reasonable excuse for not paying the surcharge by the trigger date.
Held, allowing the taxpayer's appeal:
Under TMA 1970, Taxes Management Act 1970 section 59C subsec-or-para 9s. 59C(9)(a), the Tribunal has an explicit statutory jurisdiction to consider whether a person has "a reasonable excuse for the default". In O'KaneTAX[2013] TC 02712, the Tribunal considered whether it could exercise that jurisdiction where there was no underlying tax (i.e. because the assessment on which the surcharge was based was itself invalid). In that case, the Tribunal decided that its power to allow the appeal was limited by TMA 1970, Taxes Management Act 1970 section 59C subsec-or-para 9s. 59C(9)(a) to cases where the taxpayer had a reasonable excuse throughout the period of default for not paying the tax. For the reasons set out in that decision, the Tribunal concluded that it could exercise such jurisdiction in this case.
Here, when HMRC raised the protective assessment, the enquiry was still not resolved. The taxpayer also understood the issues involved in the assessment remained open. In Courts plc v C & E CommrsVAT[2005] BVC 68, it was held that in relation to protective assessment, "no steps [would] be taken to recover the debt so created pending the occurrence of a future contingency". No similar action was taken by HMRC in this case. Had the taxpayer received professional assistance, he would probably have been advised to appeal the protective assessment and seek postponement of the tax due. However, he was unrepresented. He described himself as "an individual taxpayer trying to operate the self-assessment system to the best of [his] ability". He had no adviser to suggest that an appeal and postponement might have been a sensible course of action, and HMRC did not provide that assistance.
Furthermore, it was clear the taxpayer did not see the warnings about surcharges in the notice of further assessment. It was not until the actual surcharge notice was issued that he understood HMRC were penalising him for not paying the tax levied by the further assessment. Both the taxpayer and HMRC understood that the 2007-08 tax position was still unresolved. Discussions were continuing and the taxpayer was seeking advice. He received many pages of information which he did his best to digest. He failed to realise that, among those pages, was a requirement to pay what he understood to be a provisional figure, by a fixed date, and that failure to pay by that date would trigger a surcharge. Thus, he had a reasonable excuse for not paying the tax by the surcharge trigger date.
[1]This was Adrian Salmon's appeal against a surcharge of £147.05 for late payment of self-assessment ("SA") tax for the 2007-08 fiscal year. The tax was assessed by way of a "protective assessment".
[2]This is a long decision, and the key points are summarised here for Mr Salmon's benefit.
(2) There can only be a surcharge if there is tax to pay in the first place. HMRC opened an enquiry into Mr Salmon's 2009-10 return, and then issued an assessment to collect further tax for 2007-08.
(3) The law only allows HMRC to collect tax for earlier years if certain conditions are met. On the facts provided, it appears that these conditions may not have been met. This would mean that HMRC could not collect extra tax for 2007-08 and so should not have levied a surcharge.
(4) The Tribunal has limited powers. In particular, it does not have the power to strike out a surcharge on the basis that it should not have been levied. It can only cancel a surcharge if the taxpayer had a "reasonable excuse" for not paying the tax.
(5) The Tribunal decided that Mr Salmon did have a reasonable excuse, and set aside the surcharge.
(6) The Tribunal cannot consider whether or not HMRC should have collected extra tax from Mr Salmon for 2007-08 and/or 2008-09. This is a matter on which he may want to take advice, or which HMRC may choose to review.
[3]The statutory provisions relating to the imposition of surcharges are at Taxes Management Act 1970 ("TMA") Taxes Management Act 1970 section 59Cs 59C. So far as relevant to this Appeal, they are as follows:
(1)This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with Taxes Management Act 1970 section 55section 55 or Taxes Management Act 1970 section 59B59B of this Act.
(2)Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid...
To continue reading
Request your trial