Smith
| Jurisdiction | UK Non-devolved |
| Judgment Date | 03 January 2020 |
| Neutral Citation | [2020] UKFTT 2 (TC) |
| Date | 03 January 2020 |
| Court | First Tier Tribunal (Tax Chamber) |
[2020] UKFTT 2 (TC)
Judge Anne Redston, Ms Jane Shillaker
The appellant appeared in person, appearing by video link
Ms Oliva Donovan, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the tespondents, also appearing by video link
Income tax – Penalties – Appellant opted for paperless contact – HMRC sent emails alerting to new documents posted to appellant's online account – Appellant's assumption that HMRC's emails were spam – Failure to file – Whether notice to file given to appellant in accordance with TMA 1970, s. 8 – Yes – Whether penalties correctly served – Yes – Whether need to consider notice given under the authority of an officer of HMRC – No – Whether reasonable excuse – No – Whether there were special circumstances – No – Appeal dismissed – FA 1999, s. 132, 133 – Income and Corporation Taxes (Electronic Communications) Regulations 2003 (SI 2003/282) – FA 2009, Sch. 55.
The First-tier Tribunal (FTT) dismissed a taxpayer's appeal against late filing penalties, finding that as the taxpayer had consented to paperless contact, HMRC could send all notices to the taxpayer's online account.
The appellant (Mr Smith) had consented to paperless contact with HMRC. This meant that rather than HMRC sending letters by post to him, HMRC posted notices on his online personal tax account and sent emails advising him when a new message had been posted to his online account.
HMRC posted a notice to file a 2016–17 tax return to Mr Smith's online account and sent an email saying that a new message had been posted to the account. Mr Smith was not expecting to have to file a return, based on a conversation he had with HMRC's helpline that he did not need to file a return after he stopped being a director, and assumed the message was spam and deleted it, and did not look at his online account. He did the same with several further emails, until HMRC finally sent him a letter telling him that he had incurred £1,300 of late filing penalties. These comprised an initial £100 penalty, daily penalties of £900 and a £300 6 month penalty.
Mr Smith appealed against the penalties on the grounds that the notice to file had neither been “given” to him, nor given to him “by an officer of the Board”, as required by TMA 1970, s. 8.
The FTT gave permission for Mr Smith to make his appeals out of time having considered the three stage approach in Martland v R & C Commrs [2018] BTC 525. The FTT found that while the delay was both serious and significant, it was outweighed by other factors.
The FTT decided that in accordance with FA 1999, s. 132 and 133 and the Income and Corporation Taxes (Electronic Communications) Regulations 2003 (SI 2003/282 or “EComms Regs”), reg. 5, information delivered to Mr Smith's online account and notified to his email account was deemed to have been “given” to him by HMRC.
The FTT also considered whether the penalties were correctly served and, disagreeing with Judge Thomas in Armstrong [2018] TC 06606, found that the delivery by HMRC of the penalty notices to Mr Smith's online account met the necessary statutory condition in FA 2009, Sch. 55, para. 18 that they had “notified” him of the penalty. Unlike Judge Richards, the FTT had no hesitation in finding that by consenting to “paperless” communication a taxpayer has agreed to receive all statutory notices, including penalties, by that route.
The FTT noted that for daily penalties to be imposed under FA 2009, Sch. 5, para. 4, HMRC must give notice to the taxpayer “specifying the date from which the [daily] penalty is payable”. However the E Commrs Regs do not state that the notice required under para. 4 can be given by being posted to an online account. The FTT referred to Donaldson v R & C Commrs [2016] BTC 28, which held that the Sch. 5, para. 4 requirement was satisfied in that case because the date from which the daily penalty was payable was set out in the £100 penalty notice, and that constituted the provision of “notice”. As the FTT found that the wording of the £100 penalty notice posted to Mr Smith's online account, was identical to the penalty notice given to Mr Donaldson, the “notice” required by Sch. 5, para. 4 was therefore contained within the £100 penalty notice, and that document is covered by the EComms Regs. As a result, there was no need for the EComms Regs to contain a reference to Sch. 5, para. 4.
The FTT also found that the notice to file had been issued by an officer of the Board, on the basis set out in the recent Upper Tribunal judgment in the joined cases of Rogers & Shaw [2020] BTC 533. In that case it was held that a notice to file does not have to be issued by an identifiable officer, but just given “under the authority of an officer of HMRC”.
Mr Smith also submitted that he had, in any event, a reasonable excuse for not filing his return by the due date because his belief that the email messages were spam was objectively reasonable.
The FTT found that it was reasonable for Mr Smith to believe he did not have to file a return in 2016–17, and that this only changed when he found out about the high income child benefit charge (HICBC) in October 2018. But it did not follow from this conclusion that Mr Smith had a reasonable excuse, because the FTT also had to consider his other actions, or failures to act.
The FTT also found that Mr Smith had not acted reasonably in deleting the email which alerted him to the notice to file without reading it. As a result, the FTT found that he did not have a reasonable excuse for failing to file his return by the due date.
The FTT rejected Mr Smith's submission that the penalties were disproportionate and should therefore be reduced because of special circumstances under FA 2009, Sch. 55, para. 16. This was in reliance of Edwards v R & C Commrs [2019] BTC 516.
Mr Smith's appeal was dismissed, and the penalties confirmed.
The taxpayer had signed up to paperless contact with HMRC. However, he assumed that the emails he got from HMRC telling him that he had new documents on his online account were spam and simply deleted them. The emails were directing the taxpayer to look at his online account, to which HMRC had added a notice to file and then subsequent late filing penalty notices.
Just as taxpayers should not ignore letters from HMRC, those taxpayers that have signed up to paperless contact should not ignore emails. Even if there is an understandable wariness of spam, the process is designed to limit this by not asking taxpayers to click on a link in the email, but to instead separately login to their online account.
[1] This was Mr Smith's appeal against penalties totalling £1,300 for filing his 2016–17 self-assessment (“SA”) tax return on 29 October 2018, after the due date of 31 January 2018. The penalties were issued under Finance Act 2009, Schedule 55, as follows:
(1) a £100 fixed penalty;
(2) daily penalties of £900; and
(3) a six month penalty of £300
[2] HM Revenue and Customs (“HMRC”) have recently allowed taxpayers to consent to “paperless” communication, as a result of which instead of sending letters by post:
- they post documents on the taxpayer's personal tax account (online account) on HMRC's portal; and
- send an email to the taxpayer's email address, advising that a new message has been posted to his online account, which could be viewed by logging into that account.
[3] Mr Smith had consented to paperless filing. On 6 April 2017, HMRC posted a Notice to File to his online account, and sent Mr Smith an email saying that a new message had been posted to on that account.
[4] However, Mr Smith did not expect to receive communications from HMRC because he had understood from a conversation with their helpline that he would not have to file a tax return. He assumed the email message received on 6 April 2017 was spam, and deleted it. He made the same assumption, and took the same action, when he received subsequent email messages from HMRC. He did not access his online account. Finally, he received a letter from HMRC informing him that he had incurred penalties of £1,300.
[5] Mr Smith tried to appeal the penalties, but HMRC refused to accept the appeals because they were out of time. He applied to the Tribunal, asking for permission to make late appeals, and we gave that permission.
[6] His appeal against the penalties placed significant reliance on Taxes Management Act 1970 (“TMA”), s8, which requires that a Notice to File must be “given” to the taxpayer “by an officer of the Board”. Mr Smith submitted that this requirement was not satisfied because:
- the Notice had not been given to him; and
- it had not been issued by an officer of the Board.
[7] We decided that reg 5 of the Income and Corporation Taxes (Electronic Communications) Regulations 2003 (“the EComms Regs”) applied, with the result that information delivered to a taxpayer's online account was deemed to have been “given” to him by HMRC. We also found that the Notice had been issued by an officer of the Board, on the basis set out in the recent Upper Tribunal (“UT”) judgment in the joined cases of R & C Commrs v Rogers [2020] BTC 533 (“Rogers & Shaw”), a decision of Zacaroli J and Judge Richards.
[8] Mr Smith also submitted that he had, in any event, a reasonable excuse for not filing his return by the due date. For the reasons set out at paragraph 123ff we disagreed, and we refused his appeal.
[9] The legislation which applies in this case is set out in the Appendix. It is cited only so far as relevant to the issues raised by the appeal.
[10] Mr Smith asked for permission to make late appeals against the penalties. He said he had been unable to appeal against any of the penalties within the 30 day time limit because he had not realised they had been issued; this was because he had assumed HMRC's emails were spam. He pointed out that once he had realised what had happened, he acted straight away, first contacting HMRC...
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