Solomon
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 May 2019 |
| Neutral Citation | [2019] UKFTT 305 (TC) |
| Date | 09 May 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 305 (TC)
Judge Richard Thomas
Income tax – Penalties for late delivery of tax return – Whether appellant knew that he had been registered for self-assessment – Held no, it had been done without his knowledge while he was abroad by the agency who had arranged a temporary teaching job and formed a personal service company for him – Whether reasonable excuse – Yes for initial penalty as he had no reason to have his post from HMRC monitored – Whether when reasonable excuse ceased after discussions with HMRC failure to file return was remedied within a reasonable time – Held no, but daily and six month penalties cancelled on other grounds – appeals allowed – FA 2005, Sch. 55.
The First-tier Tribunal (FTT) allowed a taxpayer's appeal against late filing penalties. Although the taxpayer's return had been submitted late: he had a reasonable excuse in respect of the initial penalty as he did not know that he had been registered for self-assessment and therefore had no reason to monitor post from HMRC; HMRC had not shown that the conditions for issuing the daily penalty had been met; and the 6 month penalty had incorrectly been issued automatically.
In March 2017 HMRC created a self-assessment record for Mr Solomon (the appellant) on the basis that he had registered for self-assessment by submitting a form SA1. In April 2017 the appellant was issued with a notice to file a 2016–17 personal tax return. On 6 April 2018 the appellant contacted HMRC and was made aware of accruing late filing penalties. As the appellant's electronic return, which was due on 31 January 2018, was not submitted until 23 August 2018, HMRC issued late filing penalties under FA 2009, Sch. 55 of:
- £100 for the initial failure under para. 3;
- £900 of daily penalties because the return was more than three months late under para. 4; and
- £300 because the return was more than 6 months late under para. 5.
The appellant appealed against all the penalties.
The FTT found that it was not the appellant who submitted the form SA1, but the agency who had found him a temporary school teaching job in 2016. It was also probably the agency that required the appellant to have a company set up to receive the remuneration from that job, and all interactions between the company and HMRC had been carried out by the agency and not by the appellant. When the appellant was registered for self-assessment and when the notice to file was issued the appellant was outside the UK working for Royal Caribbean.
The FTT also found that:
- it was legitimate for HMRC to require a return from the appellant;
- the notice to file was properly given to the appellant and he therefore had an obligation to make and deliver a return; and
- the appellant had failed to file the return by the due date.
But, while the FTT agreed with HMRC that a person who goes abroad should make arrangements to have their mail monitored for notices to file and other correspondence, the FTT disagreed that the appellant should have. A person only needs to have their post from HMRC monitored if they have reason to expect any, whereas a person whose only dealings with HMRC had been through PAYE did not have such a need, and as the appellant was unaware he had been set up for self-assessment, he had no reason to arrange for such monitoring.
Given that the appellant was unaware that he had been registered for self-assessment he had no reasons to expect that he would get a notice to file and therefore he had a reasonable excuse for his failure to file. The FTT cancelled the initial penalty of £100.
This excuse ended once the appellant had contacted HMRC on 6 April 2018 and as he did not remedy it within a reasonable time he did not have a reasonable excuse for his extended failure to file.
The FTT cancelled the daily penalties because HMRC had not produced either an SA reminder or SA 326D and so had not shown that the condition in FA 2009, Sch. 55, para. 4(1)(c) (that the taxpayer had been notified of the date from which daily penalties would become payable) had been complied with.
The FTT cancelled the 6 month penalty as it was issued automatically before the return was received without an officer of HMRC considering to the best of their knowledge and belief what the penalty should be, as is required by FA 2009, Sch. 55, para. 24(2).
In the alternative Judge Richard Thomas would have cancelled the daily and 6 month penalties holding that despite the appellant registering to receive HMRC notices digitally he did not consent to receiving penalty notices digitally (for the reasons why see Armstrong [2018] TC 06606 [69]–[86]).
The FTT cancelled all the penalties.
The FTT agreed with HMRC that in general a person who goes abroad should make arrangements to have their mail monitored for notices to file and other correspondence, but it found that this did not apply in this case because the taxpayer had no reason to expect any post from HMRC.
[1] This is an appeal by Mr Ryan Solomon (“the appellant”) against penalties of £1,300 assessed on him for his failure to deliver an income tax return for the tax year 2016–17 by the deadline.
[2] I set out below what the papers in the bundle I had show. I find as fact that that is what the documents say. I draw inferences from what is said and what the records show later.
[3] The appellant was, HMRC's records indicate, issued with a notice to file an income tax return for the tax year 2016–17 on 21 April 2017. That notice required the appellant to deliver the return by 31 October 2017 if filed in paper form or by 31 January 2018 if filed electronically (“the due date”).
[4] HMRC's records indicate that on 13 February 2018 they issued a notice informing the appellant that a penalty of £100 had been assessed for failure to file the return by the due date.
[5] HMRC's records indicate that on 2 August 2018 they issued a notice informing the appellant that a penalty of £900 had been assessed for failure to file the return by a date 3 months after the due date.
[6] HMRC's records indicate that on 14 August 2018 they issued a notice informing the appellant that a penalty of £300 had been assessed for failure to file the return by a date 6 months after the due date.
[7] The return was filed electronically on 23 August 2018.
[8] On 13 August 2018 the appellant notified an appeal to HMRC against all the penalties.
[9] On 4 October 2018 HMRC wrote to the appellant rejecting the appeals as being out of time and would not be treated as given. They informed him that he could request permission from the Tribunal to make a late appeal.
[10] On 13 November 2018 the appellant sent a notice of appeal to the Tribunal, including an application to notify a late appeal to HMRC.
[11] The appellant's self-assessment record was created on 7 March 2017 as HMRC say that the appellant registered for self-assessment on 6 March 2017 when he submitted the form SA1 “Registering for Self-Assessment and getting a tax return” digitally to HMRC. They enclosed a copy of a “proforma” SA1, ie not the actual one submitted nor a computer record of the actual entries.
[12] The appellant, HMRC say, had declared on the SA1 that he was a company director as of 31 October 2016. HMRC say that they enclosed an extract from their computer records showing when he registered and the reason why. This was an edited extract from the SA Notes that HMRC keep and it said:
8 07/03/2017 KANA SA1 received & processed on 06/03/2017. SA Record created automatically by CESA – Company Director – start date 31/10/2016.
At the far right of this entry under what is in a full set of SA Notes there is indicated as the maker of the note the abbreviation “AUTO”. There is no Pay Identification number of any officer.
[13] HMRC refer to other contacts from and on behalf of the appellant:
- A redacted SA Note made on 21 March 2018 says:tp mother tel in but no authority to speak. She adv son wont be home until 2 week in April so adv to call then. Works at sea with Royal Caribbean.
- A redacted SA Note made on 6 April 2018 says:Telin t/p re filing the return took t/p through to register PTA and GG t/p now waiting for the activation code, t/p to file return and is now off shore worker, advised can call when come to complete non-residence page for help.
- HMRC say their records show that on 6 April 2018 the appellant registered to receive HMRC correspondence to his secure inbox within his self-assessment online account, and that this had been verified by their Digital Communications specialist team. They exhibited a screenshot called Paperless Admin with a User Summary which gives the appellant's NINO and SA UTR and that he opted...
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...been included in the Bundles provided11As we explain at paragraph 62, we subsequently identified Armstrong [2018] TC 06606 and Solomon [2019] TC 07133, both decisions of Judge Thomas. We also considered Shaw [2018] TC 06547, which touches on this issue, see paragraph 63.; and Mr Smith acted......