Spacia Grocers (A Partnership); Mughal
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 June 2018 |
| Neutral Citation | [2018] UKFTT 344 (TC) |
| Date | 23 June 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0344 (TC)
Judge Christopher McNall
Mr Mughal appeared on behalf of the appellants
Mr Barry Sellers, Appeals Litigator, appeared for the respondents
Income tax – Partnership and Individual Partner – Late Payment Penalties – Daily penalties – FA 2009, Sch. 55 – Perrin v R & C Commrs [2018] BTC 513 – Burgess; Brimheath Developments Ltd v R & C Commrs [2015] BTC 533 – Islam (t/a Zainub Takeaway) [2017] TC 05814 – Sudall [2017] TC 05868 – Halfaoui [2018] TC 06292 – Donaldson v R & C Commrs [2016] BTC 28 – Clarks of Hove Ltd v Bakers' Union [1978] 1 WLR 1207.
The appellant concerned late payment penalties and daily penalties. HMRC failed to evidence the notice or daily penalties and those penalties were quashed. Other penalties upheld as no reasonable excuse.
The Appeal was against penalties under FA 2009, Sch. 55 in relation to a partnership and the partners failures to submit annual self-assessment returns for the year ending 5 April 2011 on time.
The Tribunal noted that before the consideration of any reasonable excuse the initial burden lies on HMRC to establish that events have occurred because of which a penalty is due. Sufficient evidence is required to prove the relevant facts relating to the lawful imposition of a particular penalty on the balance of probabilities.
HMRC had provided evidence being internal print-outs indicating that correspondence and documents were sent out to the Appellants. That evidence did not establish what the content of those documents was, nor whether appropriate notice that daily penalties would be charged. HMRC had failed to establish that the daily penalties were imposed following the giving of the notice required by Sch. 55, para. 4(1)(c). The daily penalties were quashed.
The Tribunal considered whether either Appellant had a reasonable excuse for the late filing. A reason provided set out that the accountants who had acted for the Appellants since 1980, had ceased work in February 2011. The Accountants had done so because costs had not been paid for work done since August 2005. The Accountants had refused to return client records. The Appellant had prepared their own return although did not realise the need for a partnership return. The Appellant admitted total confusion. The Tribunal found there was no reasonable excuse for the late filings.
The case closely follows Moulsdale (t/a Moulsdale Properties) [2018] TC 06539, which also found HMRC's evidence to support penalties lacked substance. When corresponding with HMRC on penalties, it may be prudent to request they provide evidence for daily penalties.
[1] Mrs Mughal and her husband, Mr Mughal, have been trading in partnership as “Spacia Grocers” in Ellesmere Port since 1998.
[2] These are two appeals, each made by way of Notices of Appeal dated 29 November 2012, and directed to be heard together. They are brought against penalties amounting to £730 imposed on Mrs Mughal and amounting to £1300 imposed on Spacia Grocers (the Partnership) under Schedule 55 of the Finance Act 2009 in relation to their respective failures to submit annual self-assessment returns for the year ending 5 April 2011 on time. I set out the relevant legislation in the Appendix.
[3] Insofar as either appeal was filed out of time, I extend the time of my own initiative to 29 November 2012.
[4] The penalties that have been charged against Mrs Mughal are as follows:
- An individual tax return late filing penalty of £100, issued pursuant to paragraph 3 of Schedule 55 of the 2009 Act;
- Daily penalties totalling £630 (being a daily penalty of £10 multiplied by 63 days) issued pursuant to paragraph 4 of Schedule 55 of the 2009 Act;
[5] The penalties that have been charged against the Partnership are as follows:
- An individual tax return late filing penalty of £100, issued pursuant to paragraph 3 of Schedule 55 of the 2009 Act;
- Daily penalties totalling £900 (being a daily penalty of £10 multiplied by 90 days) issued pursuant to paragraph 4 of Schedule 55 of the 2009 Act;
- A 6 month late filing penalty of £300 issued pursuant to paragraph 5 of Schedule 55 of the 2009 Act.
[6] The filing dates for the year ending 5 April 2011 were 31 October 2011 for a non-electronic (paper) return and 31 January 2012 for an electronic return.
[7] Mrs Mughal's individual self-assessment return was filed online on 3 July 2012.
[8] The Partnership's self-assessment return was filed in paper copy on 27 July 2012.
[9] Both returns were therefore late.
[10] The Partnership's return was more than six months late.
[11] These are penalty appeals. Therefore, and before any question of reasonable excuse can come into play, it is important to remember that the initial burden lies on HMRC to establish that events have occurred as a result of which a penalty is, prima facie, due. Mere assertions in Statements of Case or at the hearing by Presenting Officers are not sufficient. Evidence is required, and, unless sufficient evidence is provided to prove the relevant facts relating to the lawful imposition of a particular penalty on the balance of probabilities, then that penalty must be cancelled without any question of “reasonable excuse” becoming relevant: see the discussion in the decision of the Upper Tribunal (Judges Herrington and Poole) in Perrin v R & C Commrs [2018] BTC 513 at [69].
[12] HMRC have produced evidence, in the form of print-outs from their computer systems, that on 6 April 2011 they sent both Mrs Mughal and the Partnership notices under section 8 of the Taxes Management Act 1970 requiring each of them to file a self-assessment return for that tax years in question.
[13] HMRC bear the burden of proving that such notices were sent. It is not disputed that those notices were...
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