TC03145: Derren Urwin
| Jurisdiction | UK Non-devolved |
| Judgment Date | 16 December 2013 |
| Neutral Citation | [2014] UKFTT 4 (TC) |
| Date | 16 December 2013 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 004 (TC)
Presiding Member Peter R. Sheppard FCIS FCIB CTA AIIT
Income tax - Whether late payment of income tax, Yes. Whether reasonable excuse for late payment - Yes.
The First-tier Tribunal allowed the taxpayer's appeal against a surcharge for the late payment of income tax, finding that the penalty notice should be set aside because HMRC calculated the period of default incorrectly and the taxpayer had a reasonable excuse for the late payment of tax.
The taxpayer (U) normally paid tax by PAYE and did not usually receive a tax return to complete. If he over or underpaid tax in any year his tax code was adjusted for the difference. On 22 August 2012 HMRC sent U a tax return for 2009-10, on the basis that his income for the year was over 100,000. The notes on the return showed that the completed return needed to be received three months after the date of the notice (as HMRC take the date of delivery as no more than seven days after the date of issue the filing date was actually 29 November 2012), but no details were included about when the payment was required. U submitted his return on 28 January 2013 and paid the tax due of 8,595.79 in two tranches on 14 and 15 March 2013.
In the Tribunal's view the payment was required by 31 January 2011 (in accordance with TMA 1970, section 59B subsec-or-para 4s. 59B(4)) and this is the date HMRC used in the tax calculation they sent to U in February 2013, but in other documents, including their statement of case HMRC say the due date was 29 November 2012. Crucially HMRC calculated the penalty on what remained unpaid at 29 November 2012 which in the Tribunal's view meant that HMRC had taken the wrong date as the date payment was due and therefore the period of default was calculated incorrectly and the penalty notice should be set aside.
The Tribunal also found that U had a reasonable excuse for the late payment of tax, because:
(2) it was understandable that U did not realise that PAYE deductions by his employer had created a shortfall that could not be collected by an adjustment of his tax code;
(3) the law on when the payment was due was so complex that HMRC quoted two different dates and no prospective due date for payment was ever given to U; and
(4) it was impossible for U to pay his tax on time.
The Tribunal also commented that had they not already set aside the penalty they would have reduced it on the grounds that there were "special circumstances" under FA 2009, Finance Act 2009 subsec-or-para 9Sch. 56, para. 9.
The case provides a useful reminder to carefully check that any penalty notices and if errors have been made an appeal may be possible.
It is interesting that the Tribunal commentated that "it may be that the law is deficient in not adequately covering the situation the appellant was in", but given that this case was only heard in the Frist-tier Tribunal it is unlikely that we will see legislative changes as a result.
[1]This considers an appeal against a penalty of 429.78 levied by HMRC for the late payment of income tax of 8,595.79 for the year ending 5 April 2010.
[2]
Finance Act 2009 Finance Act 2009 schedule 56Schedule 56
Taxes Management Act 1970, in particular section 7sections 7, section 88, section 99, section 59B59B, section 59C59C and section 118118.
[3]
Rowland v R & C CommrsSCD(2006) Sp C 548
Wood (t/a Propave)TAX[2011] TC 01010
[4]The appellant normally paid tax by PAYE and did not usually receive a tax return for completion. If at the end of the tax year the appellant's payments under PAYE were either too little or too much his tax code was adjusted so that his PAYE deductions the following year adjusted for the difference. For the year 2009/10 HMRC say they will use this system providing the shortfall does not exceed 2,000. In respect of the tax year 2009/10 the shortfall for the appellant was 8,595.79. On 22 August 2012 HMRC sent the appellant a tax return for the year ending 5 April 2010. The return was required to be filed by 29 November 2012. The date payment was required is a matter of dispute and is discussed below.
HMRC say self assessment of tax is based on voluntary compliance. Taxpayers who are within the self assessment system must file their returns by the due date and pay the tax they owe by the date specified in law.
It is therefore important to establish the due date as specified in law
The Taxes Management Act 1970 (TMA) section 59B(3) states :-
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(3)In a case where the person-
(a) gave the notice required by Taxes Management Act 1970section 7 of this Act within six months from the end of the year of assessment, but
(b) was not given notice under Taxes Management Act 1970section 8 or Taxes Management Act 19708A of this Act until after 31 st October next following that year,
The Tribunal observes firstly that the year of assessment was the year ending 5 April 2010 and secondly that the appellant did not give any notice as required by section 7section 7, however he was not given notice under section 8section 8 or section 8A8A until after 31 st October next following that year.
Section 7(3) states
A person shall not be required to give notice under subsection (1) above in respect of a year of assessment if for that year his total income consists of income from sources falling within subsections (4) to (7) below and he has no chargeable gains.
Subsections (4) to (7) set out at length the various sources of income.
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...This is the second case released on 16 December 2013 where a penalty for late payment has been set aside, the other case being UrwinTAX[2014] TC 03145. In both cases although the notes accompanying the return were clear about the deadline for submitting the return, because the returns were ......
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Weekly Tax Update - Monday 13 January 2014
...the Tribunal considers that there were special circumstances in this case.' www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKFTT/TC/2014/TC03145.html&query=DERREN+and+URWIN&method=boolean 2 PRIVATE CLIENT 2.1 Inheritance Tax BPR and LLPs The CIOT, ICAEW and STEP have produced some ......