Tillzane Scaffolding Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 September 2019 |
| Neutral Citation | [2019] UKFTT 575 (TC) |
| Date | 12 September 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 575 (TC)
Judge Nigel Popplewell
Mr Phil Davies of Spot-On Accountancy appeared for the appellant
Mr Joel Price, Officer of HM Revenue & Customs, appeared for the respondents
Corporation tax – Penalties for late filing of company tax returns – Insufficient evidence that HMRC had given proper notice to file the returns under FA 1998, Sch. 18, para. 3 – Appeal allowed – FA 1998, Sch. 18, para. 17, 18.
The First-tier Tribunal (FTT) allowed a company's appeal against penalties for late filing of company tax returns. The FTT found that HMRC's computer records were insufficient to prove that valid notices to file had been issued, and therefore no penalties could be charged.
Tillzane Scaffolding Ltd (the appellant or the company) submitted company tax returns on 22 August 2018 for three accounting periods ending on 28 July 2016, 31 July 2017 and 31 July 2018. HMRC sent the company penalty notices in relation to the apparent late filing of the three tax returns pursuant to FA 1998, Sch. 18, para. 17 and 18. The company appealed against the penalties.
On the issue of whether valid notices to file had been issued, neither the company's owner/manager nor the company's tax adviser could recall whether they had or had not received any notices. Given the lack of admission that notices to file had been received it was for HMRC to establish that notices had been given to the company. HMRC supplied computer printouts which they submitted evidenced that notices to file had been given.
Judge Popplewell referred to the decisions of Platt [2019] TC 07131 and Griffiths [2019] TC 07239, which had dealt with individual tax returns rather than company tax returns. Although not bound by the decisions he found the sentiments of the judges in both cases, concerning the importance of primary evidence, and the difficulty of inferring, from the primary evidence, that a taxpayer had been given a valid notice to file, were just as relevant to the giving of notices to file a company tax return as they were to the giving of notices to file an individual tax return.
Judge Popplewell found that as in Platt and Griffiths, from the evidence put forward by HMRC he was unable to infer that notices to file returns had been served. He found that:
- the printouts did not provide evidence of the nature of the actual documents which might have been sent to the appellant, HMRC did not provide any witness evidence on the point, nor did they provide any evidence of system;
- the printouts might have reflected the giving of notices to file a company tax return, but there was nothing to link the printouts with any actual notices;
- the printouts did not show whether any notices had been given by an officer of HMRC;
- the printouts did not give any indication of what information was sought by any of the notices; and
- the Tribunal could not infer from the printouts that any notices requiring the company to file a tax return had specified the period to which the notices related.
The FTT went on to consider whether the legislation on voluntary returns in FA 1998, Sch. 18, para. 20A (introduced by FA 2019, s. 87) could assist HMRC. Judge Popplewell was not wholly convinced that the legislation was intended to operate to cure defective notices to file. But if para. 20A did apply, Judge Popplewell was not sure it assisted HMRC. This was because the deeming provision would defer the date the notices to file were issued to the date they were received, so no penalties could have arisen.
The FTT allowed the appeal.
This case provides a useful reminder that in penalty appeals HMRC have the burden of proving that the penalties have been correctly issued. Neither the company's owner/manager nor its accountant recalled receiving notices to file, so it was for HMRC to prove that the notices had been issued. As has been the position of the FTT in several recent cases it was not willing to infer from HMRC's computer printout that notices to file had been issued. The FTT also considered the voluntary returns legislation introduced by FA 2019 but found this to be of no assistance to HMRC.
[1] This appeal concerns the imposition on the appellant (or the “company”) of penalties (the “penalties”) assessed under Schedule 18 to the Finance Act 1998 (“schedule 18”), for failing to file tax returns on time for three accounting periods (the “periods under appeal”). The periods and penalties are as follows:
- A flat rate penalty of £200 for the accounting period ending 28 July 2016;
- A tax related penalty of £1705.36 for the accounting period ending 28 July 2016;
- A flat rate penalty of £200 for the accounting period ending 31 July 2016; and
- A flat rate penalty of £500 for the accounting period ending 31 July 2017.
[2] The appellant's appeal was brought only in respect of the first three of these penalties, but HMRC are content that the appeal may be extended to include the £500 penalty, and I direct that the appeal is so extended.
[3] For reasons given later in this decision, I have decided that:
- HMRC have failed to establish that valid notices requiring the company to file a company tax return for the periods under appeal was served on or given to it.
- If the provisions of paragraph 20A of Schedule 18 apply, then the notice to require the company to deliver the company tax returns to HMRC was only given to it on 22 August 2018, and so the returns, having been given to HMRC on that date, were not made late.
[4] Under paragraph 17 of Schedule 18, a company which is “required” to deliver a company tax return and fails to do so by the filing date is liable to a fixed rate penalty of (basically) £100 if the return is less than three months late or £200 if later.
[5] A tax related penalty under paragraph 18 of that schedule can also be visited on a company which is required to deliver a company tax return for an accounting period and fails to do so. That penalty is 10% of the unpaid tax if the return is delivered within two years after the end of the period for which the return is required and 20% of the unpaid tax in any other case.
[6] A company is required to deliver a company tax return if an officer of Revenue and Customs has, by notice, required the company to so deliver a return (paragraph 3 of Schedule 18).
[7] Under paragraph 14 (1) of Schedule 18, the...
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