Wood
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 February 2018 |
| Neutral Citation | [2018] UKFTT 74 (TC) |
| Date | 13 February 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0074 (TC)
Judge Nigel Popplewell, Will Silsby
The appellant appeared in person.
Miss L Morgan, Officer of HM Revenue & Customs appeared for the respondents.
Income tax – Individual tax return – Penalties for late filing – Whether giving notice under TMA 1970, s. 8(1) a prerequisite for filing a tax return under s. 8(1)(a) – Yes – If no such notice given can FA 2009, Sch . 55 apply – No – On the facts no notice given – Appeal allowed.
The First-tier Tribunal (FTT) allowed a taxpayer's appeal against personal tax return late filing penalties, holding that the taxpayer had not received notices from HMRC to file the personal tax returns and such notices were a prerequisite to late filing penalties.
Mr Wood (the appellant) submitted several personal tax returns after the relevant filing dates. HMRC issued late filing penalties purportedly under FA 2009, Sch . 55.
In the FTT's view where HMRC do not give a taxpayer a notice to file a return, there can be no late filing penalties assessed under Sch . 55. This is so even if the taxpayer files a return, because unless a return is made in response to a notice to file the return cannot be made under TMA 1970, s. 8(1)(a), and for Sch . 55 to be engaged for a personal tax return HMRC have to show that a taxpayer has failed to deliver a return under s. 8(1)(a).
HMRC submitted that they had given the appellant notices to the file the returns. But the FTT found that HMRC had not shown that a proper notice containing the information required by s. 8 had been sent to the taxpayer. By HMRC simply providing a computer record with the words “Notice to File” included did not, in the FTT's view, discharge HMRC's evidential burden of establishing that a notice complying with s. 8 had been sent.
Given that the FTT had held that the giving of such notices was a pre-requisite for the engagement of Sch . 55, the FTT decided that the taxpayer's appeal had to be allowed.
The FTT accepted that had the documents been TMA 1970, s. 8 compliant notices, they were “given” to the appellant. They were sent in a properly addressed pre-paid envelope, to the appellant at his usual or last known place of residence and the appellant was unable to prove the contrary.
The FTT also found that: the taxpayer did not have a reasonable excuse; there were no special circumstances; if HMRC had been able to assess penalties the daily penalties had been assessed correctly; and the penalties were not disproportionate.
As the FTT noted, it may be reasonably commonplace for a taxpayer to submit a return without having received a notice to file. For example an individual may submit a return knowing that they have a source of income which needs to be returned, but having not notified their chargeability to HMRC.
[1] The appellant appeals against late filing penalties under Schedule 55 Finance Act 2009 (“late filing penalties”), in a total amount of £3,400.
[2] Details of the late filing penalties are set out below:
| Tax Year | Penalty | Amount |
| 2015/2016 | Late filing penalty | £100.00 |
| 2014/2015 | Late filing penalty | £100.00 |
| Daily penalties | £900.00 | |
| 6 months late filing penalty | £300.00 | |
| 12 months late filing penalty | £300.00 | |
| 2013/2014 | Late filing penalty | £100.00 |
| Daily penalties | £900.00 | |
| 6 months late payment penalty | £300.00 | |
| 12 months late payment penalty | £300.00 | |
| 2010/2011 | Late filing penalty | £100.00 |
[3] The law imposing late filing penalties is in Schedule 55 Finance Act 2009 and in particular paragraph 1, paragraph 3 (initial penalty of £100.00), paragraph 4 (daily penalties) and paragraphs 5 and 6 (fixed or tax geared penalty after 6 and 12 months respectively).
[4] Paragraph 1(1) of Schedule 55 states that:
a penalty is payable by a person (“P”) where P fails to make or deliver a return, or to deliver any other document, specified in the Table below on or before the filing date
[5] The Table referred to is in paragraph 1(5). It specifies an income tax return as being a return under section 8(1)(a) of the TMA.
[6] Under section 8(1):
For the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, and the amount payable by him by way of income tax for that year, he may be required by a notice given to him by an officer of the Board–
- to make and deliver to the officer, a return containing such information as may reasonably be required in pursuance of the notice …
[7] HMRC must go through different procedural hoops to notify, properly, each type of late filing penalty. Most importantly, daily penalties cannot be imposed unless HMRC decide that such a penalty should be payable and also give notice to the taxpayer specifying the date from which the penalty is payable (paragraph 4(1)(c) of Schedule 55).
[8] By contrast, there are no such qualifications for the initial penalty of £100 or the fixed or tax geared penalties after 6 and 12 months.
[9] If the imposition of the penalties is procedurally correct, both the respondents and this Tribunal have power to cancel them, if they think that the appellant has a reasonable excuse; or reduce them if either HMRC consider that there are special circumstances, or that the Tribunal believes that HMRC's decision not to reduce for special circumstances is flawed.
[10] The test of reasonable excuse is set out below. An insufficiency of funds is not a reasonable excuse unless attributable to events outside the taxpayer's control.
[11] Special circumstances do not include the ability to pay.
[12] The test we adopt in determining whether the appellant has a reasonable excuse is that set out in Clean Car Co Ltd [1991] BVC 568, in which Judge Medd QC said:
The test of whether or not there is a reasonable excuse is an objective one. In my judgment it is an objective test in this sense. One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do?
[13] Although the Clean Car case was a VAT case, it is generally accepted that the same principles apply to a claim of reasonable excuse in direct tax cases.
[14] Indeed, in the First-tier Tribunal case of Barrett [2015] TC 04514 (a case on late filing penalties under the CIS) Judge Berner said:
The test of reasonable excuse involves the application of an impersonal, and objective, legal standard to a particular set of facts and circumstances. The test is to determine what a reasonable taxpayer in the position of the taxpayer would have done in those circumstances, and by reference to that test to determine whether the conduct of the taxpayer can be regarded as conforming to that standard.
[15] Under section 115 TMA:
Any notice or other document to be given, sent, served or delivered under the Taxes Acts may be served by post, and, if to be given, sent, served or delivered to or on any person by HMRC may be so served addressed to that person … at his usual or last known place of residence, or his place of business or employment …
[16] Under section 7 of the Interpretation Act 1978:
Where an Act authorises or requires any document to be served by post (whether the expression “serve” or the expression “give” or “send” or any other expression is used) then, unless the contrary intention appears, the service is to be deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be...
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