Gladders v HM Inspector of Taxes  [2003] UKSC SPC00361 (27 February 2003)

PENALTY AND SURCHARGE – late filing of returns and payment of tax –  taxpayer objecting to taxation on grounds that it was spent on war – whether reasonable excuse – no – whether any Human Rights Act defence applies – no

THE SPECIAL COMMISSIONERS

	STEPHEN R. A.  GLADDERS	Appellant

	- and -

	RAYMOND J PRIOR
	(HM INSPECTOR OF TAXES)	Respondent

		Special Commissioner:	DR JOHN F AVERY JONES CBE

Sitting in public in London on 14 February 2003

The Appellant did not appeal and was not represented

Mrs K. M. O’Neill, HM Inspector of Taxes for the Respondent

© CROWN COPYRIGHT 2003

DECISION

1.	Mr Stephen Gladders appeals against penalties of £100 for late filing of returns for the years ended 5 April 1998 and 5 April 2000 both of which were filed on 17 May 2001, plus two surcharges each of 5 per cent for the year 1997/98 and one for 1999/00 which were both paid in full on 28 June 2001.
2.	Mr Gladders gave notice that he would not attend but he provided a written submission.  Mrs O’Neill for the Respondent provided me with a skeleton argument, a copy of her oral submission and two bundles of documents.
3.	In relation to the surcharges, section 59C of the Taxes Management Act 1970 provides:
“(1) This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with section 55 or 59B of this Act.
(2) Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid tax.
(3)  Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent of the unpaid tax.
(5) An officer of the Board may impose a surcharge under subsection (2) or (3) above;…
(7) An appeal may be brought against the imposition of a surcharge under subsection (2) or (3) above within the period of 30 days beginning with the date on which the surcharge is imposed.
(8) Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (7) above as they have effect in relation to an appeal against an assessment to tax.
(9) On an appeal under subsection (7) above section 50(6) to (8) of this Act shall not apply but the Commissioners may—
(a)	if it appears to them that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax, set aside the imposition of the surcharge; or
(b)	if it does not so appear to them, confirm the imposition of the surcharge.
(10) Inability to pay the tax shall not be regarded as a reasonable excuse for the purposes of subsection (9) above.
(11) the Board may in their discretion—
(a)	mitigate any surcharge under subsection (2) or (3) above; or
(b)	stay or compound any proceedings for the recovery of any such surcharge,
and may also, after judgment, further mitigate or entirely remit the surcharge.
(12) In this section—
‘the due date’, in relation to any tax, means the date on which the tax becomes due and payable;
‘the period of default’, in relation to any tax which remained unpaid after the due date, means the period beginning with that date and ending with the day before that on which the tax was paid.”
4.	In relation to the penalties, section 93 of the Taxes Management Act 1970 provides:
“(1) This section applies where—
(a)	any person (the taxpayer) has been required by a notice served under or for the purposes of section 8 or 8A of this Act (or either of those sections as extended by section 12 of this Act) to deliver any return, and
(b)	he fails to comply with the notice.
(2) The taxpayer shall be liable to a penalty which shall be £100.
…
(8) On an appeal against the determination under section 100 of this Act of a penalty under subsection (2) or (4) above, neither section 50(6) to (8) of this Act nor section 100B(2) of this Act shall apply but the Commissioners may—
(c)	if it appears to them that, throughout the period of default, the taxpayer had a reasonable excuse for not delivering the return, set the determination aside; or
if it does not so appear to them, confirm the determination.”
5.	The issue is accordingly whether the Appellant has a reasonable excuse throughout the period of default for the late returns and payments.  His written submission starts with an objection that he is not entitled to free legal advice.  He then goes on: 
“From my own perspective, I am not a non believer in taxation per se.  I am specifically a non believer in direct taxation for many reasons, the majority of which I will not impose upon this tribunal.  The two basic reasons why I cannot believe in it are because I personally feel it is directly opposed to an individual’s freedom and has been used by successive Governments to suppress its populace and force tyranny upon it.  Moreover it was unilaterally introduced (i.e. it was made law without prior consultation with the electors, or being part of any manifesto, nor has it been ever since) as a direct method of raising monies for the propagation of war.  The introduction of direct taxation heralded a fundamental sea change in the Government’s relationship with its electorate.  It was the turning point at which the very nature of democracy changed and Government became the tyrannical master of its electorate rather than the electorates’ servant.  We have been slaves ever since.”
He goes on to make a number of points about the Human Rights Convention.
6.	Mrs O’Neill contends that, while she respects the Appellant’s right to hold his political views, they do not amount to a reasonable excuse.
7.	A reasonable excuse for not filing returns or paying tax on time is something outside the person’s control that would prevent a reasonable man from complying, such as illness.  The Appellant’s political beliefs do not relate to the delay in filing his returns or paying his tax.  I find that they do not amount to a reasonable excuse.
8.	I should add that I do not consider that the Appellant is disadvantaged in putting forward a reasonable excuse without legal advice.  I have often seen taxpayers win VAT appeals on the ground of reasonable excuse without the benefit of legal advice.
9.	I turn to the human rights aspect.  The Appellant’s main points seem to be that the Human Rights Convention fails to prevent the state from levying taxes.  A similar claim to the Appellant’s was refused in Oxley v Raynham 54 TC 779 but that was before the Human Rights Act 1998.  It is my duty as a public authority to apply that Act.  It seems to me that there are two possible arguments which the Appellant could put forward: first that the tribunal not having the power to mitigate the penalty or surcharges is contrary to his right to a fair trial under article 6, and secondly that the penalty and surcharge is contrary to article 1 Protocol 1.
10.	On the first point I said this in Bancroft v Crutchfield [2002] STC (SCD) 347, 350f:
“…as a result of Ferrazzini v Italy (Application No.44759/98) [2001] STC 1314 tax and normal interest on tax is not a matter within the taxpayer’s “civil rights and obligations” so as to be protected by article 6.  It is common ground that the penalty in this case is not sufficiently serious to constitute a criminal charge within article 6(2).  Is there a category of non-criminal penalties that relate to paying tax late that are within “civil rights and obligations” even though the tax itself is not?  The parties did not put forward anything to support the existence of such a category and nor have I been able to find anything myself.  I notice that in Ferrazzini itself there was a penalty (paragraph 12 of the judgment) but the judgment makes no distinction between the tax and the penalty.  Most of the cases listed in Philip Baker’s article Taxation and the European Convention on Human Rights [2000] BTR 211 also concern both taxation and the penalty.  However, in WS v Poland (Application No.37607/97) where a small penalty for wrong accounting entries in relation to tax (but not the tax) was in issue the court found that the proceedings were inadmissible on the ground that the penalty was not a criminal one.  I consider therefore that proceedings about the surcharge in this case which is closely related to the tax itself, being an automatic surcharge on the amount of the tax imposed for late payment of the tax, do not relate to the Appellants’ civil rights and obligations and so are not protected by article 6.
11.	For the same reasons I find that the same applies in this case to the penalty as well as the surcharge.  Article 6 does not help the Appellant.
12.	Article 1 of Protocol 1 to the Human Rights Convention provides:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by law…
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
13.	Mrs O’Neill contends that the second paragraph applies.
14.	I agree.  This is a case of the state enforcing such laws as it deems necessary to secure the payment of taxes or penalties.
15.	Accordingly I dismiss the appeal and confirm the penalties and surcharges.

J F AVERY JONES

SPECIAL COMMISSIONER

SC 3003/02