First-tier Tribunal (Tax)

[2010] UKFTT 80 (TC)

TC00392

Appeal number TC/2009/10836

Self assessment -Appeal against daily penalties charged for apparent non submission of returns – whether reasonable excuse for non receipt of returns ­- whether penalty excessive and whether penalty proportionate to tax liability - Taxes Management Act 1970 Section 100B (2)(iii)

FIRST-TIER TRIBUNAL

TAX

                                                 Mr Paul Frossell                                Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                        REVENUE AND CUSTOMS (income tax)    Respondents

                                    TRIBUNAL:  JUDGE MRS.S.M.G.RADFORD

The Tribunal determined the appeal without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First Tier Tribunal)(Tax Chamber) Rules 2009.

© CROWN COPYRIGHT 2009

DECISION

The Appeal

1.     This is an appeal against the daily penalties imposed by HMRC for non submission of income tax returns.

2.     The penalties were charged under Section 93(3) Taxes Management Act 1970.

3.     £280 was charged for the non submission of 2004/05 income tax return and £280 was charged for the non submission of the 2005/06 income tax return.

4.     The Appeal is submitted under Section 100 Taxes Management Act 1970.

5.     The Appellant stated that as he did not owe HMRC any tax the penalties charged were unfair and that in any event between 2004 and 2009 he submitted nine separate income tax returns to three different offices.

6.     HMRC replied to the Appellant stating that the amount of tax payable had no relevance as to whether the taxpayer was liable to daily penalties and that his records showed no evidence that completed tax returns had been received by them prior to the 2004/5 return being submitted on 12 January 2009 and the 2005/6 and 2006/7 returns being submitted on 16 January 2009.

7.     HMRC asked that the appeal be refused on the grounds that no reasonable excuse had been offered as to why the tax returns had not been submitted on time and that full and adequate notification had been given to the Appellant to make him aware that the returns were outstanding.

Background and facts

8.     The Appellant was issued with his 04/05 tax return on 07/07/05. It was received by HMRC on 10/01/06 but sent back to him as incomplete.

9.     His 05/06 tax return was issued to him on 06/04/2006.

10.  From then on regular statements were sent to him asking for the return of tax returns.

11.  Attempts were also made to phone him but initially no telephone number could be found. The Tribunal noted however that letters and notices were being sent to an address at Ffrith Farm whereas his address appears to be a flat in Llandudno.

12.  During the period from 7 July 2005 to 4 January 2009 HMRC apparently sent the Appellant seven separate reminders about the non receipt of the tax returns and twenty–one statements of account advising that estimates and fixed automatic penalties had been charged because of the non submission of the tax returns.

13.  On 25/07/07 a letter was sent to the Appellant at Ffrith Farm warning that unless the returns were submitted immediately penalties would be charged at up to £60 per day.

14.  On 25/10/07 telephone contact was made with the Appellant and he promised to submit the returns by 20/11/07. Duplicate returns were sent to him.

15.  On 11/12/07 a letter was issued to the Appellant informing him that daily penalties had been agreed by the Commissioners of HMRC and allowing a further 14 days for submission of the returns.

16.  On 04/01/08 a letter was issued to the Appellant informing him that further to the Commissioners of HMRC agreeing thereto, daily penalties would be charged for a period of 14 days at £20 per day.

17.  The Appellant states that between 2004 and 2009 he filed 9 separate tax returns and sent them to 3 different offices namely Bangor, Wrexham and Stockport and that he returned every tax return he was sent.

18.  Finally he filed on line and the relevant tax returns were received by the Respondents on 12 and 16 January 2009 respectively.

The Law

19.  Section 8 TMA 1970 states that 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…………to make and deliver a return containing such information as may reasonably be required…..

20.  Section 93 TMA 1970 applies where any person has failed to deliver any return and Section 93(3) states that on application made to them by HMRC, the General or Special Commissioners may direct that that person shall be liable to a penalty not exceeding £60 per day for each day on which the failure continues after which he has been notified of the direction.

21.  Section 100B 2(b)(iii) TMA 1970 states that if an appeal is brought against a penalty determination then if the amount appears excessive it may be reduced to such other amount (including nil) as is considered appropriate.

22.  In Austin v Price 2008 STC 1911 the Special Commissioner said “The penalty must be proportionate and in my view the amounts are excessive in relation to the tax liability”.

The findings

23.  HMRC did not address the question as to whether it was correct that the Appellant owed no tax and was in fact due a refund.

24.  In their statement of case HMRC did not confirm that they had specifically checked with Bangor, Wrexham and Stockport as to whether the 9 tax returns claimed by the Appellant to have been sent to these tax offices were indeed sent there but only stated that the relevant tax returns had not been received.

25.  There was no explanation in the papers as to why these 3 different tax offices were involved.

26.  The Tribunal found it significant that the returns were received when sent on line.

27.  There appeared to be some confusion about the correct address for the Appellant. He gives it as Flat 2, 12 Bodhyfryd Road, Llandudno but HMRC’s letters seem to have gone to Ffrith Farm. No contact was made by the bailiffs and few telephone calls seem to have reached him.

28.  In the absence of oral evidence by the Appellant the Tribunal had to rely on his written evidence which had a ring of truth about it and, giving the Appellant the benefit of the doubt,  found him to have a reasonable excuse for the non receipt of the returns.

29.  Whilst Special Commissioner decisions are not binding on the First Tier Tax Tribunal the Tribunal found the statement made by the Special Commissioner in Austin v Price significant.

30.  The Tribunal found that in the absence of a chance to hear oral evidence from HMRC they did not prove their case.

Decision

30. Having read the submissions of the Appellant and HMRC the Tribunal decided that the appeal should be allowed and that by virtue of Section 100B 2(b)(iii) the penalties should be reduced to nil.

The Respondent has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

TRIBUNAL JUDGE: MRS SMG RADFORD

RELEASE DATE: 22 January 2010