First-tier Tribunal (Tax)

[2010] UKFTT 221 (TC)

TC00522

Appeal number: TC/2009/15404

INCOME TAX : Surcharge - Late payment of income tax - Whether HMRC gave an undertaking not to charge penalties – no – no reasonable excuse for defaults – section 59C Taxes Management Act 1970

FIRST-TIER TRIBUNAL

TAX

                                      MRS CHERIE SMITH                            Appellant

                                                                      - and -

                           THE COMMISSIONERS FOR HER MAJESTY’S

                               REVENUE AND CUSTOMS (Income Tax)          Respondents

                        TRIBUNAL: Helen Myerscough ACA, ATII (TRIBUNAL CHAIRMAN)                                                                                                           

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 2010

DECISION

1.       This decision relates to an appeal by Mrs Smith (the Appellant) against the imposition of penalties for failure to pay her income tax by the due date.  The appeal was allocated to the default paper track, and I have reached my decision solely on the basis of written submissions made by Mr Philip Adkins (Mrs Smith's representative) and Philip Doherty (an officer of HMRC). I originally issued my decision on 22 March 2010 in summary form.  Mrs Smith wishes appeal against my decision, and in accordance with Rule 39 of the Tribunal's Rules, I am required to reissue my decision with full reasons.  Accordingly I now make this decision.

2.       Mrs Smith was chargeable to tax in the year ended 5 April 2006.  In accordance with Section 7 TMA 1970, Mrs Smith was required to notify HMRC by 5 October 2006 that she was chargeable to tax. On 17 September 2008, HMRC issued a tax return for the year ending 5 April 2006 with a filing date of 24 December 2008.

3.       Section 59B(3) Taxes Management Act 1970 provides that where a taxpayer has notified HMRC that they have income or capital gains to return (in accordance with s7 Taxes Management Act 1970) within 6 months from the end of the tax year, but HMRC have not issued the taxpayer with a tax return (or notice to file a tax return) by 31 October - the tax is due three months after the notice to file a tax return has been given. In every other case where tax is self-assessed, the tax is due and payable on 31 January following the year of assessment (s 59B(4)). In this case the tax was therefore due on 31 January 2007 (I have noted that the HMRC statement of case refers to the tax being due on or before 31 January 2006, but I have assumed that this is a typographical error, and that the tax was due on or before 31 January 2007). 

4.       Section 59C(2), Taxes Management Act 1970 applies a surcharge "where any of the tax remains unpaid on the day following the expiry of 28 days from the due date …"  Section 59C(3) applies a further surcharge if the tax remains unpaid on the day following the expiry of 6 months from the due date. Section 59C(9) provides that on an appeal the Tribunal may set aside a surcharge in the event that (amongst other things) the taxpayer had a reasonable excuse for the default.

5.       After several corrections, the return was finally submitted on 2 December 2008.

6.       The tax due was paid on 15 October 2008.

7.       HMRC issued a surcharge notice on 3 April 2009 for the first and second surcharges relating to the period from 31 January 2007 (the due date) and 15 October 2008.

8.        Mr Adkins gave four grounds for appeal

(1)        A discretionary trust covered the tax issue

(2)        A notice of overpayment of tax was issued

(3)        A tax office pestered for money

(4)        The tax office moved and delayed matters

9.       In addition Mr Adkins states that there was a verbal agreement with Mr Steven Sunderland (an HMRC officer) that no penalties would be charged.

10.    None of the four grounds for appeal have any bearing on the question of whether the appellant filed her tax return and paid the tax shown in the self-assessment by the due date, or whether the appellant has a reasonable excuse for the defaults.  Any question relating to inappropriate conduct by HMRC is outside the jurisdiction of this tribunal, and is better referred to the Revenue Adjudicator.

11.    As regards any agreement that no penalties would be charged, the tribunal has considered the letter from Mr Adkins to HMRC dated 28 April 2009 in which Mr Adkins stated “It was agreed 6 months ago or more that penalties, or a surcharge would not be made by the Inspector Steven Sunderland”.  This would put the agreement on or before 28 October 2008.  We have reviewed the correspondence in detail and can find no reference to any such agreement.  There is no reference to any such agreement in Mr Adkins' letter of 10 November 2008 to Mrs Saysell of HMRC, Mr Sunderland wrote a long letter to Mr Adkins on 18 November 2008 (partially in response to Mr Adkins' letter of 10 November 2008) in which he goes through various issues in considerable detail – including the liability of the appellant to interest and late filing penalties.  If there had been any agreement for penalties or surcharges to be waived, we would have expected either that Mr Sunderland would have mentioned this fact in the letter (particularly given that the letter discusses the possibility of there being surcharges), or alternatively that Mr Adkins would have flagged the omission in a reply.  We find on the balance of probabilities that there was no agreement that HMRC would not levy penalties or surcharges.

12.    The appeal was therefore dismissed.

13.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

Helen Myerscough ACA, ATII

TRIBUNAL CHAIRMAN

RELEASE DATE: 18 May 2010