First-tier Tribunal (Tax)

[2010] UKFTT 265 (TC)

TC00559

Appeal number:  TC/2009/11979

FIRST-TIER TRIBUNAL

TAX

-and-

Sitting in public in Nottingham on 26 March 2010

Peter North of North Accountancy Services Limited for the Appellant

Philip Oborne, Higher Officer of  HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.                The Appellants carried on business in partnership at all material times.  The partnership was issued on 6 April 2008 with a notice requiring a partnership return to be made for the year ended 5 April 2008.  The due date for that return was 31 October 2008 (if filed in paper form) or 31 January 2009 (if filed online).

2.                Mr North of North Accountancy Services Limited was responsible for filing the return.  He initially intended to file the return online, but encountered problems with the software supposed to be used for this, and decided to file the return in paper form instead.  The Tribunal accepts his evidence that he telephoned HMRC’s helpline some time before the end of 2008 and asked whether late filing penalties could, as a general proposition, be avoided by ensuring that all tax due was paid by the due date; they confirmed this was the position.  Unfortunately he did not ask whether this advice applied specifically to partnership returns as he assumed the position for the two sorts of return was the same.  He was not able to provide a note of the conversation, or even the date on which it took place, which unfortunately meant HMRC were not able to trace any record of it.

3.                The Tribunal also accepts his evidence that he attended in person at HMRC’s local office on the last working day in January 2009 to file the return (along with a number of others) and again asked the same question, receiving the same reply.  Again, he did not ask specifically about the position of partnership returns as he assumed there was no difference between the rules for the two different sorts of return; and he did not show the individual returns to the desk officer, so it was not clear to that officer that partnership returns were involved.

4.                Under s 93A Taxes Management Act 1970 (“TMA”), each person who was a partner in the partnership at any time during the tax year 2007-08 becomes liable to a fixed penalty of £100 if the return is not filed on time.  HMRC duly imposed this penalty on each of the partners and after an unsuccessful request for a review of HMRC’s decision, both partners appealed to the Tribunal.

5.                Section 93A(6) TMA provides that any appeal must be brought by the representative partner, but no evidence was put before the Tribunal as to which of the partners was the representative partner (who should therefore have brought the appeal on his/her own).   No objection to the appeal on this ground was raised by HMRC and the Tribunal came to the view that in the circumstances no prejudice would be caused to either side by allowing the appeal to proceed.  Clearly one or other of the partners was the representative partner and the appeal was not based on any conduct on the part of either of the partners but on the conduct of Mr North; accordingly it was not material to the decision which of the partners was the representative partner.

6.                As a matter of law, there is no provision in s 93A TMA mirroring s 93(7) TMA in relation to personal tax returns (which provides that any penalty is limited to the amount of the tax paid late).  So notwithstanding the fact that the Tribunal accepts both partners paid their tax liabilities for 2007-08 on time, this provides no defence to a penalty under s 93A for late delivery of the partnership return.

7.                The only basis therefore on which the appeal can succeed is if it can be shown that the representative partner (or his/her successor) had a reasonable excuse for not delivering the return, throughout the period of the default (up to the day before the day on which the return was actually delivered).

8.                We fully accept that Mr North had an honest belief that, as long as the partners had all paid their tax liabilities by the due date, any penalty imposed for the late filing of the partnership return would be cancelled.  However he accepts he was not specifically told this by HMRC, he simply assumed it because they had given a general answer to a general question and he had assumed (based at least in part on the similarity between the individual and partnership tax return forms) that the same rules would apply to both sorts of return.  The Tribunal has some sympathy for Mr North, who came across as a credible witness who was very distressed by the situation, but unfortunately we cannot accept that the facts as shown give rise to a reasonable excuse.

9.                There was also some suggestion that the apparent cancellation of a penalty by HMRC in another similar situation involving a different client of Mr North’s should require them to cancel this penalty as well.  For the reasons set out in Express Agency v HMRC [2010]UKFTT 55 (TC), the Tribunal does not accept this suggestion.

10.            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.

TRIBUNAL JUDGE

RELEASE DATE: 14 June 2010