First-tier Tribunal (Tax)

[2010] UKFTT 312 (TC)

TC00599

Appeal number: TC/2010/01269

Appeal against penalties for the late submission of monthly Construction Industry Scheme returns – whether there was a reasonable excuse

FIRST-TIER TRIBUNAL

TAX

                                                  GARY AUSTIN                                 Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

                        TRIBUNAL: Miss J. Blewitt (TRIBUNAL JUDGE)       

                                                Mr H. Middleton (MEMBER)

The Tribunal determined the appeal on 18^th June 2010 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 26^th January 2010,  HMRC’s Statement of Case submitted on 12^th March 2010 and the Appellant’s Correspondence dated 30^th October 2009 and 15^th December 2009 .

© CROWN COPYRIGHT 2010

DECISION

1.       This is an appeal by Mr Austin against the penalties imposed for the late submission of monthly Construction Industry Scheme (“CIS”) returns for the months ended 5 February 2008 to 5 August 2009 and 5 October 2009. As a result of the late submission of 20 monthly return periods, the Appellant incurred 140 separate fixed penalties totalling £15,100.00.

2.       The Appellant appealed by Notice dated 26 January 2010. The grounds of appeal state that the Appellant is dyslexic and as a new contractor had not been fully aware of his obligations under the Construction Industry Scheme. Mr Austin explained that he had told his initial accountant this and was advised not to worry as the accountant would manage his affairs. It transpired in April 2009 when the Appellant instructed a new firm of accountants that the accountant had not in fact dealt with any of the Appellant’s tax obligations. In December 2008 the Appellant suffered a suspected heart attack as a result of the stress and on his son’s advice instructed a third firm of accountants.

3.       The Tribunal also had the benefit of letters from the Appellant to HMRC, dated 30^th October 2009, 15^th December 2009 and 25^th January 2010 which clearly and concisely reiterated the grounds set out in the Notice of Appeal.  A further letter from the Appellant to the Tribunal Service, dated 4^th March 2010 was also provided for our consideration.

4.       The Tribunal carefully considered the written submissions of the Appellant. The Tribunal had no details as to the degree of the Appellant’s dyslexia, but accepted that it caused sufficient difficulty for the Appellant that it was reasonable for him to entrust his financial affairs to his accountant. That said, the Tribunal took the view that it did not absolve the Appellant from responsibility in ensuring his tax obligations were met. The Tribunal noted that the Appellant accepted he had not been fully aware of his obligations and in particular in his letter to HMRC dated 30^th October 2009 stated “I contacted my accountant who was meant to show me and my wife how to complete these forms, however, this never happened and was told not to worry about it.” The Tribunal found as a fact that the Appellant had failed to take any steps to familiarise himself with his obligations, whether in the form of advice from his accountant or by contacting HMRC.

5.       It was noted that the Appellant changed his accountant following a suspected heart attack in December 2008. The Tribunal did not have any further details as to the nature and degree of the Appellant’s ill health and in considering whether it amounted to a reasonable excuse, inferred from his letter dated 30^th October 2009 that it had not in any way hindered his appointment of new accountants or his ability to deal with his outstanding tax obligations for the whole of the default period. The Appellant’s letter goes on to state that “Thinking this was all dealt with I ignored further demands and was surprised in April 2009 to find that my accountant had only submitted CIS returns to 5 April 2008”. The Tribunal found as a fact that by ignoring further demands, the Appellant had again failed to take responsibility for managing his affairs despite an awareness, if not a clear understanding, that matters remained outstanding. Furthermore the Tribunal took the view that the Appellant at no time contacted HMRC to explain that he had been ill and seek advice as to what he could do, which neither his dyslexia nor illness would have prevented him from doing.

6.       The Tribunal accepted that the Appellant is no longer trading as a sole proprietor and therefore no further returns are expected to be submitted, however the Tribunal took the view that this has no bearing on the issue to be decided by the Tribunal, namely whether the Appellant had a reasonable excuse throughout the overdue period.

7.       In conclusion, whilst sympathetic to the large amount of penalties the Appellant has incurred, the Tribunal found the Appellant’s admitted ignorance of his tax obligations and continued lack of steps taken to seek help over such a lengthy period despite awareness that matters were outstanding was not sufficient to amount to a reasonable excuse. The Tribunal also found that reliance on his accountants was not sufficient to amount to a reasonable excuse throughout the period of default bearing in mind that the Appellant continued to ignore demands and was therefore aware that his obligations remained outstanding.

8.       The Tribunal dismissed the appeal and confirmed the penalties.

9.       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: 30 June 2010