First-tier Tribunal (Tax)

[2010] UKFTT 392 (TC)

TC00674

 

 

Appeal number: TC/2010/01260

 

Surcharges for late payment of income tax – Whether inability to pay constituted a reasonable excuse – No – Appeal dismissed – Section 59C Taxes Management Act 1970

 

 

FIRST-TIER TRIBUNAL

 

TAX

 

 

 

 

DAVINA BATCHELOR Appellant

 

 

- and -

 

 

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

 

 

 

 

 

TRIBUNAL: JOHN BROOKS (TRIBUNAL JUDGE) JOHN COLES (MEMBER)

 

The Tribunal determined the appeal on 4 June 2010 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 14 January 2010 and HMRC’s Statement of Case submitted on 10 March 2010

 

 

© CROWN COPYRIGHT 2010

 

 

DECISION

 

Introduction

1.       This is an appeal by Miss Davina Batchelor against surcharges of £123.49 and £118.49 imposed by HM Revenue and Customs (“HMRC”) for the late payment of income tax for the tax year 2007-08.

2.       The appeal was allocated by the Tribunal to the default paper category.  Having considered the papers provided by both parties, a Decision Notice dismissing the appeal and containing a summary of the Tribunal’s findings of fact and reasons for the decision was released on 15 June 2010. Following receipt of this Decision Notice Miss Batchelor contacted the Tribunal to apply for full written findings and reasons for the decision. Under Rule 35(4) of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (“the Rules”), it is made clear that if a Tribunal decision, as in this case, provides only summary findings and reasons, a party wishing to appeal must apply for full written findings and reasons for the decision before seeking permission to do so. Therefore, this decision is provided, in accordance with the Rules in order to enable Miss Batchelor to decide whether to apply for permission to appeal against the decision of the Tribunal and to assist her in formulating any such appeal.

Evidence

3.       The evidence before the Tribunal was contained in the following documents:

(1)        Miss Batchelor’s Notice of Appeal dated 14 January 2010;

(2)        HMRC’s undated document headed “Paper hearing submission” sent to Miss Batchelor on 10 March 2010 which constitutes its Statement of Case for the purposes of the Rules; and

(3)        The following documents which were attached to HMRC’s Statement of Case:

(a)        Copy of a letter from Miss Batchelor to HMRC dated 29 September 2009;

(b)        Request by Miss Batchelor dated 13 November 2009 for a review of HMRC’s decision;

(c)        Notice of Appeal dated 14 January 2010;

(d)        HMRC decision letter dated 13 November 2009;

(e)        HMRC conclusion of review letter dated 22 December 2009);

(f)         HMRC record of payments of Miss Batchelor as at 8 March 2010;

(g)        HMRC statement of Miss Batchelor’s account dated 9 March 2010;

(h)        Extract from HMRC’s self assessment manual (SAM)62080; and

(i)         Copy of Notice to complete a Tax Return for 2007-08.

Facts

4.       From these documents we find the following facts.

5.       On 6 April 2008 HMRC issued a Notice to Miss Batchelor requiring her to file a self assessment Tax Return for the year ending 5 April 2008 (2007-08). The filing date for the Return was 31 October 2008 for a paper return and 31 January 2009 if filed online. Miss Batchelor filed the Return online which was received by HMRC on 30 January 2009. The tax liability for the year, which would have been calculated automatically when the Return was filed online, was £2,669.80.  This was to be paid by 31 January 2009.

6.       Miss Batchelor made a payment of £200 on 29 January 2009 and a further payment of £100 on 9 April 2009. She contacted HMRC on 15 June 2009 to request a time to pay arrangement but was unable to reach such an agreement as she did not have the finances necessary to be able to pay 50% immediately and the remainder over three months as suggested by HMRC. Miss Batchelor contacted HMRC again on 11 September 2009 and was this time able to reach a time to pay agreement with HMRC under which she agreed to make an immediate payment of £1,000 and six monthly payments of £257.67 from 22 October 2009 however, although she did make the payment of the £1,000 only one payment of £257.67 was made. Therefore as at 28 February 2009 £2,469.80 remained outstanding and £2,369.80 remained outstanding as at 31 July 2010.

7.       Surcharge Notices were issued by HMRC on 1 April 2010 in the sum of 123.49 and on 11 August 2010 in the sum of £118.49.

Law

8.       Where income tax remains unpaid after 28 days after the due date a taxpayer is liable to a surcharge equal to 5% of the unpaid tax and is also liable to a further surcharge of 5% of the outstanding liability if it is not paid after six months from the date on which it was due (s. 59C Taxes Management Act 1970 (“TMA”)). The Tribunal may set aside the surcharge, under s. 59C(9) TMA, if it appears “that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax.”

9.       There is no definition of “reasonable excuse” in the legislation which “is a matter to be considered in the light of all the circumstances of the particular case” (see Rowland v HMRC [2006] STC (SCD) 536 at [18]).However, s. 59C(10) TMA provides that the inability to pay the tax “shall not be regarded as a reasonable excuse for the purposes of subsection (9)”

10.    Although a VAT case, which considered a similar provision in the VAT legislation, as a result of the decision of the Court of Appeal in Customs and Excise Commissioners v Steptoe [1992] STC 757, it is necessary to consider the underlying causes of the insufficiency of funds to determine whether there is a reasonable excuse for the default in this case.

Contentions of the Parties

11.    On 29 September 2009 Miss Batchelor wrote to HMRC to explain that she was “currently unemployed” asking for the surcharges to be removed and to inform them that “due to insufficient funds” she was unable to keep to the time to pay arrangement. It is apparent from her request to HMRC to review their decision that she became unemployed during April 2009. Her Notice of Appeal also refers to the fact that she is unemployed and seeking work and trying to set up a new business and finding it very difficult to keep up with normal household financial requirements.

12.    HMRC contend that this does not amount to a reasonable excuse as Miss Batchelor did not contact HMRC in sufficient time to make a time to pay arrangement and when she did come to such an arrangement she failed to fulfil her obligations.

Discussion and Conclusion

13.    For Miss Batchelor to succeed in her appeal she must establish that she has a reasonable excuse for the late payment of tax. 

14.    Having carefully considered the circumstances of this case, we find that Miss Batchelor failed to meet her tax liability because she was unable to do so as a result of the insufficiency funds. Although her unemployment from April 2009 would appear to have exacerbated the situation we have not been provided with evidence of an underlying reason for this lack of funds when the tax was due on January 31 2009. Therefore, although we sympathise with Miss Batchelor, given that s.59(c) TMA specifically excludes an inability to pay as constituting a reasonable excuse, we are compelled to dismiss her appeal

15.    The appeal is therefore dismissed and the surcharges confirmed.

16.    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.

 

 

JOHN BROOKS

 

TRIBUNAL JUDGE

RELEASE DATE: 19 August 2010