First-tier Tribunal (Tax)

[2010] UKFTT 529 (TC)

TC00783

Appeal number: TC/10/05541

Penalty – Partnership Return – Online Filing – Appeal Dismissed.

FIRST-TIER TRIBUNAL

TAX

ASSESSOR ANALYSIS SERVICES Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL JUDGE: Anne Scott, LL.B., N.P.

Sitting in public at 126 George Street, Edinburgh on Friday 15 October 2010

R K Sloan for the Appellant

C Cowen, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       The Appeal is refused.  The imposition of two late filing penalties of £100 each, charged on each of Mr R K Sloan and Mrs S Sloan, for the late submission of the 2008-2009 partnership tax return is confirmed.

2.       Mr R K Sloan and Mrs S Sloan are the partners of the partnership Assessor Analysis Services which provides internet financial analysis.  The partnership return for the year ended 5 April 2009 was issued on 6 April 2009 and further reminders including one dated 25 August 2009 were issued.  A paper return was received by HMRC on 28 January 2009.  A penalty notice was issued on 16 February 2010 and that is the subject matter of this appeal.

3.       The legal position in this case is that the statutory deadline for lodging a partnership tax return is quite clear and set out in Sections 12 AA(4) – (4E) TMA 1970.  In particular a paper return must be lodged by 31 October in any year.  In this case the Appellant chose to lodge a paper return and that return was late in terms of that legislation.  The period of default is from 31 October 2009 to 28 January 2010.  Accordingly, an automatic penalty notice is triggered.  The only basis on which the penalty notice would not be confirmed would be if the Appellant could establish that there was a reasonable excuse throughout the period of default for not lodging the return.

4.       Mr Sloan for the Appellant gave very clear and credible evidence.  The Tribunal accepted that he did not read the face of the return albeit he accepted that it did clearly state the filing dates for both paper and online filing.  That information includes the information that online filing requires third party software.  He did not read that until after the deadline for paper filing had passed.  He has always filed paper returns so he had not previously investigated online returns.  His evidence was that he decided not to file a paper return for 2008-09 because he was winding down his business and at the point at which a paper return should have been lodged he did not have final information on outstanding accounts which were material.  He checked with The Institute of Directors and having been advised about online filing decided to adopt that option rather than submit a return with provisional figures.  He assumed that it would be a straightforward process for him.

5.       He was clear that it was only when he came to file the return online in January 2010, which was long after the deadline for paper filing, that he discovered that a partnership return could only be filed using third party software which he did not have and knew little or nothing about.  He believed that it was impossible for him to resource and master the software in time to meet the online filing deadline. 

6.       In his original appeal, his ground of appeal was that HMRC had not made online filing of partnership tax returns available.  The Tribunal finds that that facility is available but requires the use of third party software.  He argued that the reminders issued did not refer to the need for such software, that the requirement for the software should have been highlighted and that the failure to do so verged on deliberate entrapment.  The Tribunal unequivocally rejects the argument that there is any element of entrapment, deliberate or otherwise.  Mr Sloan conceded that the requirement for third party software had been on the face of tax returns for a number of years.  He conceded that he had not read the wording since he had had no interest in online filing.  He argued that it was reasonable to accept that taxpayers did not read the face of the tax return when they receive it in April.

7.       Lastly, he argued that the fact that the partnership return did not give rise to payment of tax should be taken into account.  It cannot.  As indicated in paragraph 3 above the only basis on which the Appeal can succeed is if the Appellant can demonstrate a reasonable excuse for the late lodgement of the return throughout the period of default.

8.       The Tribunal did not accept that the Appellant’s arguments amounted to a reasonable excuse in terms of the relevant law.  All taxpayers have a choice as to how a return is lodged and the time limits are explicit on the returns themselves.  The Tribunal also finds that the information is also explicit on the HMRC website, extracts from which were lodged by HMRC at Folio 32-38.  In particular, the need for third party software is explicit on the face of the return for 2008-09.  Mr Sloan agreed that.  The fact that he chose not to read the tax return until after the deadline for paper filing does not amount to a reasonable excuse.  He could have lodged a paper return with estimated figures before 31 October but he chose not to do so having sought advice on online filing.  Had he read the return or checked the online guidance at an earlier date he could have sought assistance with third party software or he could have had sufficient time to obtain and deal with it himself.  The fact that the reminder issued in August did not reiterate the need for the software does not alter the position since HMRC are under no obligation to issue reminders.

9.       In all these circumstances the Tribunal finds that no reasonable excuse existed throughout the period of default and therefore the Appeal must fail. 

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.

ANNE SCOTT, LL.B., N.P.

TRIBUNAL JUDGE

RELEASE DATE: 29 OCTOBER 2010