First-tier Tribunal (Tax)

[2011] UKFTT 8 (TC)

TC00885

Appeal number:TC/2010/ 02233

Late payment of income tax – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

MUBARAK ALI TARIQ Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: PETER PETHERBRIDGE (JUDGE)

The Tribunal determined the appeal on the 15 July 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 18^th February 2010,  HMRC’s Statement of Case submitted on 19^th April 2010 and the Appellant’s Reply dated 29 April 2010.

© CROWN COPYRIGHT 2010

DECISION

Introduction

1.     The Appellant, Mr Mubarak Ali Tariq of Tangmere House, 1a Tangmere Gardens, Northolt, Middlesex UB5 6LP appeals against a first and second surcharge imposed upon him because of his late payment of tax due for the years ending the 5^th April 2003 to the 5^th April 2008, the surcharges amounting to the sum of £944.04.

Facts

2.     The decision of the HMRC is that of the 1^st October 2009 that throughout the period from 5^th April 2003 until December 2008, the Appellant failed to disclose the receipt of rental income in respect of a property (identity not disclosed) of £17,000 per annum. The Appellant does not dispute that there was non-disclosure of this receipt of rental income, but appeals on the basis that he had “reasonable excuse” for the non-disclosure on account of his ill health.

3.     The income tax surcharge for late payment for the financial year 2002/2003 was £170.38, for the year 2003/2004 £163.32, for the year 2004/2005 £169.56, for the year 2005/2006 £154.74, for the year 2006/2007 £148.50 and for the year 2007/2008 £137.54.

4.     Surcharge notices were issued in April 2009 and a further surcharge notice was issued on the 11^th August 2009.

The Appellant’s grounds of appeal

5.     The Appellant states that he suffered major health problems resulting in surgery on the 23^rd December 2008 and being required to stay in hospital until the 21^st April 2009.  He claims that once he realised that he had to pay the tax he contacted the Respondent. He said that there was no intention of trying to avoid paying the tax and payments were made when he could afford them. He said that poor advice had been received from his accountant. 

The Law

6.     Section 7 of the Taxes Management Act 1970 requires the Appellant to notify the Respondent that he was chargeable to income tax or capital gains tax for the years of assessment (2002/2003 to 2007/2008), within 6 months from the end of the relevant year.

7.     Section 86 of the Taxes Management Act 1970 provides that where income tax is paid late it carries interest at the appropriate rate from the relevant date until payment.

The Respondent’s submissions

8.     The Appellant’s health problems cannot be deemed a “reasonable excuse” for not correctly notifying it that he was chargeable to tax for the years 2002/2003 to 2006/2007, or not paying that tax by the legislative due dates.

9.     The Respondent concedes that the Appellant’s health was a factor in relation to the failure for 2007/2008, a “reasonable excuse” has to exist throughout the whole period of default; in this case, the liability for 2007/2008 had, as of the date of the Respondent’s submission, not been paid in full and as such the period of default was continuing.

10.  The Respondent submits that ignorance of the legislation by the Appellant cannot be deemed a “reasonable excuse”.

11.  The Respondent submits that with regard to the Appellant’s contention that he did not intend to avoid paying the tax and that he made payments when he could afford them that a tax payer is expected to arrange his affairs and finances to ensure that his tax obligations are met and all relevant payments are made by the legislative due dates. If funds were not available, the Appellant could have arranged for a time to pay plan and although advised to do so, the Appellant had chosen not to avail of that service.

12.  With regard to the Appellant’s contention that he received poor advice from his accountant, failure due to a dilatory agent is not deemed a “reasonable excuse” for the Appellant not having met his tax obligations.  If the Appellant feels that his accountant had failed in his professional capacity or not followed specific instructions, then the Appellant should seek redress directly from that accountant.

13.  The Respondent submits that the tax was paid late and that both the initial and further 5% surcharges have been correctly imposed in line with the legislation.

The Tribunal’s findings

14.  The Tribunal confirm that as a result of the Appellant’s failure to disclose rental income in respect of an unidentified property, but of which the Appellant himself does not dispute, there occurred for the financial years 2002 to 2008 tax liabilities, which were not discharged for varying periods of time. The Appellant’s rental income was only disclosed by the Appellant to the Respondent in December 2008. This is not disputed by the Appellant. 

15.  The outstanding tax liabilities in respect of the rental liability are not disputed by the Appellant.

16.  The Appellant disputes the payment of the surcharge that for the financial years from 2002 to 2008 amounted to £944.04, which are sought to be recovered by the Respondent under Section 59C (2) of the Taxes Management Act 1970 – the initial surcharge where any tax remains unpaid on the day following the expiry of 28 days from the due date, the surcharge being equal being to 5% of the unpaid tax – and Section 59C (3) of the Taxes Management Act 1970 where any of the tax remained unpaid 6 months after the due date a further surcharge of 5% of the tax unpaid at that date is imposed.

17.  The Appellant does not dispute that the total surcharge of £944.04 has been calculated correctly.

18.  What the Appellant disputes is a liability to pay the surcharge on account of what he claims to have been a “reasonable excuse” – his ill health.

19.  There is no dispute that the Appellant had a serious medical condition in December 2008, necessitating a heart by-pass operation, which led to complications that he was unable to leave hospital until April 2009.

20.  However, the Appellant’s failure goes back to 2002 for which there is no medical evidence that he was in a condition that he was unable to attend to his tax affairs.  The Appellant alternatively argues that he was not aware of his need to disclose his rental income as a potential liability to tax and also that he received poor accountant’s advice.

21.  There is, of course, no legal definition of “reasonable excuse”, but even if the Appellant were able to show “reasonable excuse” he would have to show that it existed and continued throughout the period of default.

22.  The Appellant had an opportunity to negotiate with the Respondent a time to pay arrangement, but declined to do so.  It would appear that the Appellant’s disclosure to the Respondent of his rental income – in papers prepared on his behalf by his accountant in October 2008 – was shortly before he was called for his heart bypass operation in December 2008. However, there is no evidence to show that the Appellant had “reasonable excuse” for the non-disclosure of his rental income until the submission of his return by his accountant in October 2008; rental income of which he had been in receipt of since 2002, which he admits.

23.  I am satisfied that the Appellant has not shown “reasonable excuse” for the non-disclosure of his rental income of £17,000 per annum for the financial years from 2002 to 2008.

24.  I am satisfied, therefore, that the income tax surcharge in the sum of £944.04 has been properly calculated and is recoverable from the Appellant.

25.  I dismiss this appeal.

26.  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:  15 DECEMBER 2010