First-tier Tribunal (Tax)

[2011] UKFTT 173 (TC)

TC01042

Appeal number TC/2010/08063

P35 late return. Reasonable excuse.

FIRST-TIER TRIBUNAL

TAX

CENTRALISED SERVICES (VALVES) LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: GERAINT JONES Q.C.

The Tribunal determined the appeal on 12 January 2011 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 16 September 2010,  HMRC’s Statement of Case submitted on 17 November 2010 and the Appellant’s Reply dated 15 December 2010.

© CROWN COPYRIGHT 2011

DECISION

1.       The appellant, Centralised Services (Valves) Ltd, should have filed with HMRC a P35 returned by 19 May 2009 in respect of the fiscal year ended 5 April 2009. It did not and therefore on 28 September 2009 HMRC sent a penalty notice to the appellant which, it says, was not received as it was not sent to the appellant’s proper correspondence address. It seems to be accepted that two later penalty notices of 25 January 2010 and 25th of February 2010 were sent and received by the appellant. Notwithstanding, the P35 was not filed until the 6 May 2010. The automatic penalty demanded is £1200. The appellant has appealed against that penalty, albeit out of time.

2.       On the 21 October 2010 the Tribunal informed HMRC as follows: “the Notice of Appeal includes an application for permission to appeal out of time…. If you object to this application you must address it in your Statement of Case. If you do not object the Tribunal will consider that you have consented.”

3.       HMRC has not filed a Statement of Case but I know its position from its several letters to the appellant, especially those rejecting the internal appeal.

4.        Permission to appeal out of time is granted.

5.       If the appeal is to succeed the appellant must show that there was a "reasonable excuse" for the failure throughout the default period. HMRC’s stance is that "reasonable excuse" means some exceptional circumstance. I do not accept that that gloss upon the statutory wording is justified. The statutory words "reasonable excuse" are ordinary English words capable of being given their ordinary everyday meaning. The gloss placed upon them by HMRC seeks to set the bar higher than the legislature decided to set it. If the legislature had wanted to say that a penalty can be set aside only if there are "exceptional circumstances" it could have so provided in the statutory language used. It has not done so.

6.       The "reasonable excuse" relied upon by the appellant is that the company had only to employ ease and that one of them, the bookkeeper, went on maternity leave in about April 2009. It was of us decided to "hibernate" the business during her absence.

7.       If the P35 had been filed timeously the appellant would/should have received a refund of about £1330 from HMRC. This point is relevant only to witness reliability, given that there are few people who would knowingly desist from filing a document with HMRC if they thought that the result would be a tax repayment.

8.       The appellant's case has been put forward by its Director, Mr Morley. In his letter of 11 March 2010 he said :“The company therefore had no active employees. There was no one available to deal with tax matters but as it was that we were in credit and that it was you who owed us money I did not consider that there may be a serious problem with a late submission.”

9.       In later correspondence Mr Morley has referred to correspondence being sent to an address where it may not have come immediately to his notice or from which, he says, it could have been removed without him knowing. In my judgement none of those factors are relevant given that the letter of 11 March 2010, upon its true and proper construction, indicates that Mr Morley, the appellant's director, has said in terms that he did not consider that there might be a serious problem if a late submission was made. That indicates to me that he was well aware that a submission needed to be made but, nonetheless, made a conscious decision that it would not matter if it was made late. In that decision, he was incorrect.

10.    In my judgement the facts relied on by the appellant do not amount to a reasonable excuse for lateness even when I ignore the gloss placed upon the words “reasonable excuse” by HMRC.

11.    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.