First-tier Tribunal (Tax)

[2011] UKFTT 185 (TC)

TC01054

Appeal number: TC/2010/08111

Construction Industry Scheme—Penalties for late returns (Taxes Management Act 1970 s.98A)—Reasonable excuse—Appeal allowed

FIRST-TIER TRIBUNAL

TAX

LILYSTONE HOMES LTD Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: DR CHRISTOPHER STAKER (TRIBUNAL JUDGE) MRS SUSAN LOUSADA (TRIBUNAL MEMBER)

The Tribunal determined the appeal on 21 February 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 15 October 2010, and HMRC’s Statement of Case submitted on 16 November 2010.

© CROWN COPYRIGHT 2011

DECISION

1.       This is an appeal by the Appellant against the imposition of a £100 penalty under s.98A of the Taxes Management Act 1970 (the TMA) in respect of the late filing by the Appellant of his CIS return for the period ending 5 July 2010. 

2.       The deadline for its filing was 19 July 2010.  HMRC states that it received the return on 23 July 2010, the period of default thus being 4 days.  The Appellant claims that the return was put in the mail with first class postage on 16 July 2010, and that it should have been received by HMRC by the due date.  HMRC states that on a previous occasion it accepted a similar appeal by the Appellant, and at that time sent the Appellant a letter informing him that any further appeals raising postal issues would require proof of postage.  In the circumstances, it is regrettable that the Appellant did not obtain proof of postage. 

3.       If a CIS return is submitted late and a late filing penalty is imposed, the burden of proof is on the contractor to establish a reasonable excuse.  However, the contractor is only put in the position of having to establish a reasonable excuse if the return was indeed submitted late.  The initial burden of proof is on HMRC to establish that the return was submitted late.  It is only if HMRC discharges this burden, on a balance of probabilities, that the burden then shifts to the Appellant to establish a reasonable excuse.

4.       The HMRC statement of case states at page 3 that “1 CIS monthly return due for the period from 6 June 2010 to 5 July 2010 has been submitted late.  This return was not received until 23 July 2010”.  However, no evidence has been provided by HMRC to establish the date on which the return was received by HMRC.  It may be that the only evidence that HMRC would be capable of providing would be a printout of the relevant HMRC record stating the recorded date of receipt.  Such evidence would not inevitably be conclusive (since records are not necessarily infallible), but such a record would certainly highly pertinent evidence as to the date of receipt, and may be sufficient, alone or with other evidence, to discharge HMRC’s burden of proof.

5.       In the present case, however, there is no evidence before the Tribunal of the contention that the return was received by HMRC on 23 June 2010. 

6.       If it is expected that the Appellant should provide proof of posting in order to discharge its burden of proving a reasonable excuse, fairness would dictate that HMRC cannot be regarded as having discharged its initial burden of proving that the return was filed late without submitting any evidence at all of the date of submission of the return.  The Tribunal does not consider it sufficient, as proof of the date of receipt of the return, that HMRC merely states in its statement of case that the receipt date was 23 June 2010.  At the least, the HMRC record itself could be expected to be provided as evidence.  The Tribunal is therefore not satisfied on the material before it that HMRC has established that the return was filed late.

7.       The Tribunal has considered whether of its own motion to provide HMRC with an opportunity to submit evidence of the issue of the date of receipt.  In view of the very small amount at issue in this appeal (£100), and having regard to the overriding objective in Rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, the Tribunal decides that the appropriate course is to hear and determine the appeal on the basis of the material before it.

8.       On the basis of the material before it, and in particular in the absence of any evidence as to the date of receipt of the return by HMRC, the Tribunal finds that it has not been established on a balance of probability that the return was filed late.  The appeal is accordingly allowed, and the determination of the penalty is set aside.

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.