First-tier Tribunal (Tax)

[2011] UKFTT 235 (TC)

TC01100

 Appeal number: TC/2010/09064

PAYE. Reasonable excuse. Inaccurate information from HMRC.

FIRST-TIER TRIBUNAL

TAX

MR T. J. FISHER (T/A THE CRISPIN) Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL:  GERAINT JONES Q.C.

The Tribunal determined the appeal on 28 March 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 undated,  HMRC’s Statement of Case submitted on an unspecified date.

© CROWN COPYRIGHT 2011

DECISION

1.       The appellant, Mr Fisher, traded as The Crispin until 28 July 2008. There is reference in the papers made available to me that the business was then sold, but it is not clear whether it was sold as a going concern or whether the business assets were sold and the business ceased to exist. Nothing turns upon that difference. When the appellant left the business (to put it in neutral terms) he paid his erstwhile employees up to date and issued them with forms P45. As the business ceased as at 28 July 2008, an employer’s annual return should have been submitted to HM RC by the 19th May 2009. No such return was made. Therefore, by a notice dated the 5th May 2010 HMRC sent a fixed penalty charge of £800 to the appellant.

2.       The appellant's response, by way of his letter of the 19th May 2010, contains factual averments which I take as part of his evidence. The letter says that the business was sold in July 2008 and that whilst preparing for the sale of that business, the appellant telephoned HMRC and spoke to somebody called Kath so that he could establish exactly what needed to be done to finish the PAYE arrangements. The appellant says that he was advised as follows. He was told that a letter should be sent to HMRC explaining about the closure of the business and that the PAYE should be brought up to date, which it was. There is no suggestion that any PAYE remained outstanding. The appellant says that he specifically asked the person to whom he was speaking on the telephone, Kath, whether there was anything else that he needed to do, whereupon he was informed that he should simply send a letter explaining about the termination of the business.

3.       The appellant also says that notwithstanding that HMRC claims that the Employer’s Return was issued on 5 September 2008, it was not received by him, as HMRC seems to accept, because it may have sent it to an incorrect address. It was not until the 5th May 2010 that HMRC issued a penalty notice thus putting the appellant on notice that he was in default of a filing requirement.

4.       After the telephone conversation, referred to above, the appellant wrote to HMRC on the 21 July 2008, providing his new address and asking HMRC to confirm that all PAYE matters were concluded. It seems that he did not receive the courtesy of a reply to that letter. HMRC has not provided a copy of the Employer’s Return said to have been issued on 5 September 2008 so that the address to which it was sent can be ascertained.

5.        In the appellant's letter of the 3 August 2010 he says that during the telephone call he had requested advice as to what was required when he was selling or closing his business. He says that he was advised that he should send a letter, which he did, but was not advised that any further returns would be necessary once the PAYE deducted taxes had been paid up to date upon him issuing the forms P45.

6.       I find that the appellant was misled by omission rather than by commission. A reasonably careful person informing the appellant of what he needed to do would have gone further and reminded him that he remained under an obligation to file an end of year return.

7.       When the appellant received the penalty notice just short of two years later, it must have come as something of an unpleasant shock to him to find that, albeit unwittingly, he had been misled when he responsibly made enquiries as to what he should do, back in 2008. I am entirely satisfied that if the appellant had been correctly advised that an end of year return was required, he would have been on notice that it was required and would have complied with the requirement within good time and thus he would have avoided any penalty. Furthermore, I am not satisfied that HMRC sent a notice requiring any end of year filing to the appellant's advised new address. No evidence has been adduced to that effect. If it had been sent to the new address, then it is reasonably to be expected that it would have been received in due course of post.

8.       HMRC argues that the appellant must show a reasonable excuse for not having made the necessary filing and that that reasonable excuse existed throughout the period of default. Incorrectly, HMRC contends that a reasonable excuse must be based upon an exceptional circumstance or exceptional event. As a matter of law, that is wrong. If Parliament had intended to say that a person could only avoid a penalty by establishing that an exceptional event or exceptional circumstance had arisen it would have said so. Parliament chose to use the phrase "reasonable excuse" which is an ordinarily expression in everyday usage which must be given its natural meaning. A reasonable excuse may involve an exceptional event but need not necessarily do so.

9.       In this case the reasonable excuse relied upon by the appellant is that he was given misleading information, at least by omission, by HMRC. Whilst HMRC may not be obliged to give advice or guidance as to what a person must do, in any given circumstances, if it does seek to assist or give advice, then that advice must be complete and accurate. If it is not, it provides a potential trap for the taxpayer who, some two years later, is said to be liable for a penalty of £800 absent any wilful default or moral fault on his part. Not only is that offensive to the ordinary person's sense of fairness and justice; it is not required by the statutory regime which identifies an exception to the penalty if a reasonable excuse exists.

10.    I find that the delay in filing, albeit possibly characterised as a failure to appreciate the law, was primarily caused by the appellant being given either misleading or incomplete information which led him reasonably to believe that he had done all that he was required to do upon closing or selling his business. That reasonable excuse plainly existed throughout the period of default as indicated by the fact that when HMRC eventually sent a penalty notice to the appellant, he put the matter right by filing the necessary documents when, as I find, he first knew that he was required so to do (contrary to the advice that he had previously been given).

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.