First-tier Tribunal (Tax)

[2011] UKFTT 261 (TC)

TC01125

Appeal number: TC/2011/00460

Reasonable excuse; mistake of fact as; Jusilla v Finland.

FIRST-TIER TRIBUNAL

TAX

ANTHONY LEACHMAN T/A WHITELEY AND LEACHMAN Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: GERAINT JONES Q.C. (TRIBUNAL JUDGE)

The Tribunal determined the appeal on 14 April 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 11 January 2011 and  HMRC’s Statement of Case submitted on 02 February 2011.

© CROWN COPYRIGHT 2011

DECISION

1.       This is an appeal brought by Mr Leachman, the appellant, against a penalty notice issued by HMRC on the 27 September 2010 whereby it levied a penalty of £400 against the appellant on the basis that his P35 for the fiscal year ended 5 April 2010 had not been filed on or before 19 May 2010. The facts are not in issue. An employer must file a P35 by the 19th May in each fiscal year and currently it is compulsory to file it online.

2.       The appellant argues that he has a reasonable excuse for the lateness and so no penalty should be levied. HMRC argues, wrongly, that before a person can establish a "reasonable excuse" it must be established that there are exceptional circumstances or some exceptional event giving rise to the default. That is not what Parliament has laid down. Parliament has used the ordinary English words "reasonable excuse" which are in everyday use and must be given their normal and natural meaning.

3.       The reasonable excuse relied upon by the appellant is, he says, that as a matter of fact he believed that his accountant would file the P35 whilst his accountant believed that the appellant would personally attend to it. The appellant has referred to this as him and his accountant getting their wires crossed. That factual account is set out in the appellant's letter of 8 November 2010. In its Case Statement HMRC claims that the appellant has said that his accountant, Mr Norfolk, deals with his tax affairs and therefore he, the appellant, could not understand why HMRC had not received the end of year return. Unless HMRC has seen a letter or other document that justifies that proposition being put forward, I am entirely satisfied that it is not supported by what the appellant has plainly stated in his letter of the 8 November 2010 and/or his Grounds of Appeal.

4.       This appeal raises two issues. The first is whether a mistake of fact can amount to a "reasonable excuse". The second is, if it can, whether on the facts of this case there is a reasonable excuse.

5.       I am entirely satisfied that, as a matter of law, a mistake of fact is capable of amounting to a reasonable excuse. It may not amount to an exceptional event but, for reasons which I have set out above, that is not a material consideration. If one person genuinely believes that another person is undertaking a particular task and that other person genuinely believes that the original person is undertaking that task, each is labouring under a mistake of fact. There is no good reason either in law or in logic, why such a mistake of fact should not amount to a reasonable excuse for a failure to file a particular document on time or to undertake some other task. Admittedly, it is a mistake relied upon by the person who is under the obligation to file by a particular time but that, of itself, does not make it something other than an excuse which is "reasonable". In my judgement, provided that there is a genuine mistake of fact (which, itself, is an issue of fact), that, in law, is capable of amounting to a reasonable excuse for the identified failure.

6.       The next issue is whether, on the facts of this case, the identified mistake of fact existed. It must be borne in mind that this is a case in which a penalty has been levied. In those circumstances the decision of the European Court of Human Rights in Jusilla v Finland (73053/01) ECtHR (Grand Chamber) is highly material. The Court decided that a penalty or supplement charged by the revenue authorities of a member country is in the nature of a criminal penalty and thus any proceedings in respect of it attract the provisions of article 6 ECHR (right to a fair trial). Thus, in my judgement, it is for HMRC to satisfy me, so that I can be sure, that there was no mistake of fact of the kind attested to by the appellant.

7.       Not only is it entirely plausible that two individuals might have laboured under the misapprehension that the other was to undertake a particular task; that is the appellant's evidence. There is no material available to me that calls the appellant's credibility or integrity into question. In those circumstances I proceed on the basis that his factual assertion is true and correct.

8.       It follows that in my judgement the appellant has established a reasonable excuse for the failure that has resulted in the penalties being levied by HMRC. I find that his state of mind was that the necessary P35 was being submitted by his agent and that he could rely upon the action of his agent to fulfil his filing obligation. I also find that that state of mind was held genuinely, but mistakenly. That situation is totally different to a situation where a taxpayer relies upon his agent do a particular act but the agent neglects to do it. The two situations are entirely different and different considerations apply to each of them.

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.