First-tier Tribunal (Tax)

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URL: http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01149.html
Cite as: [2011] UKFTT 287 (TC)

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Martin Cleveland t/a Martin Cleveland Photography v Revenue & Customs [2011] UKFTT 287 (TC) (04 May 2011)
INCOME TAX/CORPORATION TAX
Penalty

[2011] UKFTT 287 (TC)

TC01149

Appeal number: TC/2011/00720

Appeal against Employer’s penalty for late return – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

MARTIN CLEVELAND

T/A MARTIN CLEVELAND PHOTOGRAPHY Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: J. Blewitt (TRIBUNAL JUDGE)

The Tribunal determined the appeal on 18 April 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 23 January 2011 and HMRC’s Statement of Case submitted on 14 February 2011.

DECISION

1. By Notice of Appeal dated 23 January 2011 the Appellant appeals against an employer’s penalty in the sum of £400 imposed as a result of the late submission of a P35 return for the period 2009/2010.

2. The imposition of such a penalty is set down by statute; section 98A (2) (a) Taxes Management Act 1970 applies in this case which provides that a penalty of £100 can be imposed for each 50 employees for every month (or part thereof) that the return remained outstanding.

3. The filing date in this case was 19 May 2010. The return was submitted online on 24 January 2011.

4. On 27 September 2010 a penalty notice in the sum of £400 was issued to the Appellant which was calculated from 20 May 2010 to 19 September 2010.

5. By letter dated 15 October 2010, Mrs Cleveland, on behalf of the Appellant, appealed to HMRC against the penalty of £400. The letter stated:

(1) The relevant paperwork was sent to HMRC; Mrs Cleveland queried why it took HMRC 4 months to notify the Appellant that HMRC did not receive the paperwork;

(2) The Appellant runs a small company which tries to complete its own paperwork which is difficult when no one is helpful and advice is needed;

(3) Mrs Cleveland questioned why the Appellant was not sent the missing paperwork as all the forms required for the End of Year Return were requested and sent to HMRC.

6. HMRC responded by letter dated 15 November 2010 stating that the P35 should have been submitted online by 19 May 2010 and at the time of writing remained outstanding.

7. The Appellant formally requested a review of HMRC’s decision to impose penalties on 26 November 2010. The request enclosed a copy of the original return which had been sent to HMRC on 3 April 2010.

8. By letter dated 5 January 2011, HMRC informed the Appellant that following review the penalties would be upheld. The reasons given were that when the documents were submitted on 3 April 2010, a P35 was not completed or submitted. Instead the Appellant sent a P14 and P38A. As a result, the return was rejected as incomplete. The Appellant was advised of this failure on 26 May 2010 and at the time of the review on 5 January 2011, the completed 2009/2010 P35 had not been received. The copies enclosed within the request for a review were not, in HMRC’s view correct as the tax and national insurance on the P14 does not match those on the P35 and a P35 and P14 must be submitted where the figures agree. Mr McGarry, the reviewing officer explained that penalties are not issued until approximately September following the due date as the checks required as to which returns remain outstanding take some time to complete.

9. On 23 January 2011 the Appellant appealed to the Tribunal. The grounds of appeal relied upon can be summarised as follows:

(1) That the P35/P14 was submitted on 19 May 2010 by post;

(2) The Appellant was not notified until September 2010 that there was a problem with the P35 and a fine of £400 imposed;

(3) The Appellant has been in business for 20 years and never missed a payment to HMRC; help rather than a fine would be expected.

10. The obligation to make End of Year Returns prior to the deadline of 20 May following the end of a tax year is set down by statute by virtue of Regulation 73 of the Income Tax (PAYE) Regulations 2003 and paragraph 22 of Schedule 4 of the Social Security (Contributions) Regulations 2001.

11. The penalties imposed as a result of failure to meet tax obligations are provided for by statute and this Tribunal has no discretion to mitigate those penalties unless it is considered that there is a reasonable excuse lasting throughout the duration of the default period, in which case the penalties can be set aside.

12. It is a well established principle of case law that the responsibility remains on the employer to ensure that all obligations are met and ignorance cannot amount to a reasonable excuse for failing to comply with such obligations.

13. The Appellant contends that he was not notified until September 2010 that there was a problem with the P35 and a fine of £400 imposed. There is no obligation upon HMRC to issue reminders to taxpayers or notify taxpayers that a P35 has not been received prior to the issue of penalty notices. There is also no statutory obligation upon HMRC to issue penalty notices closer to the deadline date. It is well publicised on HMRC’s website that penalties can be imposed for the late submission of returns and that a reminder will not necessarily be sent. I do not find that the lack of notification until September 2010 amounts to a reasonable excuse.

14. The Appellant contends that the P35/P14 was submitted on 19 May 2010 by post. HMRC rejected the documents submitted on 19 May 2010 on the basis that a P35 was not included. When the Appellant sent copies on 26 November 2010 of the documents previously submitted to HMRC the forms were rejected as incorrect due to the fact that the tax and national insurance on the form P14 did not match the details on the P35. Therefore, even if the Appellant had sent all relevant forms on 19 May 2010, the end of year return would have been rejected as incorrect. I do not therefore find that the Appellant has a reasonable excuse for the late submission of the return.