First-tier Tribunal (Tax)

[2011] UKFTT 311 (TC)

TC01172

Appeal number: TC/2011/00255

Penalty – Late filing of company’s tax return – Whether return filed within three months of the due date – No – Appeal dismissed – Schedule 18 Finance Act 1998

FIRST-TIER TRIBUNAL

TAX

G V COX LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: JOHN BROOKS (TRIBUNAL JUDGE)

The Tribunal determined the appeal on 30 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 dated 21 December 2010,  HMRC’s Statement of Case submitted on 7 February 2011 and the Appellant’s Replies dated 17 February 2011 and 1 March 2011.

© CROWN COPYRIGHT 2011

DECISION

1.       This is an appeal by G V Cox Limited (the “Company”) against a second fixed penalty of £200 imposed for the late filing of its company tax return (the “Return”) for the accounting period ending 31 May 2009.

2.       The legislation applicable to company tax returns, assessments and related matters is contained in schedule 18 of the Finance Act 1998 and, unless otherwise stated, all subsequent references to paragraphs are to the paragraphs of that schedule.

3.       Paragraph 1 provides that HMRC may, by notice, require a company to deliver a tax return. The filing date for a return is “twelve months from the end of the period for which the return is made” (see paragraph 14(1)(a)). If a company does not file its return on time it will be liable, under paragraph 17, to a fixed-rate penalty of £100 if the return is filed within three months of the due date or £200 in any other case. However, if a person (which includes a company) “had a reasonable excuse for not doing anything required to be done” s 118(2) of the Taxes Management Act 1970 provides that “he shall be deemed not to have failed to do it unless the excuse ceased and, after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased.” There is no definition of ‘reasonable excuse’ in the legislation which “is a matter to be considered in the light of all the circumstances of the particular case” (see Rowland v HMRC [2006] STC (SCD) 536 at [18]).

4.       In this case the Company was required, by notice issued on 5 July 2009, to deliver the Return to HMRC for the accounting period ending 31 May 2009. It is common ground that this should have been, but was not, filed by 31 May 2010. As the Return remained outstanding, on or shortly after 23 June 2010, HMRC issued a notice imposing a penalty of £100. Although the penalty was paid on 16 July 2010 the Return was not submitted until later.

5.       In the Notice of Appeal Mr John Barton FCA, acting on behalf of the Company, explains that he sent the Return to HMRC by first class post on Friday 27 August 2010. However, it was not received by HMRC until Monday 6 September 2010. As this was more than three months after the due date, HMRC issued a notice of a penalty determination in the sum of £200 on 16 September 2010. The penalty was upheld following a review by HMRC and, although it paid a further £100 on 8 December 2010, the Company appealed to the Tribunal against this penalty (but not the initial £100 penalty) on 21 December 2010.

6.       For the Company, Mr Barton accepts that the return was not filed on time but contends that, because it was sent by first class post on 27 August 2010, there was a reasonable expectation the return would be received by 31 August 2010, less than three months after the due date, and the second penalty of £200 should not apply.

7.       HMRC, in their Statement of Case, submit that “it is not enough simply to have posted the return in what is believed to be sufficient postage and time to reach HMRC by the due date or in this case by 31 August 2010 to avoid the increased penalty.” They refer to the lack of any evidence of postage in this case, noting that where the grounds for reasonable excuse are cited as postal delays or where it is contended that the return was posted in good time, it is reasonable to expect some actual evidence of postage.  In the absence of such evidence, HMRC contend that as the Return was received on 6 September 2010 which is “both outside the statutory filing date beyond three months thereafter” and as there is no record of the Return having been received on or before 31 August 2010, the penalty has been correctly calculated and should be confirmed.

8.       Mr Barton, in his letter of 17 February 2011 in Reply to HMRC’s Statement of Case, “most very definitely” confirms the Return was sent by first class post on 27 August 2010. He addresses the issue of evidence of postage as follows:

9.       On balance and in view of Mr Barton’s adamant confirmation, which is evidence that the Return was posted on that date, I find that the Return was sent to HMRC on Friday 27 August 2010. In addition I note that the following Monday, 30 August 2010, was a Bank Holiday.  

10.    Part 6.26 of the Civil Procedure Rules 1998 (“CPR”) provides that service of a document by first class post is deemed to be the second day after it has been posted provided that day is a business day or if not the next business day after that day. As 27 August 2010 was a Friday and Monday 30 August 2010 was Bank Holiday and not a business day, under the CPR the Return would have been deemed to be served on 1 September 2010.

11.    Therefore, having regard to the circumstances of this case, I do not consider that there was a reasonable expectation that the Return would have been received by HMRC by 31 August 2010. As such the appeal is dismissed and the penalty confirmed.

12.    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.