First-tier Tribunal (Tax)

[2011] UKFTT 382 (TC)

TC01237

Appeal number: TC/2011/01161

Late filing of partnership return – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

HEARTHSTEAD HOMES Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: J. BLEWITT (JUDGE)

Sitting in public at Leeds on 18 May 2011

Mrs Ali for the Appellant

Mr Osborne, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.       By Notice of Appeal dated 11 February 2011, Mr and Mrs Ali, through Mrs Ali as nominated partner, appealed against penalties imposed in the sum of £400 (£200 per partner) for the late filing of the 2008/2009 partnership return.

2.       The return was issued by HMRC on 6 April 2009. The due date for a paper return to be submitted was 21 October 2009 or, if filed online 31 January 2010. nThe return was filed online by Mrs Ali on 1 February 2011.

3.       The issue for the Tribunal to determine was whether there was a reasonable excuse for the late submission of the return.

4.       Mrs Ali helpfully provided the background to the imposition of penalties and a timeline setting out contact with HMRC. The Appellant Company went into Administration in May 2009. The Administrators dealing with the Appellant Company were also involved in Mr and Mrs Ali’s limited company and all records relating to both businesses were given to the Administrators.

5.       Mrs Ali accepted that she had mistakenly assumed that the Administrators would take responsibility for filing the partnership return on the basis that the Administrators had fulfilled all tax obligations on behalf of the limited company.

6.       Mrs Ali was unaware that the partnership return was outstanding until the first penalty notices were issued on 16 February 2010. Following receipt of the penalty notices, Mrs Ali attempted to contact HMRC without success. An officer of HMRC, Mrs Higgins wrote to Mrs Ali on 18 May 2010 stating that HMRC had no record of the Administration and that the partnership return remained outstanding.

7.       Mrs Ali responded by letter dated 10 June 2010 in which she outlined that HMRC had been informed of the Administration by letter dated 8 July 2009. Mrs Ali went on to query how the partnership return could be accurately prepared and submitted without the Company records, which were held by the Administrators.

8.       A telephone message was received from HMRC and contact made by Mrs Ali in response on 23 June 2010. Mrs Ali spoke to an HMRC officer called “Duncan” who stated that the return had been received on 26 January 2010, that no further returns or information was outstanding and that there should be no penalty imposed against Mr and Mrs Ali as the return had been received by the due date. Mrs Ali was advised to call HMRC’s Cardiff office, which she did on 25 June 2010, who confirmed that the return had been submitted and advised Mrs Ali to ignore any further demands from HMRC to allow time for the system to be updated.

9.       The second penalties for failing to submit the return in the 6 month period following the due date were imposed on 3 August 2010.

10.    It became clear during the hearing that there had been confusion on the part of HMRC during the conversation with Mrs Ali on 23 June 2010, as Mrs Ali had filed personal returns in January 2010 and it appears that in referring to the return having been filed, the HMRC representative was referring to the personal rather than partnership return. Understandably, Mrs Ali believed that HMRC were advising her in relation to the partnership return, as the telephone call had been received from HMRC following Mrs Ali’s letter dated 10 June 2010 in which she raised a query about the partnership return.

11.    I find that it was wholly understandable that Mrs Ali relied on what appears to have been incorrect advice from HMRC following her telephone conversation in which she was told that no returns remained outstanding. It is also regrettable that HMRC imposed the second penalties on Mr and Mrs Ali only days after the advice was given as had correct information been given, Mrs Ali would have been in a position to rectify the situation prior to the second penalties being imposed.

12.    I have considered the legislation applicable and the Tribunal must consider not only whether a reasonable excuse existed in respect of the late submission of the return, but whether that reasonable excuse existed throughout the period of the default.

13.    On Mrs Ali’s own evidence, she had mistakenly assumed that the Administrators would submit the partnership return. I do not find that this can amount to a reasonable excuse and therefore the penalties in the sum of £100 were correctly imposed on Mr and Mrs Ali.

14.    I was troubled by the second penalties imposed as it is clear that part of the delay in submitting the return was brought about by Mrs Ali relying on incorrect advice from HMRC. However, in determining the issue of reasonable excuse, I must look at the whole period of default; that being from the due date until submission of the return. In doing so I found that there was no reasonable excuse for the late submission for the following reasons; although Mrs Ali had relied on advice given by HMRC, this advice was not given until June 2010, at which point the return was already overdue and no reasonable excuse existed in respect of the circumstances leading up to that point. I accept that, having spoken to HMRC, Mrs Ali took no further action, however the return remained outstanding until February 2011 with no further query raised by Mrs Ali and by which point I found that any reasonable excuse which may have existed, could not last throughout the period of default.

15.    The appeal is dismissed.

16.    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.