First-tier Tribunal (Tax)

[2011] UKFTT 418 (TC)

TC01271

Appeal number: TC/2011/01385

PENALTIES – late filing of Company Tax Return – reasonable excuse -  serious illness within auditors’ office – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

THE HORSESHOE INN AND LODGE LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: LADY MITTING (TRIBUNAL JUDGE)

The Tribunal determined the appeal on 20 May 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 15 February 2011,  HMRC’s Statement of Case submitted on 21 March 2011.

© CROWN COPYRIGHT 2011

DECISION

1.       The Appellant appeals against flat rate penalties in the sum of £200 for accounting period ending 31 October 2007; a flat rate penalty for the accounting period ended 31 October 2008 in the sum of £1,000 and a tax-related penalty for a late return in the period ending 31 October 2008in the sum of £1.48. All penalties arose out of the failure of the Appellant to submit its Corporation Tax returns for the two periods.

2.       The 2007 return was due no later than 31 October 2008 and was lodged, showing a nil Corporation Tax Liability, on 6 August 2010, a default period of 644 days.

3.       The 2008 return was due no later then 31 October 2009 and was delivered on 6 August 2010, a default period of 279 days.

4.       The Appellant pleads a reasonable excuse for the failure to submit the returns arising out of intense pressure within the offices of it s auditors.  The auditors were a two-partner practise, a Mr Malcom Uppard and Mr. Ken Ashburner whose wives handled the secretarial work.  Within the three years 2007 to 2010, Mrs. Ashburner died of cancer, Mrs Uppard was diagnosed with cancer and later died, and Mr. Ashburner also died.  Mr. Uppard was therefore left throughout this period to manage the practise alone and to serve all the practise’s clients.  During the period Mr. Uppard sought assistance from other practises and has now entered into an amalgamation.  Throughout the period the practise struggled to deal with its responsibilities and failed to submit the returns.  The Appellant pleads that it was not within its capability to submit its own returns and it was totally dependant upon the auditors to do so for it.

5.       A reasonable excuse is not defined by statute but it is expressly stated that the taxpayer must act without unreasonable delay after the excuse has ceased.  In other words to succeed, the taxpayer must have had a reasonable excuse throughout the period of default.

6.       I have every sympathy with Mr. Uppard.  He was clearly under extraordinary personal and professional pressure and the position in which he found himself was indeed tragic.  I accept that under certain circumstances illness within the offices of a taxpayer’s representatives can constitute a reasonable excuse – especially where the illness if sudden or indeed very serious.  However, the tribunal is looking not at Mr. Uppard’s position but that of the Appellant.  It remains the Appellant’s duty at all times to ensure that its returns are submitted in time.  Whilst initially the tragic circumstances surrounding Mr. Uppard might well have constituted a reasonable excuse, that excuse cannot possibly have lasted for the length of the default period.  It was always open to the Appellant to instruct new auditors to submit the returns, or estimated returns to the best of its ability.  Unfortunately the Appellant did none of these things and did not in my view respond reasonably to the circumstances.

7.       I therefore find that the Appellant did not have a reasonable excuse for the two defaults and the appeal is dismissed.

8.       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.