[2012] UKFTT 217 (TC)
TC01912
Appeal number:
TC/2011/04198
INCOME TAX – self
assessment – penalty for late submission of return – delay by HMRC in issuing
activation code for online filing – whether reasonable excuse – held, on
particular facts, yes – delay between receipt and use of activation code and
submission of return – held excuse did not continue throughout period of
default – appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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STUART BLAKEMORE
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Appellant
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- and -
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THE COMMISSIONERS
FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE JOHN CLARK
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CHRISTINA HILL WILLIAMS
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Sitting in public at 45 Bedford Square, London WC1B 3DN on 17 October 2011
The Appellant in person
Eleanor Gardiner, Presenting
Officer, HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT
2012
DECISION
Introduction
1.
Mr Blakemore appeals against a surcharge for the late submission of his
self assessment return for the year 2009-10 by the Respondents (“HMRC”). As
agreed at the hearing, we produced a summary decision dismissing Mr Blakemore’s
appeal; this was dated 5 November 2011, and released to the parties on that
date. However, for some reason, Mr Blakemore did not receive his copy.
2.
Following discussion between Mr Blakemore and HM Courts and Tribunals
Service (“HMC&TS”), HMC&TS sent him another copy on 20 December 2011.
On 3 January 2012, Mr Blakemore emailed HMC&TS to explain that he wished to
appeal, and asked for help to enable him to do so.
3.
HMC&TS took that request as a request for a full reasoned decision,
in accordance with the combined effect of Rules 35 and 39 of the Tribunal
Rules.
4.
On 10 January 2012, HMC&TS contacted this Tribunal to explain the
position, and to pass on the request for full written findings and reasons.
5.
It is not clear to us whether Mr Blakemore is aware that, where a
Tribunal has produced either a short form decision or a summary decision, a
full decision is not prepared unless one of the parties requests it. This
requires additional work to be done by the Tribunal in preparing a full
decision providing all the necessary detail to enable a party to consider
whether an application for permission to appeal is to be pursued, and (if such
an application proves to be successful) to enable the Upper Tribunal to deal
with the appeal.
6.
The additional task of preparing this full decision has had to await our
availability, as work notified before 10 January 2012 on other appeals has had
to take precedence. In addition, one of us has been unavailable over an extended
period. The lapse of time since the hearing has been unfortunate, but we hope
that the parties understand the reasons for that rather lengthy interval.
7.
Paragraph 1 of our summary decision stated:
“The Tribunal decided that the Appellant’s return
for the year ended 5 April 2010 was filed late, that the Appellant did not have
a reasonable excuse which continued throughout the period of default, and that
the penalty of £100 was in the correct amount. Accordingly, the Tribunal
dismissed the appeal.”
The facts
8.
The evidence consisted of the bundle of documents prepared for the
hearing; in addition, Mr Blakemore provided us during the hearing with two CDs
of recordings of telephone conversations between him and HMRC, as explained
below. In addition, Mr Blakemore gave informal evidence in the course of
putting his case. Except to the extent indicated later in this decision, we
accepted that evidence, which Mrs Gardiner did not seek to challenge. We asked
Mrs Gardiner whether HMRC would accept our taking into account the CD
recordings after the hearing if this proved necessary in arriving at our
decision, as only one copy of each CD was available. She agreed that we could
do so, but commented on this in opening her argument. From the evidence we find
the following facts.
9.
Mr Blakemore had filed self assessment returns for a number of years,
but as a result of a change in circumstances, he had stopped doing so following
advice from HMRC that this was not necessary. In respect of 2009-10, he became
aware as a result of advice from HMRC that he would need to file a self
assessment return. At that point the filing date for paper returns had already
passed. As a result he needed to file on line.
10.
He submitted form SA1 during the latter part of 2010. However, he was
unable to log on to the HMRC system. He therefore contacted the HMRC help desk.
He was told on different occasions by two HMRC employees that there were delays
with the system. (He informed us that on the day of the hearing, he had checked
again, and that there was a six week backlog.)
11.
As a result he was unable to register. His position was compounded by a
practical problem; there were two files relating to him within the HMRC system,
and these were unable to be linked. Within these two files, some entries related
to National Insurance and some were made against the UTR, so that neither file
contained the full picture.
12.
He had had a number of telephone conversations in the period from September
2010 to 31 January 2011. He had found it virtually impossible to deal with the
matter through his contacts with HMRC. He had been told that no self assessment
record had been set up; however, he had told HMRC of his UTR. It appeared that
someone had previously tried to set up a self assessment record. He had
telephoned on 10 January 2011, as he knew that the deadline for filing was
approaching and he definitely did not want to be “fined” (ie, suffer a penalty).
He was told again that his activation code would not be with him in time for
him to file a return on line.
13.
His telephone conversations had been between five and twelve minutes
long. He had been told repeatedly by HMRC that it was not possible for him to
file on line. He was also told that a new record needed to be set up. He had
tried repeatedly to call. There had been contact between him and HMRC after the
filing deadline because his return was not filed until after 31 January 2011.
He emphasised that he had not been given the tools to access HMRC’s system.
14.
According to HMRC’s records (of which there was no direct evidence), Mr
Blakemore enrolled on line on 13 April 2011, and the activation “PIN” code was
sent out on 14 April 2011.
15.
He wrote to HMRC on 16 April 2011 about the fixed penalty issued to him
for late submission of his self assessment return. He referred to telephone
conversations which he had had with individuals at HMRC, first in October 2010
and then in January, as the filing deadline was approaching. He explained that
he had again been told that he probably would not have the information which he
needed to be able to file a return on line. He continued:
“I was told that a fine would be sent out
automatically but I just needed to let you know that this was not due to me,
but due to a backlog at HMRC and the fine would be cancelled. I’d be grateful
if you could please confirm that this is the case. I have attempted to call 3
times but each time have been put on hold for over 30 minutes and as I don’t
have a landline this is extremely expensive.
As the situation currently stands I now have managed
to get a Gateway ID number but I am still waiting for a password so I can
finally submit my application. I’d be grateful if you could also let me know
what this password is, or how long I should expect to wait for it.”
16.
Mr Blakemore’s recollection was that he had not received an activation PIN
code until about 18 April 2011. He had not been able to enrol on line until 13 April
2011, and the first occasion on which he had been able to log on to HMRC’s on-line
system had been about ten days before that.
17.
He had activated his account on 10 May 2011 and filed his return on 19
May 2011, as he knew the deadline of 31 January 2011 had been substantially
missed.
18.
On 19 May 2011 HMRC wrote to Mr Blakemore concerning his appeal against
the first penalty for late submission of his 2009-10 return. This letter
indicated that the time limit for appealing against the penalty had expired,
and that his letter had been received by HMRC after the expiry of the 30 day
appeal period. The only circumstances in which a late appeal would be accepted were
where Mr Blakemore had a reasonable excuse for not filing the return on time.
The letter continued:
“This reasonable excuse must be an exceptional event
beyond your control, which continued for the 30 days beyond the receipt of the
penalty notice.
We are unlikely to agree you were prevented from
filing your tax return on time or appealing against the penalty within a 30 day
period if, during the exceptional event, you were able to manage the rest of
your private and business affairs.”
19.
On 2 June 2011 Mr Blakemore gave Notice of Appeal to HMC&TS. In his
grounds for appeal, he set out a broad description of the background facts, and
stated:
“I was told that a fine would be sent out
automatically but I just needed to notify HMRC that this was not due to me, but
due to a backlog at HMRC and the fine would be cancelled.”
The law
20.
The relevant legislation is contained in the Taxes Management Act 1970
(“TMA 1970”). The sections relevant to Mr Blakemore’s filing obligations are s
8, and (in respect of a 2009-10 return) s 93(2), (7) and (8) TMA 1970. We need
only set out the latter sub-section:
“(8) On an appeal against the determination
under section 100 of this Act of a penalty under subsection (2) or (4) above that
is notified to the tribunal, neither section 50(6) to (8) nor section 100B(2)
of this Act shall apply but the tribunal may—
(a) if it appears that, throughout the period of
default, the taxpayer had a reasonable excuse for not delivering the
return, set the determination aside; or
(b) if it does not so appear, confirm the
determination.”
21.
The legislation does not define reasonable excuse. Section 118(2)
provides:
“(2) For the purposes of this Act, a person
shall be deemed not to have failed to do anything required to be done within a
limited time if he did it within such further time, if any, as the Board or the
tribunal or officer concerned may have allowed; and where a person had a
reasonable excuse for not doing anything required to be done 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.”
Mr Blakemore’s arguments
22.
Much of Mr Blakemore’s argument was set out in his account of the facts,
which we have very largely (but not completely) accepted.
23.
As a result of his tax and National Insurance details being split
between two separate and unlinked files, those involved in presenting HMRC’s
case were not aware of all his telephone conversations with HMRC. He had
therefore contacted HMRC’s Data Protection Officer, and obtained two CDs of
conversations between him and HMRC. However, although Mr Blakemore had sent a
fax requesting transcripts of the telephone conversations between him and HMRC
relating both to his self assessment position under his Universal Tax Reference
(“UTR”) and to his National Insurance position (under his National Insurance
number), the conversations recorded on these CDs related only to the latter.
His contacts with HMRC had been by phone and email. Each time he had contacted
HMRC by phone, he had asked for a log of the call to be made. However, not all
the calls had been listed.
24.
He emphasised in his argument before us that he had tried to enrol
before the due date. He thought that his postcode could be an issue, as he had
moved residence several times. He submitted that the reasonable excuse had been
maintained throughout the default except for the last period. The steps which
he had taken to meet his obligation were shown by the transcripts (ie the CD
recordings). He had not made errors. Those within HMRC dealing with the penalty
had not been aware of the recorded conversations. This was perhaps due to
HMRC’s administrative error in not linking the two files relating to him. He
acknowledged that his filing of the return had been late, but this had been
outside his control.
Arguments for HMRC
25.
Mrs Gardiner commented that she had difficulty in dealing with the CD
recordings when she had not had an opportunity to listen to them. She was not
in a position to comment on them at the hearing.
26.
The issues were:
(1)
Was the tax return for 2009-10 filed late?
(2)
If so, did Mr Blakemore have a “reasonable excuse for the entire period
of default” for the return being delivered late?
27.
As to the first issue, Mr Blakemore’s return had been filed on line on
19 May 2011, which was 108 days late.
28.
On the second issue, Mrs Gardiner provided information relating to the
Government Gateway. Once an individual had completed the registration process,
the activation code would be sent separately by post within seven days. If the
PIN was not activated within 28 days it would expire.
29.
Mr Blakemore had contended that he could not file his return as HMRC had
failed to provide him with his User ID and/or activation code due to a 3 month
backlog. However, she submitted that HMRC had no three month backlog in issuing
activation codes.
30.
There was no indication that Mr Blakemore had enrolled on line before 13
April 2011. She referred to a note of a telephone call made on 18 July 2011 to
HMRC’s Online Services department, which confirmed this, as well as the date on
which the activation PIN code had been set out, the date on which Mr Blakemore
had activated the online account, and the date on which he had filed his return.
31.
Mr Blakemore had not activated the account until the 26th day of its
validity period. Once he had done this, he had not filed his return for a
further nine days.
32.
Mrs Gardiner referred to the chronology. The penalty notice had been
issued on or around 15 February 2011. Mr Blakemore’s original contact with HMRC
had been on 23 September 2010, to obtain advice on completing the employment
pages of the self assessment return. This had been before the deadline for
filing a paper return. His subsequent steps had been after the filing deadline.
On 13 April 2010 he had asked for advice on registering to file on line. On 10
May 2011 he had contacted HMRC to explain that he was having trouble completing
his return on line. On 17 May 2011 he had asked for clarification on payments
on account. On 19 May 2011 he asked HMRC for advice on completing returns where
there were losses, and also on payments on account. She submitted that this was
a clear indication that he had not completed his tax return before 31 January 2011.
33.
She further submitted that Mr Blakemore was familiar with the self
assessment system, and therefore aware of his obligations to complete and file
his 2009-10 return by specific dates, which he had failed to do. A reasonable
person would have a process in place to ensure compliance with his various
obligations, including the filing of returns.
34.
HMRC contended that the penalty had been correctly issued in the correct
amount. The Tribunal therefore had to consider whether there was a reasonable
excuse under s 118(2) TMA 1970.
35.
Mrs Gardiner submitted that a reasonable excuse was normally an
unexpected or unusual event, either unforeseeable or beyond the relevant
person’s control, which prevented him from complying with an obligation when he
otherwise would have done. A combination of unexpected and foreseeable events
might when viewed together be a reasonable excuse.
36.
If there was a reasonable excuse it must exist throughout the period of
default. She submitted that Mr Blakemore did not have a reasonable excuse for
the whole period of the default.
37.
She contended that he had been negligent in not submitting his return on
time, and that negligence could never be a reasonable excuse. The penalty had
been correctly issued in the correct amount. There was no reasonable excuse,
and the penalty should be confirmed.
38.
HMRC had made no errors in the present case; Mr Blakemore had made the
error by not taking action to ensure that he complied with the filing
requirements. His appeal should be dismissed.
Discussion and conclusions
39.
We are satisfied on the evidence that Mr Blakemore’s 2009-10 return was
filed late, on 19 May 2011. He is therefore liable to a penalty, unless he can
satisfy us that there was a reasonable excuse for the late filing of his
return, and that such reasonable excuse subsisted throughout the period of
default.
40.
At the hearing, having heard Mr Blakemore’s arguments, Mrs Gardiner’s
arguments for HMRC and Mr Blakemore’s reply, we retired to consider our
decision. We found ourselves able to reach a decision immediately, and returned
to announce it to the parties. Our decision was that although we considered
that Mr Blakemore had a reasonable excuse for the late filing of his return, as
a result of the difficulties which arose because of the existence of two separate
and unrelated HMRC files concerning his tax and National Insurance position, the
delay between receipt of the PIN and the activation and submission of the
return was, in the circumstances, unreasonable.
41.
Having waited for the position to be resolved, Mr Blakemore could
reasonably have been expected to act immediately once the difficulties in
arranging for filing of the return had been eliminated. We considered that if
the Appellant had activated the PIN and filed the return as soon as he had
received the PIN, he would have had a reasonable excuse for the late filing,
and that excuse would have continued throughout the period of default.
42.
We therefore found that the reasonable excuse did not continue
throughout the period of default. In the absence of a reasonable excuse which
continued throughout the period of default, the determination of the penalty
had to be confirmed and the appeal dismissed.
43.
Following the hearing, we prepared our summary decision. In the course
of doing so, we reviewed extracts from the recordings of telephone
conversations which the Appellant had had with HMRC. (In the light of the
amount at issue, we did not consider it appropriate to listen to every
conversation, especially as Mr Blakemore had indicated that these recordings
did not comprise all of the conversations which he had had with HMRC.) Although
the conversations which we have listened to support the conclusion which we
would otherwise have reached as mentioned at paragraph 41 above, in the light
of the conclusion reached on the basis of ss 93(8)(a) and s 118(2) TMA, they do
not affect the result of Mr Blakemore’s appeal. The recordings and associated
correspondence handed to the Tribunal by Mr Blakemore will be returned to him
once matters relating to this appeal have become final.
44.
We have referred above the absence of direct evidence of the date of Mr
Blakemore’s enrolment and the subsequent events concerning his on-line account.
The record of the telephone conversation does not include any details of the
caller, whom we presume to have been Mrs Gardiner. Although in the present case
we have accepted the dates mentioned in that telephone conversation as correct,
we consider that HMRC ought to provide evidence from an office in its Online
Services department, at the very least in the form of an email identifying the
officer in that unit who is giving details of the status and history of the
on-line account.
45.
It is clear that Mr Blakemore had conversations with HMRC between the
date of activating his account and the final filing of his return. We can
understand that Mr Blakemore would have wished to have his account operating
before finalising his return and submitting it, although we think that he was
somewhat imprudent not to have as much as possible of the necessary information
available as soon as his account was activated.
46.
The factor which leads us to conclude that he does not satisfy s
93(8)(a) TMA 1970, despite our having found that in his particular and unusual
circumstances he had a reasonable excuse up to the time of receiving the
activation code, is his failure to act with sufficient speed from that point
onwards to ensure that his return was filed without further delay. He therefore
does not fulfil s 118(2) TMA 1970. We emphasise that it is for him to satisfy
us that he had a reasonable excuse, and in addition that such excuse continued
throughout the period of default; as a result of his failure to act quickly
following receipt of the activation code, he has not satisfied us that there is
any reason for setting the penalty determination aside.
47.
In reconsidering matters for the purposes of this full decision, we are
aware that there was a great deal more information provided by Mr Blakemore
than we were able to consider at the hearing, and also that some of the
statements which he made at the hearing were not fully consistent with the
facts as we have found them. However, we do not consider that the decision
which we reached at the hearing is in any way affected by these matters. The
reason why his appeal does not succeed is that his reasonable excuse did not
continue throughout the period of default; he appeared to acknowledge this in
the final stage of his argument (see paragraph 24 above). The other matters
just mentioned are not relevant to the latter issue.
48.
We note that on the HMRC website, under the heading “Making an appeal if
you have a 'reasonable excuse'”, the following is considered by HMRC to be a
reasonable excuse:
“late receipt of your online Activation Code, User
ID or password even though you asked for them before the tax return deadline”
However, it is not a reasonable excuse where:
“you didn’t get your online Activation Code, User ID
or password in time, but you didn't ask for them until after the tax return
deadline”.
49.
We have no means of establishing whether this wording was on the website
in January 2010. However, we find that the administrative problem with the two unlinked
files concerning Mr Blakemore’s taxation and National Insurance affairs continued
beyond the filing date.
50.
As we found at the hearing, Mr Blakemore’s appeal must be dismissed.
51.
We have prepared this decision on the basis that Mr Blakemore is
considering appealing against it. We have two comments on this. First, as
indicated in the following paragraph, his only right is to apply for permission
to appeal; the giving of permission is not automatic, and an appeal can only be
made on a point of law. (Details of the requirements can be obtained from the First-tier
Tribunal (Tax) website; see “Guidance notes on completing the First-tier
Tribunal application for permission to appeal to the Upper Tribunal”, and the
corresponding application form, which must be completed.) Secondly (but only
relevant if permission to appeal were to be granted), the costs regime in the
Upper Tribunal is entirely different; unlike a basic appeal before the
First-tier Tribunal, an appeal to the Upper Tribunal carries the risk that the
losing party may become liable to the costs suffered by the other party. The
costs at risk are therefore likely to be many times more than the amount of the
penalty under appeal. Mr Blakemore should therefore consider carefully whether seeking
to appeal is an appropriate step for him to take.
Right to apply for permission to appeal
52.
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.
JOHN CLARK
TRIBUNAL JUDGE
RELEASE DATE: 27 March 2012
