First-tier Tribunal (Tax)

[2012] UKFTT 712 (TC)

TC02379

Appeal number:  TC/11/05883

Penalties – Late payment of PAYE instalments for 2010/11 – whether “reasonable excuse” or other mitigating factors – No – Finance Act 2009, Schedule 56 – Appeal disallowed

FIRST-TIER TRIBUNAL

TAX CHAMBER

Sitting in public at George House, 126 George Street, Edinburgh on 1 November 2012

Mr D Lindsay, Director for the Appellant

Ms E McIntyre, for the Respondents

© CROWN COPYRIGHT 2012

DECISION

Preliminary

1.             This is an Appeal against the imposition of penalties totalling £3,635.11 for late payment of PAYE for the Year 2010/11.  The Appellant company which operates a garage and car sales business with a Vauxhall dealership was represented by its director, Mr Lindsay.  He indicated that he did not dispute the late payment of monthly PAYE or the calculation of the penalty.  The issue for the Tribunal was whether the penalties should be mitigated.

Submissions

2.             Helpfully, on behalf of HMRC Ms McIntyre agreed to “open” the Hearing by setting out the background to the imposition of the penalties.  Payments were due on the 19^th of each month.  The first late payment is ignored.  Also, in light of the decision in Agar (TC/2011/04910), any payment falling due after the end of the relevant tax Year is ignored too.  Consequently the original penalty total of £4,012.45 had been reduced to £3,635.11.

3.             Ms McIntyre addressed the Grounds of Appeal set out in the correspondence.  Essentially, the absence of any forewarning of the imposition of a penalty was complained of by the Appellant.  Although HMRC was under no obligation to issue such a warning, Ms McIntyre emphasised that repeated warnings had in fact been given to the Appellant company.  She noted pages 27-29 of the Bundle which record HMRC’s issuing warnings and the form of a warning letter.  In particular that encourages a tardy taxpayer to contact HMRC to negotiate an agreement to pay any overdue tax.  Penalties thereafter can be suspended.  In the present case the taxpayer company had not contacted HMRC.  Moreover, in addition to the warnings issued to the taxpayer company, general advice had been issued publicising the penalty system introduced by Finance Act 2009 (see pages 83 et seq).

4.             The Tribunal referred Mr Lindsay to the Grounds of Appeal (page 5) and his two letters, one dated 7 July 2011 and the other received during October 2011 (pages 21-22 and 26) and invited him to address us on the terms of these and elaborate as appropriate.  Having confirmed that he did not dispute the calculation of the penalty, Mr Lindsay indicated that the essence of his complaint was that he had never been forewarned of an actual penalty, far less its amount.  Once he had received the notice of penalties the company had never made late payment thereafter.  Mr Lindsay submitted there should be some system advising a taxpayer of the possible imposition of a penalty and the amounts involved.  A bill had been issued only after the end of the tax Year.  He had been surprised then by the amount of the penalty.  He accepted that he had not approached HMRC to negotiate a system of late payment.

5.             The Tribunal invited Mr Lindsay to explain his reference to financial difficulties (page 21).  Apparently there is a special system of payment whereby Vauxhall pays bi-monthly (on the 13^th and 17^th of each month) an extra payment to its dealers depending on the number of vehicles sold.  The actual sale of a vehicle by the taxpayer to its customer is at a discount or loss, and this extra payment compensates and produces a profit.  There was, it seems, no change or unexpected factor affecting the system of payment at the material time, however.  In response to Mr Lindsay’s complaints, Ms McIntyre referred us to the UTT’s decision in Hok Limited [2012] UKUT 363 (TCC), which suggests that the absence of a system of reminders is not in itself unfair.

Conclusion

6.             We consider that Ms McIntyre’s submissions were well-founded.  We appreciate that there is some scope to modify such penalties where there is a “reasonable excuse” or “special circumstances” (see paras 16 and 9 of Schedule 56, Finance Act 2009), but we do not consider that the complained lack of a system of warnings meets this.  In any event we would question whether there was any lack of forewarning in imposing the penalty in the present circumstances or any unfairness.  Further, we do not consider that there were any exceptional financial circumstances which might give rise to a “reasonable excuse”, although we are conscious of the cashflow problems which the system of payment by Vauxhall may cause.

7.             For these reasons we dismiss the Appeal and confirm the penalties imposed.

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.

KENNETH MURE, QC

TRIBUNAL JUDGE

RELEASE DATE:  20 November 12