[2012] UKFTT 755 (TC)
TC02412
Appeal number:
TC/2012/06126
TYPE OF TAX – appeal
against the penalty imposed for the late payment of PAYE- Schedule 56 Finance
Act 2009-appellant paying using wrong reference- concerned when informed by
HMRC payments not received –held back payments- five different HMRC offices
involved – appeal allowed for months 5, 6, and 7- dismissed for all other
months
FIRST-TIER TRIBUNAL
TAX CHAMBER
|
|
EUROBULK LIMITED
|
Appellant
|
|
|
|
|
|
|
- and -
|
|
|
|
|
|
|
|
THE
COMMISSIONERS FOR HER MAJESTY’S
|
Respondents
|
|
|
REVENUE &
CUSTOMS
|
|
|
TRIBUNAL:
|
JUDGE SANDY RADFORD
|
|
|
JAMES MIDGLEY
|
Sitting in public at Bedford Square , London on 6 September 2012
Ms S Beazer, financial manager
of the Appellant, for the Appellant
Mrs G Orimoloye, Officer of HMRC,
for the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
This is an appeal against the penalty of £2,530.40 imposed for the late
payment of PAYE during the tax year 2010/11.
The legislation
2.
Penalties for the late payment of monthly PAYE amounts were first
introduced for the tax year 2010/11. The legislation is contained in Schedule
56 to the Finance Act 2009 (“Schedule 56”). Schedule 56 covers penalties for
non- and late payment of many taxes: paragraph 1(1) (which applies to all
taxes) states that a penalty is payable where the taxpayer fails to pay the tax
due on or before the due date.
3.
Paragraph 6 (which relates only to employer taxes such as PAYE) states
that the penalty due in such a case is based on the number of defaults in the
tax year, though the first default is ignored. The amount of the penalty
varies as provided by sub-paragraphs (4) to (7):
(4)
If P makes 1, 2 or 3 defaults during the tax year, the amount of the penalty is
1% of the amount of tax comprised in the total of those defaults.
(5)
If P makes 4, 5 or 6 defaults during the tax year, the amount of the penalty is
2% of the amount of tax comprised in the total amount of those defaults.
(6)
If P makes 7, 8 or 9 defaults during the tax year, the amount of the penalty is
3% of the amount of tax comprised in the total amount of those defaults.
(7)
If P makes 10 or more defaults during the tax year, the amount of the penalty
is 4% of the amount of tax comprised in those defaults.
In this and other paragraphs of Schedule 56 “P” means a
person liable to make payments.
4.
Under paragraph 11 of Schedule 56 HMRC is given no discretion over
levying a penalty:
11(1) Where P is liable to a
penalty under any paragraph of this Schedule HMRC must –
(a)
assess the penalty,
(b)
notify P, and
(c)
state in the notice the period in
respect of which the penalty is assessed.
(3)
An assessment of a penalty under any paragraph of this Schedule—
(a)
is to be treated for procedural purposes in the same way as an assessment to
tax (except in respect of a matter expressly provided for by this Schedule),
(b)
may be enforced as if it were an assessment to tax, and
(c)
may be combined with an assessment to tax.
5.
Paragraphs 13 to 15 of Schedule 56 deal with appeals. Paragraph 13(1)
allows an appeal against the HMRC decision that a penalty is payable and
paragraph 13(2) allows for an appeal against the amount of the penalty.
Paragraph 15 provides the Tribunal’s powers in relation to an appeal which is
brought before it:
(1)
On an appeal under paragraph 13(1)
that is notified to the tribunal, the tribunal may affirm or cancel HMRC’s
decision.
(2)
On an appeal under paragraph 13(2)
that is notified to the tribunal, the tribunal may-
(a)
affirm HMRC’s decision, or
(b)
substitute for HMRC’s decision
another decision that HMRC had the power to make.
(3)
If the tribunal substitutes its
decision for HMRC’s, the tribunal may rely on paragraph 9-
(a)
to the same extent as HMRC…[…],or
(b)
to a different extent, but only if
the tribunal thinks that HMRC’s decision in respect of the application of
paragraph 9 was flawed.
6.
Paragraph 9 (referred to in paragraph 15) states:
(1)
If HMRC think it right because of special circumstances, they may reduce the
penalty under any paragraph of this Schedule.
(2)
In sub-paragraph (1) “special circumstances” does not include –
(a) ability
to pay, or
(b) the
fact that a potential loss of revenue from one taxpayer is balanced by a
potential over-payment by another.
(3)
In sub-paragraph (1) the reference to reducing a penalty includes a reference
to-
(a) staying
a penalty, and
(b) agreeing
a compromise in relation to proceedings for a penalty.
7.
Paragraph 16 contains a defence of reasonable excuse, but an
insufficiency of funds is not a reasonable excuse unless attributable to events
outside P’s control. Nor is it such an excuse where P relies on another person
to do anything unless P took reasonable care to avoid the failure; and where P
had a reasonable excuse for the failure but the excuse has ceased, P is to be
treated as having continued to have the excuse if the failure is remedied
without unreasonable delay after the excuse has ceased.
Background and facts
8.
Ms Beazer explained that the appellant changed payment methods to
electronic from April 2010. They were talked through the process by HMRC and
believed they were paying using the correct reference.
9.
During the year the appellant was notified that payments were not being
received. This resulted in payments being made late as the appellant was
reluctant to keep sending payments that were not received or allocated to their
account.
10.
Until then according to Ms Beazer all the payments had been made on time
with the exception of months 1 and 2.
11.
Ms Beazer stated that when they were told that the payments had not been
received it made perfect sense not to continue sending funds to the account as
they had been constantly advised to be vigilant and wary of fraudulent
transactions.
12.
The appellant did not dispute that some of the payments were sent late
but they were greatly concerned with the problems on their account and the
continuing conflicting information received from various offices of HMRC.
13.
The appellant stated that they had received letters from HMRC at
Bradford, Chesterfield, Southend and London; and each time Ms Beazer telephoned
she had spoken to a different person and been transferred from one department
to another because no one person was able to deal with the complete problem.
14.
The initial problem appeared to have been caused by the PAYE payments
being allocated to the corporation tax account because the wrong reference was
used.
15.
Eventually all the payments were correctly allocated apart from
£9,746.63 which had been posted to a corporation tax holding account and it too
was correctly allocated eventually.
16.
Ms Beazer gave evidence that HMRC had phoned her several times to say
that they had not received any PAYE from the appellant that year which was when
she realised that there was a problem.
17.
The problem apparently arose because the appellant had used its
reference number from the previous year but until this was discovered Ms Beazer
was reluctant to make further PAYE payments. Ms Beazer said however that all
that was missing from the payment reference was the last four digits such as
04/10.
Appellant’s submissions
18.
Ms Beazer submitted that the misallocation of the PAYE had resulted in
an apparent overpayment of some £10,000 for the year 2009/10.
19.
She submitted that she disagreed with the imposition of the penalty by
HMRC because they had not dealt directly with the detailed responses to the
appellant’s letters.
20.
She submitted that no-one had been able to tell them why they were not
informed of an apparent overpayment from the year 2009/10. If this information
had been brought to the appellant’s attention, the subsequent misallocation
would not have occurred.
21.
She submitted that the appellant was constantly advised to be vigilant
and wary of fraudulent transactions so it made perfect sense not to continue
sending funds to an account, which funds, according to HMRC, had not been
received.
22.
She submitted that it was the appellant’s conclusion that the penalty
was unjust because the payments were sent late following conflicting and
inconsistent advice from HMRC.
HMRC’s submissions
23.
Mrs Orimoloye submitted that the appellant had always paid late in the
previous tax year and had thus established a pattern of non-compliance.
24.
She submitted that HMRC had no record of a telephone call concerning the
online banking.
25.
She submitted that the appellant had not been right to have withheld
payment bearing in mind that they had used the main payment reference from the
previous tax year.
26.
Mrs Orimoloye submitted that the appellant had been provided with ample
information on the payment dates and electronic banking.
Findings
27.
The Tribunal found Ms Beazer to be honest and sincere. We accepted that
the appellant had received conflicting information and inconsistent advice from
a number of HMRC offices. Additionally we found that not all the appellant’s
telephone calls were adequately dealt with and some of their letters were not
adequately answered.
28.
We found that it appeared that HMRC might not have explained to the
appellant the reason why the month 6 payment had been allocated to the
corporation tax account.
29.
We accepted that as a result of being told by HMRC that they had not
received the PAYE payments the appellant was concerned at the possibility of
fraud as they were now paying electronically.
30.
For these reasons we decided that the penalty in respect of three of the
months should be cancelled.
31.
We did find however that the appellant had consistently paid late in
previous years and even when the payments had been correctly allocated; it appeared
that they were still late although this may have been in part because of their
concern about the apparent non receipt of the payments.
Decision
32.
In recognition of the confusing information supplied to the appellant
from a number HMRC offices and the appellant’s concern that despite paying
their PAYE correctly as they believed, they were told by HMRC that no payments
had been received and consequently stopped paying, we have decided to cancel
the penalty in respect of months 5, 6 and 7 and the appeal is allowed in
respect of these months.
33.
In respect of the other months the appeal is hereby dismissed and the
penalty in respect of these months are hereby confirmed.
34.
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.
SANDY
RADFORD
TRIBUNAL JUDGE
RELEASE DATE: 8 December 2012
