Hazel Brenda McGuinness v Revenue & Customs [2013] UKFTT 88 (TC) (31 January 2013)
DECISION
1.
This was Mrs McGuinness’s appeal against a penalty of £100 for late
submission of her 2010-11 self-assessment (“SA”) tax return.
The issues in the case
2.
The first issue was whether Mrs McGuinness should be allowed to make a
late appeal.
3.
If the answer to that question was yes, then the second issue was
whether the Notice to File her SA return was invalid, because it had been was
issued in the name of Mrs B McGuinness when her name is Mrs Hazel Brenda
McGuinness.
4.
If the Notice was valid, the third issue is whether she had a reasonable
excuse for its late submission.
The evidence
5.
The Tribunal was provided with the correspondence between the parties,
and between the parties and the Tribunal.
6.
HMRC also provided copies of a number of documents, including:
(1)
the SA Notes relating to Mrs McGuinness’s SA return;
(2)
the “SA Return Summary” in respect of Mrs McGuinness, for 1999-2000,
2009-10 and 2010-11, showing the name under which the returns were issued, the
date of issue and the date the completed return was received. For 2010-11 and
2009-10 the SA Return Summary also give the Unique Taxpayer Reference (“UTR”);
(3)
a page headed “Individual Designatory details” in the name of Mrs B
McGuinness, dated 19 October 2012 and showing Mrs McGuinness’s date of birth,
UTR number, NI number and other information;
(4)
HMRC’s PAYE record under the name “H B McGuinness”, showing Mrs
McGuinness’s UTR and NI number;
(5)
an extract from HMRC’s central computer record under the name “H B
McGuinness” which includes her UTR and NI number as well as other information.
The facts
7.
On the basis of the evidence provided, the Tribunal found the following
facts.
8.
Mrs McGuinness’s PAYE record is held under the name of H B McGuinness.
9.
On 11 January 2000 an SA record was created under the name Mrs B
McGuinness. It shows Mrs McGuinness’s correct national insurance number and her
date of birth.
10.
An SA tax return under the name Mrs B McGuinness was issued for
1999-2000. On 31 January 2001 Mrs McGuinness filed the return.
11.
Mrs McGuinness’s SA account was then dormant for a number of years as
there was no requirement for her to complete SA returns.
12.
On 9 July 2010 Mrs McGuinness called HMRC to inform them that she had
commenced self-employment on 1 March 2010. The HMRC adviser amended Mrs
McGuinness’s PAYE code for 2010-11, re-opened her SA account, gave her the
telephone number of the HMRC helpline for the newly self-employed and issued a
letter containing her UTR.
13.
The UTR shown on the SA record is the same as that on the PAYE record
and HMRC’s central computer record. All three documents have Mrs McGuinness’s
date of birth and address.
14.
On the same day, 9 July 2010, an SA tax return was issued in the name of
Mrs B McGuinness.
15.
On 9 August 2010 Mrs McGuinness ceased self-employment. Her period of
self-employment thus covered two tax years, 2009-10 and 2010-11
16.
On 17 January 2011 Mrs McGuinness called HMRC. She told them she had
made a loss during 2009-10 and that there would be no tax liability for that
year. She again asked for her UTR (which was reissued to her) so she could
complete her tax return which she said she would download from the internet.
17.
On 31 January 2011 Mrs McGuinness filed her return online. The SA return
summary for 2009-10 is headed “Mrs B McGuiness”.
18.
Mrs McGuinness submitted accounts to HMRC before 5 April 2011. These
showed that she had ceased her self-employment and suffered a loss.
19.
On 6 April 2011 HMRC issued a 2010-11 Notice to File to Mrs B
McGuinness.
20.
At or around 14 February 2012, as the SA return had not been received by
the due date, HMRC issued a penalty to Mrs B McGuinness of £100.
21.
Mrs McGuinness appealed the penalty on 27 February 2012 on the basis
that “self-employment ceased – you were informed and a loss made.” She made no
reference to the name on either the Notice to File or the penalty notice.
22.
On 2 April 2012 Mrs McGuinness filed the 2010-11 return online.
23.
On 14 May 2012 HMRC rejected her appeal against the penalty.
24.
On 7 June 2012 she asked for a review of HMRC’s decision because:
(1)
HMRC had been provided with final accounts prior to 5 April 2011 and
thus she was “under the impression she had fulfilled her obligation”; and
(2)
the return had been issued under the wrong name.
25.
On 11 July 2012 HMRC’s review officer upheld the decision not to allow
the appeal.
26.
By letter dated 6 August 2012 Mrs McGuinness appealed to the Tribunal.
The letter of appeal was received on 16 August 2012, which is outside the
appeal time limit of 30 days.
The late appeal
27.
When considering whether to give permission for a late appeal, The
Tribunal must make its decision must make its decision in the context of its
overriding objective: to deal with cases fairly and justly.
28.
Guidance on when and whether to allow a late appeal was given in Advocate
General for Scotland v General Commissioners for Aberdeen City [2006] STC 1218 and R (oao Cook) v General Commissioners of Income Tax [2009] STC 1212.
29.
I derive from those cases the principles that the Tribunal must conduct
a balancing exercise, considering inter alia the reason for delay, and
in particular whether it was intentional; how long the delay has lasted, the
effect on either party if permission is allowed or refused and the merits of
the case.
30.
In this case Mrs McGuinness’s delay was unintentional, and her appeal
was only a few days after the deadline. If the Tribunal refused permission for
the late appeal, she would suffer the prejudice of not having her case heard,
but the prejudice to HMRC would be slight. Finally, Mrs McGuinness has an
arguable case
31.
The Tribunal therefore decided that it was in the interests of justice
to give permission for Mrs McGuinness to make a late appeal.
The law
32.
From 2010-11 onwards, penalties for late filing of SA tax returns are
charged under Finance Act 2009, Schedule 55. Paragraph 23(1) states that a
penalty will not arise if a person has a reasonable excuse for the failure.
33.
Taxes Management Act 1970 (“TMA”) s 8 sets out a person’s obligations
when a tax return has been issued:
Personal return
(1) For
the purpose of establishing the amounts in which a person is chargeable to
income tax and capital gains tax for a year of assessment, and the amount
payable by him by way of income tax for that year, he may be required by a
notice given to him by an officer of the Board—
(a) to
make and deliver to the officer…a return containing such information as may
reasonably be required in pursuance of the notice, and
(b) to
deliver with the return such accounts, statements and documents, relating to
information contained in the return, as may reasonably be so required.
34.
TMA s 114 deals with errors or omissions:
Want of form or errors not to invalidate
assessments, etc
(1) An
assessment or determination, warrant or other proceeding which purports to be
made in pursuance of any provision of the Taxes Acts shall not be quashed, or
deemed to be void or voidable, for want of form, or be affected by reason of a
mistake, defect or omission therein, if the same is in substance and effect in
conformity with or according to the intent and meaning of the Taxes Acts, and
if the person or property charged or intended to be charged or affected thereby
is designated therein according to common intent and understanding.
(2) An assessment or determination shall
not be impeached or affected—
(a) by reason of a mistake therein
as to—
(i) the name or
surname of a person liable, or
(ii) the description
of any profits or property, or
(iii) the amount of
the tax charged, or
(b) by
reason of any variance between the notice and the assessment or determination.
Mrs McGuinness’s submissions
35.
Mrs McGuinness submits that the 2010-11 Notice to File was issued to Mrs
B McGuinness and not to Mrs H B McGuiness. She says that “a penalty cannot be
levied on a person who does not exist”.
36.
She states that HMRC have “made an error and are running two sets of
records for myself but the one on which the penalty has been levied does not
relate to myself.”
37.
She also says that she had explained to HMRC on the phone that she had
made a loss and had sent in a final account of her self-employed earnings. She
therefore thought she had fulfilled her obligation to the tax authorities. She
states that she had assumed, as a lay person, that “the reminders for the
return of the form were an oversight by a clearly incompetent department
[which] had merely not noted my records correctly that a return was no longer
necessary.”
HMRC’s submissions
38.
HMRC say that filing the return is a statutory obligation and that Mrs
McGuinness does not have a reasonable excuse for not filing by the due date.
39.
They say that Mrs McGuinness had filed the earlier returns under the
name “Mrs B McGuinness”. They have only one record which relates to her, and
the various parts of their system show the same UTR, NI number, date of birth
and address.
40.
HMRC have also considered the legislation on special circumstances and
do not consider that there are any circumstances which are “out of the ordinary
run of events” – the definition given to the phrase “special circumstances” in Clarks
of Hove v Bakers' Union [1978] 1 WLR 1207.
Whether the Notice to File was validly issued
41.
In order for a penalty to be levied for the late filing of a tax return,
a person must first have been “required by a notice given to him” to complete
the return.
42.
Mrs McGuinness’ full name is Hazel Brenda McGuinness. The Notice to File
was issued to “Mrs B McGuinness”. Although the surname was correct, the initial
of the first of Mrs McGuinness’s forenames was omitted Mrs McGuinness therefore
submits that the Notice was invalid.
43.
It is arguable that the omission of the initial “H” from the Notice does
not constitute a mistake as to the name of the recipient, but HMRC have not
sought to argue this point: they have accepted there was an error. The Tribunal
has thus considered the matter on the basis that the Notice did contain a
mistake as to Mrs McGuinness’s name.
Statutory
interpretation of TMA s 114
44.
TMA s 114(1) states that “a mistake, defect or omission” does not
invalidate “an assessment, determination, warrant or other proceeding” if the
recipient has been “designated according to a common intent or understanding.”
TMA s 114(2) applies only to assessments and determinations and is thus not
relevant to the Notice.
45.
A Notice to File is not an assessment, determination or warrant, so the
first question is whether it is an “other proceeding”. There is no statutory
definition of “proceeding” and so reference can be made to the dictionary
definition.
46.
The Oxford English Dictionary’s main definition is that a
“proceeding” means “the carrying on of an action or series of actions; action,
course of action; conduct, behaviour.” The secondary definition is “a particular
action or course of action; a piece of conduct or behaviour.” This definition
indicates that the word should be given a wide meaning.
47.
I have also considered two rules of statutory construction. The first is
the principle “eiusdem generis”, meaning that when a list of two or more
specific descriptors is followed by a more general descriptor, the otherwise
wide meaning of that general descriptor must be restricted to the class of the
specific words that precede it.
48.
In s 114(1) the words “other proceeding” follows “assessment,
determination or warrant”. An assessment is similar, but not identical, to a
determination – both set out a fiscal liability. If these were the only two
words which came before “other proceeding”, it would be arguable that they form
a “genus” or type, and that a narrow meaning should be ascribed to the term
“other proceeding”, such that it could not encompass a
Notice to File but would be limited to a type of document which set out a
fiscal liability.
49.
A warrant, however, has a different character. It is a legal document
empowering a court official to enter premises and distrain goods (see, for
example TMA s 61(2)) or to arrest and detain an individual. It is very
different in type from an assessment or a determination. The meaning of “other
proceeding” cannot therefore be limited to a document setting out a liability
to tax.
50.
The second rule of statutory construction is that an Act is to be read
as a whole, so that an enactment within it is not to be treated as standing
alone but is instead to be interpreted in its context as part of the Act. In A-G
v HRH Prince Ernest Augustus of Hanover [1957] AC 436 at page 461 Viscount
Simonds said that “words, and particularly general words, cannot be read in
isolation; their colour and their content are derived from their context”.
51.
The immediately preceding section, TMA s 113, reads as follows:
“Every assessment,
determination of a penalty, duplicate, warrant, notice of assessment, of
determination or of demand, or other document required to be used in assessing,
charging, collecting and levying tax or determining a penalty shall be in
accordance with the forms prescribed from time to time in that behalf by the
Board, and a document in the form prescribed and supplied or approved by them
shall be valid and effectual.”
52.
TMA s 113 thus also refers to “assessment”, to “determination” (albeit
limited to penalties), and to “warrant”, in the same sequence as in TMA s
114(1). In TMA s 114 the three terms “assessment, determination and warrant”
are followed only by the term “other proceeding”, whereas in TMA s 113 the list
continues with “notice of assessment, of determination or of demand, or other
document required to be used in assessing, charging, collecting and levying tax
or determining a penalty…”
53.
It is thus reasonable to infer that by “other proceeding” the draftsman
was using a shorthand for the list of documents set out in TMA s 113.
54.
If this is correct, then an SA tax return would be an “other proceeding”
as it is a “document required to be used in assessing…tax”. A Notice to File
takes the place of an SA return for those who are expected to file online. If
it is correct that an SA return is an “other proceeding”, then it must also be
correct that a Notice to File such a return falls within TMA s 114(1).
55.
Other decisions of this Tribunal provide support for this conclusion. In
Mander Pension Trustees Ltd v R&C Commrs [2012] SFTD 322 at
[56], the Tribunal (Judge Mosedale and Mr Collard) held that a Notice of
withdrawal of approval from a pension scheme was an “other proceeding” within
the meaning of TMA s 114(1). In UK Co v R&C Commrs [2011] SFTD 72,
the Tribunal (Judges Kempster and Demack) held at [91] that the term “other
proceeding” was wide enough to encompass a Notice of enquiry into a corporation
tax return.
56.
I find, in conformity with those decisions and taking into account the
statutory context as well as the wide dictionary definition, that a Notice to
File an SA return is an “other proceeding” and so within the scope of TMA s
114(1).
Application to this case
57.
TMA s 114(1) only operates to save a Notice issued in an incorrect name
if the person has been “designated according to a common intent or
understanding.”
58.
On the evidence in this case, Mrs McGuinness had already filed two
returns issued under the name “Mrs B McGuinness”; the same National Insurance
number was on these SA returns as was on her PAYE records. HMRC have only one
central record for Mrs Gallagher which connects, via the UTR and NI numbers, to
both her PAYE and her SA records.
59.
I thus find that the designation “Mrs B McGuinness” was commonly
understood by both Mrs McGuinness and HMRC as referring to the same person as
Mrs H B McGuinness.
60.
As a result, TMA s 114(1) operates and the Notice to File was validly
issued.
The validity of the penalty notice
61.
The penalty notice was also addressed to Mrs B Gallagher. Although Mrs
Gallagher has not explicitly argued that this notice was invalid, for
completeness I deal with that point.
62.
First, the penalty notice is saved by TMA s 114(1) for the same reasons
as the Notice to File.
63.
Secondly, it is also saved by TMA s 114(2). That subsection applies to
assessments and determinations, and so encompasses penalty notices. The
subsection is broader than subsection (1) in that it is not subject to the
condition that the document must have been “designated according to a common
intent or understanding”.
Reasonable excuse
64.
The legislation does not define a reasonable excuse. This Tribunal has
held that “an excuse is likely to be reasonable where the taxpayer acts in the
same way as someone who seriously intends to honour their tax liabilities and
obligations would act,” see B&J Shopfitting Services v R&C
Commrs [2010] UKFTT 78 (TC) at [14]
65.
Mrs McGuinness argues that as a layperson she reasonably have thought
that there was no need to file a 2010-11 return, because on 17 January 2011 she
had informed HMRC she had made a loss and she had subsequently filed her
accounts.
66.
However, on 6 April 2011 HMRC issued her with Notice to File for
2010-11. Mrs McGuinness thought this was an oversight by “a clearly incompetent
department” and wrongly assumed she did not need to complete a return. She
received filing reminders from HMRC, which she ignored.
67.
In my judgment, a reasonable response to the receipt of the Notice to
File would have been to call HMRC and ask if they had made a mistake. Simply
assuming that the Notice had been issued in error, and ignoring not only the
Notice but the subsequent reminders, is not the action of someone who
“seriously intends to honour their tax liabilities and obligations”.
68.
I find that there is no reasonable excuse for the late filing of Mrs
McGuinness’s return.
Special circumstances
69.
HMRC have considered whether there are “special circumstances” in this
case, and decided that there are not. The Tribunal can only change an HMRC
decision not to reduce the penalty on the grounds of “special circumstances” if
the Tribunal thinks that HMRC’s decision was “flawed”. The meaning of “flawed”
must be interpreted in the light of judicial review principles.
70.
In my judgment, applying the normal principles of judicial review, the
HMRC decision is not flawed. Even were it to be flawed, so that I were able to
consider the “special circumstances” rules, I would have found, on the facts of
this case, that there were no grounds for a reduction under those provisions.
Decision
71.
As a result of the above analysis, I dismiss the appeal and confirm the
penalty.
Appeal rights
72. 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.
73. 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.
ANNE
REDSTON
TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 31st January 2013
