[2013] UKFTT 156 (TC)
TC02572
Appeal number:
TC/2012/02474
INCOME TAX – Default
surcharge for late payment of tax (TMA s.59C – Reasonable excuse – Appeal
dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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G O OSUNDIYA
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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 CHRISTOPHER STAKER
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The Tribunal determined the
appeal on 21 September 2012 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 27 January
2012 (with enclosures), HMRC’s Statement of Case dated 22 March 2012 (with
enclosures), the Appellant’s reply dated 10 April 2012, and other papers in the
case.
© CROWN COPYRIGHT
2013
DECISION
Introduction
1.
In this default paper case, a summary of the findings of fact and
reasons for the decision were released on 27 November 2012. The Appellant
subsequently filed a request for full written reasons, as well as a notice of
appeal, which was accompanied by additional documents. The Appellant states
that he is uncertain about the time limit for applying for permission to
appeal.
2.
The Tribunal notes that paragraphs (4) and (5) of rule 35 of the Tribunal
Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Rules”) provide
as follows:
(4) If the Tribunal provides no findings and
reasons, or summary findings and reasons only, in or with the decision notice,
a party to the proceedings may apply for full written findings and reasons, and
must do so before making an application for permission to appeal under rule 39
(application for permission to appeal).
(5) An application under paragraph (4) must be made
in writing and be sent or delivered to the Tribunal so that it is received
within 28 days after the date that the Tribunal sent or otherwise provided the
decision notice under paragraph (2) to the party making the application.
3.
According to the Rules, therefore, the Appellant cannot apply for
permission to appeal until he has first applied for full written reasons. The
filing submitted by the Appellant is therefore treated as a request for full
written reasons only. The full written reasons are now provided. These full
written reasons are reasons for the decision that was released on 27 November
2012, based on the material that was before the Tribunal at that time.
Consideration is not given in the present full written reasons to the
additional material contained in the documents filed by the Appellant on 14
December 2012. Should the Appellant upon receipt of these full written reasons
decide that he wishes to appeal against the Tribunal’s decision, he can then file
an application for permission to appeal within the applicable time limit.
Background
4.
This is an appeal against a default surcharge of £26.15 imposed pursuant
to s.59C of the Taxes Management Act 1970 (the “TMA”) in respect of the late
payment of tax for the 2009/10 tax year.
5.
The Appellant submitted a paper tax return for the tax year in question
on 6 May 2011. This was outside the time limit for filing the tax return,
which was 31 October 2010 for a paper return or 31 January 2011 for an
electronic return. It appears that originally a penalty was imposed for the
late filing of the tax return, but that HMRC subsequently allowed an appeal on
the basis that the Appellant had a reasonable excuse for the late filing,
namely the sickness of his partner and a period in hospital.
6.
It appears that HMRC originally calculated his tax liability as
£1,111.05. However, on 19 August 2011, HMRC have calculated the tax due to be
£523.05. HMRC’s position is that this tax was due to be paid on 31 January
2011, pursuant to section 59B(4) TMA.
Applicable legislation
7. Section 59C of the TMA states in relevant part as
follows:
(1) This section applies in relation to any income tax
or capital gains tax which has become payable by a person (the taxpayer) in
accordance with section 55 or 59B of this Act.
(2) Where any of the tax remains unpaid on the day
following the expiry of 28 days from the due date, the taxpayer shall be liable
to a surcharge equal to 5 per cent of the unpaid tax.
(3) Where any of the tax remains unpaid on the day
following the expiry of 6 months from the due date, the taxpayer shall be
liable to a further surcharge equal to 5 per cent of the unpaid tax.
...
(5) An officer of the Board may impose a surcharge
under subsection (2) or (3) above; and notice of the imposition of such a
surcharge—
(a) shall be served on the taxpayer, and
(b) shall state the day on which it is issued and the
time within which an appeal against the imposition of the surcharge may be
brought.
...
(7) An appeal may be brought against the imposition of
a surcharge under subsection (2) or (3) above within the period of 30 days
beginning with the date on which the surcharge is imposed.
...
(9) On an appeal under subsection (7) above that is
notified to the tribunal section 50(6) to (8) of this Act shall not apply but
the tribunal may—
(a) if it appears that, throughout the period of
default, the taxpayer had a reasonable excuse for not paying the tax, set aside
the imposition of the surcharge; or
(b) if it does not so appear, confirm the imposition of
the surcharge.
(10) Inability to pay the tax shall not be regarded as
a reasonable excuse for the purposes of subsection (9) above.
(11) The Board may in
their discretion—
(a) mitigate any
surcharge under subsection (2) or (3) above, or
(b) stay or compound any
proceedings for the recovery of any such surcharge,
and
may also, after judgment, further mitigate or entirely remit the surcharge.
(12) In this section—
“the due date”, in relation to any tax, means the date on
which the tax becomes due and payable;
“the period of default”, in relation to any tax which
remained unpaid after the due date, means the period beginning with that date
and ending with the day before that on which the tax was paid.
8. Section
118(2) of the TMA provides as follows:
(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.
Arguments of the parties
9.
The Appellant argues as follows. Periods of illness of the Appellant
and his wife have prevented him from filing the tax return and paying the tax
on time. The Appellant disputes HMRC’s calculation of the amount of tax due.
The Appellant therefore does not accept HMRC’s calculation of the surcharge.
The Appellant does not understand how the tax liability is said to have arisen,
and HMRC have not provided him with a proper explanation.
10.
HMRC argue as follows. HMRC records show that the underpayment of
£523.05 was created as neither the Appellant nor his partner qualified for
Married Mans Allowance. This was explained to the Appellant in detail in
letters dated 22 August 2011 and 23 November 2011. HMRC have accepted that
periods spent in hospital by the Appellant and his partner provided the
Appellant with a reasonable excuse for not filing his tax return until 6 May
2011. HMRC have accordingly accepted that he had a reasonable excuse for not
paying the tax until that date, and the first surcharge for late payment of the
tax has accordingly been cancelled. However, as the Appellant was able to file
his tax return on 6 May 2011, it is reasonable to assume that he was also able
to pay his outstanding tax liabilities on that date. Despite detailed
explanations regarding his tax and numerous reminders, he has not paid the
tax. HMRC must be consistent in its approach to all customers, particularly
those who comply with their tax obligations, and in this case the surcharge has
been properly charged. The Appellant has not shown that payment was prevented
by anything unexpected or out of his control.
The Tribunal’s findings
11.
The trigger dates for the two default surcharges were 28 February 2011
and 31 July 2011 respectively.
12.
The HMRC statement of case says that consistently with the HMRC view
that the Appellant had a reasonable excuse until 9 May 2011 for the late filing
of the tax return, the Appellant had a reasonable excuse until 9 May 2011 for
the late payment of the tax. HMRC state that the first of the surcharges with
the trigger date of 28 February 2011 has accordingly been cancelled.
13.
However, HMRC maintain that if the Appellant was in a position to file
his tax return on 6 May 2011, he should have been in a position to pay his tax
liability on that date. HMRC therefore consider that the Appellant did not
have a reasonable excuse for the late payment of the tax on 31 July 2011, the
trigger date for the second surcharge liability.
14.
The Tribunal notes however that the Appellant submitted a paper tax
return, such that he was relying on HMRC to calculate the amount of tax due.
HMRC state that it was only on 19 August 2011 that the Appellant was advised of
the revised amount of tax due.
15.
Assuming this statement in the HMRC statement of case to be correct, the
Tribunal considers that, depending on the precise circumstances of the original
erroneous assessment and the circumstances requiring the correction, it might
be that the Appellant has a reasonable excuse for not paying the tax until a
reasonable period after receipt of the correct calculation on 19 August 2011.
16.
However, in order to avoid a surcharge, it is necessary that the
reasonable excuse continue throughout the period of default. Section 59C(12)
TMA defines “period of default” as “the period ... ending with the day before
that on which the tax was paid”. The HMRC statement of case states that the
tax remained unpaid on the date that the statement of case was prepared (22
March 2012). The Appellant has not disputed this. To avoid liability for the
second surcharge, the Appellant would therefore have to establish a reasonable
excuse that continued until 22 March 2012 at the least. The burden of proof
rests with the Appellant to establish circumstances amounting to a reasonable
excuse. The Tribunal is not satisfied on the evidence before it that the
Appellant has done so. Sections 7 and 8 of the Appellant’s notice of appeal
refer to illness, a period of hospitalisation and disability, and unforeseen
circumstances. However, the Tribunal finds that insufficient evidence has been
provided to show that these matters establish a reasonable excuse lasting until
22 March 2012. The Appellant also contends that HMRC have failed to reply to
his queries as to the amount of his tax liability, and the Appellant appears to
argue that the amount of his tax liability is unclear. However, since 19
August 2011 at least, HMRC have consistently stated that the amount of the
balancing payment due for the tax year in question is £523.05, in letters from
HMRC dated 22 August 2011, 20 September 2011, 23 November 2011, and 2 December
2011. On the material before the Tribunal, the Appellant has not established
that the HMRC calculation is wrong. Furthermore, the
Tribunal does not consider that an appeal against a default surcharge can be
used as a collateral challenge to the underlying assessment of tax.
17.
HMRC state that they have cancelled the first default surcharge. To the
extent that it may still be necessary, the Tribunal sets it aside. However,
for the reasons given, the appeal against the second default surcharge is
dismissed.
18.
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.
CHRISTOPHER STAKER
TRIBUNAL JUDGE
RELEASE DATE: 27 February 2013
