The relevant legislation

“(2) Where this section applies in relation to a provision of regulations, any person who fails to make a return in accordance with this provision shall be liable –

(a) to a penalty or penalties of the relevant monthly amount for each month (or part of a month) during which the failure continues, but excluding any month after the twelfth or for which a penalty under this paragraph has already been imposed, …

(3) For the purposes of subsection (2)(a) above, the relevant monthly in the case of a failure to make a return –

(a) where the number of persons in respect of whom particulars should be included in the return is fifty or less, is £100 …

4. Section 100(1) of the TMA provides for HMRC to make a determination imposing a penalty under s.98A of the TMA in such amount as it considers correct or appropriate.

Section 100B of the TMA provides for an appeal against the determination of that penalty.

Section 100B(2)(a) of the TMA provides, so far as is relevant, that in the case of a penalty which is required to be of a particular amount, the Tribunal may:

(i) if it appears … that no penalty has been incurred, set the determination aside,

(ii) if the amount determined appears … to be correct, confirm the determination, or

(iii) if the amount determined appears … to be incorrect, increase or reduce it to the correct amount.

5. Section 119(2) of the TMA provides for reasonable excuse:

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 without unreasonable delay after the excuse had ceased.

Facts

6. The filing date for the Return was 19 May 2011. The Return was filed online on 31 October 2011. The Respondents (“HMRC”) sent the first interim late filing penalty notice on 26 September 2011 totalling £400.  A final late filing penalty notice totalling £100 was issued on 6 October 2011. 

Submissions

7.  The case for the Appellant was set out in the Notice of Appeal dated 12 March 2012. The Appellant accepted that the Return had not been filed on 19 May 2011 but believed that the Return had been filed on 31 May 2011.  It was the Appellant’s case that in those circumstances a penalty of £100 only for the period 19 May 2011 to 31 May 2011 should be imposed.

8. The year  2011 was the first occasion on which the Appellant had attempted to file the Return online. Difficulties had been experienced and numerous calls had been made to HMRC’s on line Helpdesk.  The Appellant was not aware that the Return had not been filed successfully until the first penalty notice was issued on 26 September 2011.

9.  The late submission of the Return was not a course of action adopted by the Appellant as a means of delaying payment of the PAYE and National Insurance liabilities. In the past the Appellant had been on time with both the payments and the filing of the paper returns.  The Return had been filed late because an employee of the Appellant, responsible for filing the Return, was absent from work during the last week of May 2011 due to family ill health.

10. HMRC’s Statement of Case can be summarised as follows. The Return was submitted late and the fixed penalties were correctly charged in accordance with the legislation.  HMRC accepted that the Appellant may have accessed the online system on 31 May 2011.  However the Return needed to be correctly submitted and received by HMRC before it could be deemed to be validly delivered.  The Return was not successfully submitted until 3 October 2011.  As the Appellant had filed online since 2009-2010 HMRC submitted that the Appellant had seen a successful submission and should not have assumed that the submission of the Return for 2010-2011 had been completed on 31 May 2011.  No notification was sent to the Appellant by HMRC to confirm that the Return had been submitted on that date. In those circumstances the Appellant should have contacted HMRC for guidance on online submission and in particular messages issued to confirm successful receipt or rejection of returns.  The online guidance confirmed that before an employer can assume that an annual return has been successfully filed it must receive an online message from HMRC confirming that “the EOY Return has been processed and passed full validation”. No such acceptance message was issued to the Appellant at any time before the Return was actually filed on 3 October 2011.

11.  In 2002 the Government first announced that small employers would be required to file online by 2010.  A wealth of information had been published by HMRC to assist small employers. HMRC maintained that the Appellant had had adequate time to become acquainted with the employer’s online filing procedures.

12. There was no statutory obligation of HMRC to issue penalty notices using a set timetable. The penalty notice was not a reminder and all employer late filing penalties were issued and processed in the same way. HMRC’s website publicised the penalties imposed for late submission of annual returns and made it clear that if a return was outstanding for more than four months then HMRC would issue a penalty notice shortly after 19 September in any one year.

13. The amount of penalty was calculated using Section 98A (2)(a) TMA and the penalty had been correctly calculated relying on the number of employees for which P14s were submitted.

14. The fact that the Appellant had always made payments on time and filed paper returns on time was irrelevant. The penalty imposed was for the late filing of the  Return for the specific year.

15. The fact that the person responsible for completing the Return was absent during the last week of May, was not accepted by HMRC as a reasonable excuse.  The absence of the employee had not existed throughout the period of default and in any event the Appellant, as a prudent employer, should have had in place contingency plans so that it could meet its obligation to submit the Return on time.

Decision

16.  The Tribunal did not accept that the Appellant had a reasonable excuse for the late filing of the Return.  The Appellant believed the Return had been filed on 31 May 2011 and that it had been filed late because the employee of the Appellant, responsible for filing the Return, was absent from work during the last week of May 2011. This did not in the opinion of the Tribunal amount to a reasonable excuse. The onus was on the Appellant to ensure that the Return was correctly filed on time. The Appellant had a responsibility to ensure that alternative arrangements were in place so that the Return filing date could be met.  Furthermore, the reasonable excuse claimed by the Appellant was not sustainable on the second ground, namely, that for a reasonable excuse to be acceptable it had to last throughout the period of default.  This was not the case as the absence of the relevant employee was for one week only at the end of May 2011 and not throughout the period 20 May 2011 to 3 October 2011.

17. The fact that the Appellant found the process of filing the Return online onerous does not amount to a reasonable excuse. The requirement to file online was announced in the 2002 Budget by the Government.  Extensive information had been published by HMRC to support an employer to file a return online.  It appeared to the Tribunal that the Appellant had not adequately prepared for the mandatory requirement to submit a return online.  This failure therefore could not amount to a reasonable excuse.