First-tier Tribunal (Tax)

[2014] UKFTT 93 (TC)

TC03233

Appeal number: TC/2012/03514

PAYE – LATE LODGING OF EMPLOYER’S ANNUAL RETURN – PROBLEMS WITH SYSTEM FOR ONLINE FILING – COMMUNITY GROUP WITH NO PAYE ADMINISTRATOR -- WHETHER REASONABLE EXCUSE - NO – APPEAL DISMISSED

FIRST-TIER TRIBUNAL

TAX CHAMBER

The Tribunal determined the appeal on 3 January  2014 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 22 February 2012 (with enclosures), and HMRC’s Statement of Case submitted on 7 June 2013(with enclosures).

© CROWN COPYRIGHT 2014

DECISION

1 The appellants  appeal against the decision of HMRC to impose penalties of £400  in terms of Section 98A (2) and (3) of the Taxes Management Act 1970,  for late submission of the Employer’s Annual Return for the tax year ending  5 April 2011. The Annual Return was to be filed online by  19 May 2011.It was filed online on 8 March 2012.

2. The appellants say that they had were unable to file the return online. They say they  were sent two discs to try to overcome the problem but these did not work either. They submitted the relevant figures for the return on paper. They say too that they are a community group and do not have the funds to employ a PAYE administrator. Following an unsuccessful review of the decision it was submitted on behalf of the appellants that they had been let down by the HMRC filing system. As at 22 February 2012 contact with the online helpdesk and with HMRC technical department showed that there were still HMRC system errors preventing them from logging in. They had been told that a new ID and password would be issued by post and were given a  reference number to cite so that the history of the problem could be referred to if necessary.   

 3. The position of HMRC is that the appellants have been registered as employers since 2007 and so should be fully aware of their tax obligations. Employers were advised numerous times that online filing would be required from 2011 and guidance and instructions are on their website. They say that the appellants were using third-party software for which HMRC have no responsibility  and no support network. The obligation to have a system which  enabled the filing of the return on time was on the appellants,. The paper return  is not acceptable. HMRC say that there is no record of the appellants having contacted their helpline prior to 19 May 2011. They say too that despite a penalty notice having been issued on 26 September 2011 and subsequent letters  of 28 November 2011 and 2 February 2012, (both rejecting the grounds of appeal submitted and upholding the penalty charge, the return was not filed until March 2012. They say that alleged delay in the receipt of information from HMRC has no bearing on delay after 19 May 2011.  HMRC conclude that the appellants have not established that on a balance of probabilities there is a reasonable excuse for their failure to file their return on time.

4. . If a person is to rely on reasonable excuse, this must have existed for the whole of the period of default. A reasonable excuse is normally an unexpected or unusual event, either unforeseeable or beyond the person’s control, which prevents him from complying with an obligation when he otherwise would have done. The matter has to be considered in the light of the actions of a reasonable prudent tax payer exercising foresight and due diligence and having proper regard for his responsibilities under the Taxes Act.  

5.  I have some sympathy for the appellants but it  seems that they were  not set up to complete a return online on the due date. The fact that they did not have a system set up to file online cannot be seen as a reasonable excuse since they were under an obligation to set up a system and to file their returns on time. Although the appellants claim to have had two discs sent,  HMRC say that the appellants were using third-party software and that no CD ROMS were issued for the 2010/11 tax year. I note too that according to HMRC the appellants had successfully registered for online filing in  April 2010. There is no chronology from the appellants of  their contact with HMRC and no evidence of any concerted effort to resolve any problem they may had with their system. Even after receipt of the penalty notice there was a delay in dealing with the problem. I accept that the appellants do not believe the penalty to be justified but on the information and evidence before me, it seems that they quite simply failed to meet their obligation to file a return by 19 May 2011 and indeed did not effect filing until March 2012. In all the circumstances I find  that the appellants have not established that they have a reasonable excuse for late filing.

6. The appeal is dismissed.

7. 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.

N A BAIRD

TRIBUNAL JUDGE

RELEASE DATE: 14 January 2014