First-tier Tribunal (Tax)

[2014] UKFTT 95 (TC)

TC03235

Appeal number: TC/2012/03510

PAYE – LATE LODGING OF EMPLOYER’S ANNUAL RETURN – PROBLEMS WITH NEW SOFTWARE – DELAY BY HMRC IN ISSUING A REMINDER - 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 5 June 2013(with enclosures).

© CROWN COPYRIGHT 2014

DECISION

1 The appellants  appeal against the decision of HMRC to impose penalties of £200  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 13 July 2011.

2. The appellants say that they  had problems with changing their software from IRIS to Sage. They say that for a period of two months they were unaware that the return was overdue. They submit that HMRC was legally obliged to notify  them that the return  was overdue. They have no history of filing late. The penalty should be waived. They rely on the decision  of the First-tier Tribunal in HMD Response International to support their submission that it is unfair that HMRC do not send penalty notices out until months after the return is was due.

 3. The position of HMRC is that the appellants accept that the return was late and  were using third-party software for which HMRC have no responsibility  and no support network. The obligation was on the appellants to file their return on time and there is  no legal obligation on HMRC to issue reminders or indeed penalty notices. Decisions of the First-tier Tribunal do not set precedents. HMRC  rely on the decision in HMRC v Hok Ltd [2012] UKUT 363. They point out  that in February 2011 they  issued a reminder to the appellants that the return had to be filed online by 19 May. They say too  that  the return for 2008-9 had been filed late.   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 given consideration to all the evidence before me. The return was filed late and HMRC cannot be said to have had any responsibility for that. They had sent a reminder in February so the appellants were aware  that the return would be due.  The fact that they were changing their software and had problems with that does not constitute an excuse for late filing. They were under an obligation to file their return on time. It is the case that there is no obligation on HMRC  to issue reminders and on the basis of the decision of the Upper Tribunal in Hok there is no merit in a submission that a delay of four months by HMRC in issuing a penalty notice  is unreasonable or that they were under an obligation to reduce the penalty.  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: 16 January 2014