[2010] UKFTT 112 (TC)

TC00423
            
    Appeal number TC/2009/11243

Income Tax – late filing of P35 Return – reasonable excuse – illness of Taxpayer’s Representative

FIRST-TIER TRIBUNAL

TAX 

	MR M. R. BROOKES	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (INCOME TAX)	Respondents

TRIBUNAL: 	Mr P M Petherbridge (Judge)

Sitting in public in Birmingham on 20 August 2009

Mr J Kirkpatrick for the Appellant

Mr B Webster for the Respondent 

© CROWN COPYRIGHT 2010 
This decision contains full written findings and reasons for the summary decision released on the 24th August 2009.

DECISION

Introduction

1.	The Appellant appeals against the decision of HMRC of the 29th September 2008 under Section 98A(2)(a) of the Taxes Management Act 1970, arising out of an alleged failure by the Appellant to file an annual return on time. (P35)
2.	The Appellant was required to complete and return his P35 for the year 2007/2008 by the 19th May 2008.  It was eventually filed 4 months late.
3.	The HMRC levied a penalty against the Appellant for the period from the 20th May 2008 to the 19th September 2008 at the rate of £100 for each month, the aggregate of penalties under appeal by the Appellant is £400.
The Appellant’s case
4.	The Appellant’s case is put on the basis that his agent, Mr J Kirkpatrick, a Chartered Accountant, was taken ill and admitted to the Queen Elizabeth Hospital in Birmingham on the 19th April 2008 where he was diagnosed as suffering from throat cancer. 
5.	Mr Kirkpatrick did not disclose to anyone but his wife, his illness, and he had no one to depute the work that he was undertaking on behalf of his clients at the time.
The Law
6.	Regulation 73 of the Income Tax (Pay As You Earn) Regulations 2003 requires that an annual return of relevant payments liable to deduction of tax (form P35 and P14) have to be delivered to the Inland Revenue before the 20th May following the end of a tax year.
7.	Section s93 (8) of the Taxes Management Act 1970 provides as follows:-
“On an appeal against the determination of a penalty....the Commissioners may –
(a)	if it appears to them that, throughout the period of default, the taxpayer had a reasonable excuse for not delivering the return, set the determination aside; or
(b)	if it does not so appear to them, confirm the determination.”

The Evidence
8.	Evidence was given by Mr John E Kirkpatrick who confirmed that he was the sole principal of a chartered accountancy practice operating in Lickey Road, Cofton, Near Birmingham.      
9.	Mr Kirkpatrick confirmed that he was the tax adviser for Mr M R Brookes.  He dealt with all revenue matters on behalf of Mr Brookes.
10.	Mr Kirkpatrick said that he worked alone.  He was a Chartered Accountant.  
11.	Mr Kirkpatrick confirmed that he had been diagnosed with cancer of the throat, having been admitted to the Queen Elizabeth Hospital in Birmingham on the 19th April 2008.
12.	Mr Kirkpatrick said that he had not informed anyone other than his wife of his illness.  He had not taken any steps to have the work carried on by his practice delegated to another person or firm during his illness.
13.	Mr Kirkpatrick said that he had his voice box removed and left hospital in May 2008 and underwent radiotherapy treatment until September 2008.
Findings
14.	It was accepted on behalf of the Appellant that he had not had filed his P35 for the tax year 2007/2008 by the 19th May 2008, as required by Regulation 73 of the Income Tax (Pay As You Earn) Regulations 2003.
15.	The Appellant did not dispute the amount of the penalty, which was £100 per month for the period from the 20th May 2008 to the 19th September 2008, in aggregate a sum of £400.  
16.	The Appellant argued, through his representative, Mr Kirkpatrick, a Chartered Accountant, that he had a reasonable excuse for the late filing of the return.  This was because of the illness of Mr Kirkpatrick, his agent.  Mr Kirkpatrick was admitted to hospital in April 2008 with cancer of the throat, for which he had his voice box removed, but which he was able to leave hospital by the middle of May of 2008.
17.	The Tribunal had every sympathy for Mr Kirkpatrick’s illness, but its view was that Mr Kirkpatrick as a Chartered Accountant had a responsibility to his professional body on behalf of his clients that if he was a sole practitioner, he should have had in place arrangements for his practice to have continued whilst he was unfit through illness.   It seemed to the Tribunal to be a totally irresponsible position for Mr Kirkpatrick to maintain having sole responsibility for a Chartered Accountant’s practice without any fall back position in the event of illness.
18.	The Code (i.e. Part X of TMA) does not qualify the expression “reasonable excuse” by, for example, ruling out reliance on another to perform a task such as making a tax return on time is nonetheless the taypayer’s.  It remains his obligation regardless of the fact that he may have delegated the task of making the return to his agent.  There may be circumstances in which the taypayer’s failure, through his agent, to comply with, e.g. the obligation to make the return on time can amount to a “reasonable excuse”.  To be such a circumstance it must be something outside the control of the taxpayer and his agent or something that could not reasonably have been foreseen.  It must be something exceptional.
19.	Further, the Tribunal had no evidence from the appellant as to whether or not he was aware of the illness of Mr Kirkpatrick, but found it unlikely that between May and September 2008 he had no knowledge of his accountant’s illness that he would not have been alerted to the possibility of whether his statutory returns had been properly dealt with HMRC. 
20.	The Tribunal did not see any reason why Mr Kirkpatrick could not have employed a locum to cover the work of his practice whilst he was ill – presumably Mr Kirkpatrick being unaware at the time he was admitted to hospital how long he would be away from his practice.
21.	Whilst, therefore, the Tribunal had every sympathy with Mr Kirkpatrick on account of the illness he had suffered – it was moved to see that he had made a good recovery and was now back in practice and able to attend the appeal Hearing on behalf of his client – the duty lay on the appellant to have filed his P35 in time and the reason for his failure – the illness of his accountant at the time this was required to be done did not amount to the Appellant having a reasonable excuse.
22.	The Tribunal also noted that the Appellant had been discharged from hospital in May 2008 and was undergoing radiotherapy treatment, but took the view that the Appellant’s agent, Mr Kirkpatrick, must have been operating his practice in one form or another for the most part of the period of the failure to file the return for Mr Kirkpatrick’s practice was still up and running that if he had not been able to undertake any work on behalf of the practice, or have anyone to delegate the work to between April and September 2008, it seemed unlikely that the practice could have continued.
23.	The reasonable excuse for the failure to file a return has to exist throughout the whole of the period of the delay.   The Tribunal did not find, for the reasons set out above that any such reasonable excuse existed throughout the whole period of delay.
24.	The decision of the Respondent of the 29th September 2008 is, therefore, confirmed.   The penalty of £400 for the later return of the Appellant’s P35 for the year 2007/2008 is upheld.
25.	The Appellant’s appeal is dismissed.
26.	As the decision contains the full findings and reasons for the summary decision released on the 24th August 2009, the Appellant is now at liberty to apply for permission to appeal.

TRIBUNAL JUDGE
RELEASE DATE: 11 March 2010