[2010] UKFTT 117 (TC)

TC00428              
Appeal number TC/2009/14208

Late filing of partnership return – Penalties – Whether reasonable excuse on facts – Yes – Appeal allowed

FIRST-TIER TRIBUNAL

TAX 

	DAVIES SOFTWARE SERVICES	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Income Tax)	Respondents

				TRIBUNAL: 	John Brooks (Judge)
						Terence Bayliss (Member)

Sitting in public in Birmingham on 5 March 2010

William Davies (representative partner) for the Appellant

Paul Reading of HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This is an appeal against a penalty of £200 (£100 imposed on each partner of Davies Software Services) under s 93A(2) of the Taxes Management Act 1970 (“TMA”) for the failure to file a partnership tax return (the “Return”) for the year ending 5 April 2008 on time.
2.	Having orally given our decision to allow this appeal at the conclusion of the hearing Mr Reading, for HM Revenue and Customs (“HMRC”), requested these full written findings of fact and reasons.
Law
3.	Section 12AA(2) TMA provides that where a partnership is sent a return by HMRC, the representative partner is required to complete it and submit it to HMRC by the filing date. 
4.	For years ending 5 April 2008 onwards,  the filing date for returns submitted on paper is the later of 31 October following the end of the tax year to which the return relates, or 3 months from the date of issue of the return or notice to file.  For returns submitted online, the filing date is the later of 31 January after the end of the tax year to which the return relates, or 3 months from the date of issue of the return or notice to file (see s 12AA(4)-(4E) TMA).  
5.	Where the representative partner fails to comply with the notice all partners are liable to a penalty of £100 each (section 93A(2) TMA).   
6.	Under section 93A(7) TMA, if the representative partner is able to show that there was a reasonable excuse for the whole period of default the penalty may be set aside if not the penalty will be confirmed.
7.	There is no definition in the legislation of a “reasonable excuse” which “is a matter to be considered in the light of all the circumstances of the particular case” (see Rowland v HMRC [2006] STC (SCD) 536 at [18]).
Facts
8.	It is not disputed that HMRC sent a blank Partnership Tax Return to Mr William Davies, as the representative partner of Davies Software Services, on 6 April 2008. 
9.	The first paragraph stated:
This Notice requires you to send us a Tax Return, and any documents we ask for, for the year from 6 April 2007 to 5 April 2008. Give us details of all the income and disposals of chargeable assets on which the partners may be charged to tax using.
•	the internet (using 3rd party commercial software).
An instant online acknowledgement will tell you that your Tax Return has been safely received. Go to https://online.hmrc.gov.uk/ssoin to register and enrol for Self Assessment Online for Partnerships; OR
•	this form and any supplementary Pages you need.
Make sure your Tax Return, and any documents asked for, reach us by:
•	31 October 2008 (if you complete a paper Tax Return); OR
•	31 January 2009 if you file online.

10.	It accepted that Mr Davies filed the Return on paper, posting it to HMRC on 31 January 2009 where it was received on 3 February 2009.
11.	Therefore unless Mr Davies is able to show he has a reasonable excuse throughout the period of default the penalty will be confirmed.
Contentions of the Parties  
12.	Mr Davies explained that he was aware of the need to file the Return and of the respective filing dates to do so on paper and electronically and that he had decided to file the Return electronically, in the same way as he had filed his and his wife’s personal tax returns, and registered with HMRC to be able to do so.
13.	However, on 31 January 2009 when he attempted to submit the Return online he found that, unlike the personal returns, he was unable to do so without third party commercial software which he did not have. Once he realised that he could not file the Return electronically he posted a paper version to HMRC.
14.	Although he accepted that the Return did “indicate” using third party commercial software to file online Mr Davies said that he understood this to be an option not a requirement as the words used in the Notice were ambiguous and not clearly stated. 
15.	He contended that this would not have been the case had the Notice on the Return stated that it could “only” be submitted online by using third party commercial software.
16.	For HMRC Mr Reading contended that Mr Davies did not have a reasonable excuse as the need for third party commercial software was clearly stated on the Return as it had been on previous partnership returns submitted by Mr Davies although he accepted that this appeal turned on the words used in the Return.
17.	He referred us to the decision of Express Agency v HMRC [2010] UKFTT 55 (TC) in which the Tribunal had dismissed an appeal where the Appellant had filed a paper return after the due date as it been unable to file a partnership return electronically as it did not have third party commercial software.
Discussion and Conclusion
18.	We find Express Agency to be distinguishable from the present case. Although that case concerned the late filing of a paper return in the absence of third party commercial software the issue was whether, as HMRC had accepted that a taxpayer had a reasonable excuse in identical circumstances, the Appellant, who had employed a professional bookkeeper to file its return, also had a reasonable excuse for the late filing of its paper return.
19.	Even if this were not the case, whether or not Mr Davies has a reasonable excuse is a matter we have to consider in the light of all the circumstances of this case. As the Tribunal Judge (Nicholas Aleksander) said in Express Agency, at [2], “Each case has to be considered on its own merits.” 
20.	Having considered all the circumstances of the case we accept the contention of Mr Davies in respect his understanding of the words used in the Notice on the Return and find that he has a reasonable excuse for failing to file the Return on time
21.	As such we allow the appeal and set aside the penalty.
22.	The Respondents have a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   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.

JOHN BROOKS

TRIBUNAL JUDGE
RELEASE DATE: 12 March /2010