[2010] UKFTT 371 (TC)

TC00653

Appeal number TC/2010/02166

Late filing of self-assessment return – surcharges imposed under section 59C TMA 1970 for late payment of income tax.  Late payment arose partly from error in tax code – whether reasonable excuse – no

FIRST-TIER TRIBUNAL

TAX 

	MR STUART GRIFFITHS	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

TRIBUNAL: 	Mr Michael S Connell (Judge)
		Ms Beverley Tanner (Member)

Sitting in public at Manchester on 09 July 2010
 
For the Appellant : the Appellant appeared in person
For the Respondents : Mr B Morgan, Representing officer for HMRC

© CROWN COPYRIGHT 2010

DECISION

1. 	In his appeal the Appellant, Mr Stuart Griffiths, appeals a decision of HMRC to impose surcharges of £219.58 and £216.17.  These were imposed as a result of Mr Griffiths’ late payment of tax for the 2005-06 tax year pursuant to s.59C(2) and (3) Taxes Management Act (TMA) 1970.

2.  	Mr Griffiths was issued with a self-assessment ‘Notice to File’ for 2005-06 on 06 April 2006.  The filing date for the return was 31 January 2007.  The notes with the Notice to File state that, if tax is not paid by the due date of 31 January 2007, interest is payable and a surcharge is imposed on any amount of tax unpaid for 28 days from the due date. A second charge is imposed on any amount of tax still remaining unpaid 6 months from the due date.  In both instances the rate of the surcharge is 5% of the unpaid tax.

3.  	Mr Griffiths did not submit his 2005-06 tax return until 17 December 2007, which was some 320 days after the due date.

4.  	Mr Griffiths’ self-assessment return did not contain a self-calculation of the tax due. Section 9 TMA 1970 says that every return should contain a self-assessment unless the return is filed by 31 October following the end of the year to which the return relates, in which case HMRC will do the calculation. The return was processed by HMRC on 23 January 2008 and showed a tax liability of £5,331.02.

5.	Mr Griffiths was due a repayment for 2004-05 of £939.29 which was set against his 2005-06 tax liability.  This reduced the amount due to have been paid for 2005-06 by 31 January 2007 to £4,391.73.  As this amount was still outstanding on 28 February 2007 (ie 28 days after the due date), the first surcharge was automatically imposed when the return was captured at a rate of 5% - that is £219.58.

6.	The due date for the second surcharge is 6 months from the due date of the liability – that is 31 July 2007.  At this stage there was a further credit due to Mr Griffiths of £68.22 which was therefore set off against his tax liability, reducing it to £4,323.51.  The second surcharge was therefore automatically imposed on this amount, amounting to £216.17.

7.	The Tribunal may only set aside a surcharge where the taxpayer has a reasonable excuse for not paying the tax for the period of default in accordance with s.59 C(9) TMA 1970.  ‘Reasonable excuse’ is not defined in the legislation.  The words are therefore given their normal everyday meaning.  HMRC take this to mean that it is something exceptional or out of the taxpayer’s control.

8.	HMRC say that the Appellant has been making self-assessment returns since 1996-97, being the commencement of the self-assessment system.  He had previously been the subject of surcharges for the years ended 1997, 1998, 1999, 2000, 2001, 2002, 2004 and 2005.  He was therefore experienced in the self-assessment system and aware of the possibility of the position of surcharges for the late payment of tax.

9.	Mr Griffiths said in his appeal to the Tribunal that he did not know he needed to complete a self-assessment return for the year 2005-06.  He said that in 2004 he had been a freelance project manager and then joined Laing O’Rourke Services Limited as an employee.  It appears that his P60 for 2004-05 showed a code of BR (basic rate) but that HMRC had not queried it when his employers made PAYE payments to HMRC.  HMRC say they did not issue a tax code of BR and in any event, that if a code is issued to an employer then one is also issued to the individual, which gives the individual an opportunity to tell HMRC if a tax code is incorrect – which Mr Griffiths did not do.  It was Mr Griffiths’ responsibility to check that the code being used by his employer was correct and, if not, to notify HMRC immediately.

10.	The issue before the Tribunal was whether Mr Griffiths had a reasonable excuse for the late payment of tax which resulted in the imposition of the surcharges.  Mr Griffiths did not submit his self-assessment tax return by the due date and in fact it was almost 12 months late.  He had chosen not to comply with the Notice to File, irrespective of the warnings of possible interest and surcharges.  By the time he sent his return, the two dates for imposing surcharges had already passed and Mr Griffiths had still not paid his tax liability.  He eventually accepted the tax liability, which was paid in full but not for almost another 12 months, which was 2 years after the due date.

11.	Having heard the explanations put forward by Mr Griffiths, the Tribunal considered that they did not amount to a reasonable excuse.  They were not events beyond his control.  If he had submitted his self-assessment return on the due date, he would have received a tax calculation from HMRC.  The return was late and, even when a calculation was sent to him, there was a further delay in payment of the tax.

12.	In all the circumstances, the Tribunal decided that Mr Griffiths did not have a reasonable excuse for the late payment of tax and that the surcharges should therefore be upheld.

13.	This Decision Notice contains full reasons and findings of facts.  A person seeking permission to appeal this decision must make a written application to the Tribunal for permission to appeal, which must be sent or delivered to the Tribunal so that it is received no later than 56 days after the Tribunal sends this Decision Notice to the party making the application.  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.        

    MICHAEL S CONNELL
TRIBUNAL JUDGE 

RELEASE DATE: 10 August 2010