[2010] UKFTT 461 (TC)

TC00726
Appeal number: TC/2010/00828

INCOME TAX – SURCHARGE FOR LATE PAYMENT OF TAX – Whether Appellant had reasonable excuse for default – No – Appeal dismissed.  

FIRST-TIER TRIBUNAL

TAX 

	KENNETH WATSON	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	MICHAEL TILDESLEY OBE (TRIBUNAL JUDGE)									
	The Tribunal determined the appeal on 15 September 2010 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 21 December 2009,  HMRC’s Statement of Case submitted on 5 March 2010 and the additional submissions dated 25 June 2010.

© CROWN COPYRIGHT 2010

DECISION

1.	The Appellant was appealing against a surcharge in the sum of ₤866.70 dated 1 April 2009 for the late payment of tax for the year ended 5 April 2008.
2.	The Appellant contended that he had a reasonable excuse for not paying the tax on time. The Appellant had been in negotiations with his bank for several months before the tax was due. The bank was less helpful than usual because of the risks with the Appellant’s property ownership business. The bank, however, assured him that it would give him a credit facility to meet his tax liability. The Appellant believed that the facility would come through in February 2009 which would enable payment of the outstanding tax before the surcharge came into effect. The Appellant went off on a pre-booked holiday abroad and did not return until March 2009. Unfortunately his bank did not make the facility available because it did not recognise his signature on the form requesting the necessary monies. The Appellant had been with his bank for many years. The signature held by the bank was some 30 years out of date. The Appellant was only able to resolve the difficulties with his bank on return from his holiday with the result that the outstanding tax was paid on 31 March 2009.
3.	The Tribunal finds the following facts:
(1)	The Appellant’s tax liability for 2007/08 was ₤25,547.81.
(2)	The first payment on account of ₤4,106.87 due on 31 January 2008 was fully paid on 4 August 2007.
(3)	The second payment on account of ₤4,106.88 due on 31 July 2008 was fully paid on 6 August 2008.
(4)	The balancing payment of ₤17,334.06 due on 31 January 2009 was paid on 31 March 2009. The period of default was 59 days.
(5)	HMRC issued a surcharge notice on 1 April 2009. The surcharge was in the amount of ₤866.70 calculated at 5 per cent of ₤17,334.06 which was the amount of tax outstanding after the expiry of 28 days from the due date of 31 January 2009.
(6)	The Appellant was 75 years of age. This was the first time in 60 years that he not been paid his tax liabilities on time.
(7)	The Appellant’s reason for not paying the tax on time was essentially a misunderstanding with his bank regarding the advance of monies to discharge his outstanding liability.
(8)	The Appellant did not contact HMRC’s Business Support Service regarding his difficulties with paying the tax on time prior to the due date for payment.
4.	The Tribunal has limited jurisdiction in penalty Appeals. It has no power to mitigate the penalty. The Tribunal can either confirm the penalty or quash it if satisfied the Appellant has a reasonable excuse for his default. The Appellant can avoid the penalty if he satisfies the Tribunal on a balance of probabilities that he has a reasonable excuse for not making the balancing payment on time. If the tax payer cannot establish a reasonable excuse, the legislation takes no account of the difference between a taxpayer who has made a genuine effort to comply albeit without success and a taxpayer who has made very little effort. Either  the taxpayer is on time or he is not; either he exercises due diligence or he does not. No account is taken of the degree of culpability.
5.	In considering a reasonable excuse the Tribunal will examine the actions of the Appellant from the perspective of a prudent business person exercising reasonable foresight and due diligence and giving proper regard to his responsibilities under the Tax Acts. 
6.	The Tribunal accepts that the Appellant took some steps to meet his responsibility to pay the balancing payment by the due date. The steps taken, however, fell short of those that would be taken by a prudent business person exercising reasonable foresight and due diligence. A prudent business person in the Appellant’s position would have warned HMRC of his difficulties once it became apparent that the negotiations with the bank were not progressing as planned. Further a prudent business person would have checked with the bank that the advance had been secured before he departed on his holiday.
7.	The Tribunal holds that the Appellant did not have a reasonable excuse for the balancing payment remaining unpaid after the expiry of 28 days from the due date of 31 January 2009.. The Tribunal dismisses the Appeal and confirms the penalty of ₤866.70.
8.	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.

MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE
RELEASE DATE: 30 September 2010