[2010] UKFTT 496 (TC)

TC00754

Appeal number: TC/2010/03841 

Stamp Duty Land Tax – Penalty – failure to deliver land transaction return on time – reliance on solicitor – whether reasonable excuse on facts – yes – appeal allowed – section 97 Finance Act 2003

FIRST-TIER TRIBUNAL

TAX 

	CAROLYN BROWNE	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	JOHN BROOKS (TRIBUNAL JUDGE)									

The Tribunal determined the appeal on 11 August 2010 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 15 March 2010, HMRC’s Statement of Case submitted on 16 June 2010 and the Appellant’s reply dated 23 June 2010.

© CROWN COPYRIGHT 2010

DECISION

Introduction
1.	This is an appeal by Carolyn Browne against a flat rate penalty of £100.00 imposed under paragraph 3 of schedule 10 to the Finance Act 2003 for the failure to deliver a “land transaction return” on form SDLT 1(the “Return”) to HM Revenue and Customs (“HMRC”) within 30 days of a “notifiable transaction” as required by s 76 Finance Act 2003.
2.	The appeal was allocated by the Tribunal to the default paper category.  Having considered the papers provided by both parties, a Decision Notice allowing the appeal and containing a summary of the Tribunal’s findings of fact and reasons for the decision was released on 18 August 2010. Following receipt of this Decision Notice HMRC wrote to the Tribunal on 24 August 2010 to apply for full written findings and reasons for the decision. 
3.	Under Rule 35(4) of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (“the Rules”), it is made clear that if a Tribunal decision, as in this case, provides only summary findings and reasons, a party wishing to appeal to the Upper Tribunal must apply for full written findings and reasons for the decision before seeking permission to do so. This decision is therefore provided, in accordance with the Rules, in order to enable HMRC to decide whether to apply for permission to appeal.
Evidence
4.	The evidence before the Tribunal was contained in the following documents:
(1)	Ms Browne’s Notice of Appeal dated 15 March 2010 (although made after the establishment of this Tribunal the form completed by Ms Browne was that used for an appeal to the Tribunal’s predecessor, the General Commissioners, which I assume was the form provided by HMRC’s Stamp Taxes Office when Ms Browne indicted she wished to appeal);
(2)	HMRC’s undated document headed “Statement of Case” sent to Ms Browne and the Tribunal on 16 June 2010;
(3)	The following documents attached to HMRC’s Statement of Case:
(a)	Diary note of telephone calls to HMRC Contact Centre;
(b)	Copy letter from Ms Browne, dated 26 January 2010, to her solicitors enclosing a copy of a letter from HMRC seeking payment of £100 penalty;
(c)	Letter from HMRC Ms Browne, dated  2 February 2010;
(d)	Letter from Ms Browne to HMRC, dated 9 February 2010;
(e)	Letter from HMRC to Ms Browne, dated 2 March 2010;
(f)	Letter from Ms Browne to HMRC, dated 10 March 2010;
(g)	Formal Appeal against penalty dated 15 March 2010 (treated as Notice of Appeal);
(h)	Letter from HMRC to Ms Browne, dated 23 March 2010;
(i)	Letter from Ms Browne to HMRC, dated 29 March 2010;
(j)	Letter from HMRC to Tribunal, dated 31 March 2010; and
(k)	Note of telephone conversation of 21 May 2010 prepared by HMRC. 
(4)	Ms Browne’s letter of response to the Statement of Case dated 23 June 2010.
Facts
5.	From these documents I find the following facts.
6.	On 12 August 2009 Ms Browne completed her purchase of a flat in London. She had instructed Wostenholmes solicitors to carry out the conveyancing and relied on them to submit the Return to HMRC on time. 
7.	However, because Ms Browne relied on her solicitors to submit the Return to HMRC, the Return which should have been filed by 11 September 2009 was in fact filed on 28 October 2009. As a result of the late filing a Notice, imposing a flat rate penalty of £100.00, was issued by HMRC on 1 December 2009. 
8.	It is clear from the correspondence between Ms Browne and HMRC that, although they did complete the transfer of the property, Ms Browne was not satisfied with her solicitors. For example, in her letter of 9 February 2009 she writes:
“How many people do their own conveyancing? They have to, like myself, rely on a firm of solicitors to carry out the conveyancing and this includes filing the return. They are completely at the mercy of the solicitors and believe me there are some extremely bad ones, as the example of  Wostenholmes demonstrates. I never had the slightest idea of what they were doing as I could never get through to them on the phone and could never manage to get an update from them. I almost lost the property because the process took so long that the Vendor’s solicitors had to write to my solicitors threatening to pull out by 12 noon the next day unless they got a response to their countless phone calls and letters. If the solicitors could not get in contact with them what chance did you think I had? 
How can I be deemed to be accountable, when the solicitors in question displayed such incompetence that the Solicitors Regulation Authority actually closed them down, astounds me.  
9.	As stated in that letter the solicitors concerned were “intervened into” (i.e. closed down) by the Solicitors Regulation Authority.  It is apparent from their letter of 23 March 2010 to Ms Browne that HMRC were aware of this.
Legislation
10.	The relevant statutory provisions are contained in the Finance Act 2003 (“FA 2003”) s 76(1) of which provides:
In the case of every notifiable transaction the purchaser must deliver a return (a “land transaction return”) to the Inland Revenue before the end of a period of 30 days after the effective date of the transaction.
11.	A “land transaction” is a “notifiable transaction” if it is an acquisition of a “major interest in land” (s 77 FA 2003) and a “major interest in land” is either “an estate in fee simple absolute” or “a term of years absolute” (s 117 FA 2003). The “effective date” of the transaction is the date of completion (s 119(1) FA 2003) and a person who fails file a land transaction return by the filing date is liable to a flat rate penalty of £100.00 under paragraph 3 schedule 10 FA 2003 if the return is filed within three months after the filing date and £200 in any other case. 
12.	Section 77(2) FA 2003 provides:
Where a person had a reasonable excuse for not doing anything required to be done for the purposes of this Part [of the Act] – 
(a) he shall be deemed not to have failed to do it unless the excuse ceased and, 
(b) after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased”
Submissions
13.	HMRC, although sympathetic to Ms Browne’s circumstances, point to the legislation which states that it is the purchasers responsibility to make sure that the Return is received on time and even if an agent was instructed Ms Browne retained the obligation to file the Return. They contend that Ms Browne has supplied no reasonable excuse for the late submission of the Return and ask for the £100 penalty to be confirmed.
14.	In her letter, of 23 June 2010, in response to HMRC’s Statement of Case Ms Browne says that in the “extreme situation an exception should be made and I should not be held accountable and should not have to pay the penalty as events were totally beyond my control.” 
Discussion and Conclusion
15.	There is no doubt that the purchase of the flat in London by Ms Browne on 12 August 2009 constituted a “notifiable transaction” under the legislation and a return should have been filed by 11 September 2009 and, as the purchaser of the property, it was, as HMRC contend, Ms Browne’s responsibility under s 76(1) FA 2003 to file the Return on time. It is also clear that she did not do so, hence the penalty. Therefore, the issue for me to determine is whether she has a reasonable excuse for that failure and either whether that the excuse continued throughout the period of default or that the Return was submitted without unreasonable delay after the excuse ceased. 
16.	Despite the considerable difficulties Ms Browne faced in dealing with her solicitors, who was supposed to be acting for her, I consider that it was reasonable for her to rely on them to submit the Return to HMRC. I may have come to a different conclusion had there been a failure to complete the transfer of the property but, given the necessity the complete and file various forms as part of the conveyancing exercise, I see no reason for Ms Browne to think that the solicitors would fail to submit the Return on her behalf within the statutory time limit
17.	I now have to consider whether this amounts to a reasonable excuse. This is not defined in the legislation but “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]).
18.	Although reliance on a third party is specifically precluded from being a reasonable excuse for VAT purposes by s 71 Value Added Tax Act 1994 there is no similar provision in relation to Stamp Duty Land Tax (“SDLT”) contained in FA 2003. As this legislation came into effect many years after the VAT provisions had been in force it would have been open to the draftsman to adopt a similar restriction to the definition of “reasonable excuse” for SDLT purposes. However as he did not do so I conclude that, in the absence of a specific provision to the contrary, reliance on a third party can amount to a reasonable excuse in cases such as this.
19.	I find support for my view from the decision of the Special Commissioner (Adrian Shipwright) in Rowland where he said at [22 – 26]:
“The issue arises as to whether reliance on a third-party is prevented from being a reasonable excuse. For VAT purposes there is specific provision that where "reliance is placed on any other person to perform any task, neither the fact of that reliance nor any dilatoriness or inaccuracy on the part of the person relied on is a reasonable excuse." There is also specific provision that insufficiency of funds is not a reasonable excuse (see section 71 VATA). The legislation that I am concerned with in this case was passed after the VAT legislation but only contains a provision that insufficiency of funds is not a reasonable excuse. There is no equivalent provision that reliance on a third party is not a reasonable excuse for direct tax purposes. 
Whilst in the VAT context it was thought necessary to exclude reliance on a third party as presumably otherwise it could be a reasonable excuse in the direct tax context it is, at most only a indication that reliance on a third party can be a reasonable excuse. However, I consider it a very telling indication especially as it is a limited exclusion for VAT (see Enterprise Safety Coaches notwithstanding GB Capital Ltd). 
The Thorne case and Enterprise Safety Coaches are clear authority that reliance on a third party can be a reasonable excuse. 
I conclude that in the direct tax context reliance on a third party can be a reasonable excuse. 
The issue then becomes, did Mrs Rowland have an effective reasonable excuse? Having found that it was reasonable from Mrs Rowland to rely on her then accountants and that it was this reliance that led to the underpayment, I consider that this was an excuse for making the underpayment and as the reliance was reasonable the excuse was at first blush reasonable. Having further concluded that reliance on a third party can be a reasonable excuse I conclude that Mrs Rowland has a reasonable excuse in the particular circumstances of this case for not having paid the tax on time and had this reasonable excuse throughout the period of default.” 
20.	I agree with the conclusion of the Special Commissioner in Rowland that reliance on a third party, such as the solicitors in this case, can be a reasonable excuse and, like him, having found it was reasonable for the Ms Browne to rely on her solicitors and that it was this reliance that led to the failure to file the Return on time find that Ms Browne had a reasonable excuse throughout the period of default and should be “deemed not to have failed” to have filed the Return on time.
21.	The appeal is therefore allowed.
22.	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.

JOHN BROOKS

TRIBUNAL JUDGE
RELEASE DATE: 15 October 2010