[2011] UKFTT 132 (TC)

TC001006

Appeal number TC 2010/8309

INCOME TAX – PENALTY FOR LATE FILING OF RETURN – Whether Appellant had reasonable excuse for default – No – Appeal dismissed.  

FIRST-TIER TRIBUNAL

TAX 

	MR J H JOY	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: MICHAEL TILDESLEY OBE

The Tribunal determined the appeal on 11 February 2011 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 20 October 2010,  HMRC’s Statement of Case submitted on 22 November 2010 and the Appellant’s Reply dated 16 December 2010.

© CROWN COPYRIGHT 2011

DECISION

1.	The Appellant appeals against the imposition of fixed penalties for the late filing of his personal tax return for the year ending 5 April 2005. 
2.	The Appellant filed his return on 21 September 2006, which was more than six months after the filing date of 31 January 2006. The Appellant was, therefore, liable to pay a fixed penalty of ₤100 for not filing the return by 31 January 2006, and a further fixed penalty of ₤100 because the return was still outstanding as at 31 July 2006. The penalties, however, were capped at ₤120.47 in total which was the amount of the unpaid tax liability on the 2004/05 return.
3.	The Appellant requested permission to appeal out of time against HMRC’s decision on review dated 10 September 2010. The Appellant had been away from 10 September 2010 until 19 October 2010. He lodged his Notice of Appeal immediately on his return. HMRC did not object to the application. The Tribunal is satisfied that it is in the interests of justice to grant the application and extends the time in which to make the Appeal to 20 October 2010.  
4.	The Appellant contends that he has a reasonable excuse for the late filing of the tax return for the year ended 5 April 2005.
5.	The Appellant stated in his letter dated 18 August 2010 that a combination of factors prevented him from submitting his tax return on time. The factors were that he was on sabbatical leave from his employment, recently divorced and supporting two daughters aged 13 and 16, one of whom was having a baby. In his reply to the statement of case dated 16 December 2010, the Appellant explained that in August 2005 he suffered a mild stroke which resulted in loss of normal speech, memory and part of his left side. As a result of his illness and personal difficulties he was given sabbatical leave in 2005 by his employer. The decree absolute on his divorce was granted on 26 June 2006.
6.	The facts of the Appellant’s failure to file the tax return by the required date were as follows:
(1)	The Appellant had been making self assessment returns since 1996/97.
(2)	On 6 April 2005 HMRC issued a tax return for 2004/05 to the Appellant. 
(3)	The return specified a filling date of 31 January 2006 with a warning that a penalty would be imposed if the return was not filed by the required date.
(4)	The Appellant did not file his 2004/05 tax return by the specified date.
(5)	On or about 17 February 2006 a penalty notice in the sum of ₤100 was issued against the Appellant.
(6)	On or about 8 August 2006 a second penalty notice in the sum of ₤100 was issued against the Appellant.
(7)	On 21 September 2006 the Appellant filed a paper return for the year ended 5 April 2005, which was some 233 days late. The Appellant enclosed a brief letter with his return which stated that he was on sabbatical leave in 2005 due to marriage problems ending in divorce June 2006. This letter was the Appellant’s first contact with HMRC regarding the late filing of his 2004/05 return.
7.	The Tribunal has limited jurisdiction in penalty Appeals which reflects the purpose of the legislation of ensuring that tax payers file their returns on time. The Tribunal has no power to mitigate the penalty. The Tribunal can either confirm the penalty or quash it if satisfied that the Appellant has a reasonable excuse for his failure.  If there is a reasonable excuse it must exist throughout the period of default. The Appellant has the obligation of satisfying the Tribunal on a balance of probabilities that he has a reasonable excuse for not filing the return on time. 
8.	In considering a reasonable excuse the Tribunal examines the actions of the Appellant from the perspective of a prudent tax payer exercising reasonable foresight and due diligence and having proper regard for his responsibilities under the Tax Acts. 
9.	The Tribunal acknowledges that the Appellant experienced significant health and personal difficulties in 2005. The Appellant, however, has not supplied sufficient details about how these difficulties prevented him from filing the return on time. The Appellant suffered a mild stroke in August 2005 which was some five months before the filing date of 31 January 2006. The Appellant stated that he was on sabbatical leave in 2005 but did not elaborate upon why this could be an excuse for the late filing of the return. The Tribunal on the information provided by the Appellant is not in a position to determine whether the reasons put forward by the Appellant existed throughout the period of default from 31 January 2006 to 21 September 2006. On the evidence presented the Tribunal finds no causal link between the Appellant’s health and personal difficulties and his failure to file the return on time. Finally the Appellant did not alert HMRC about any difficulty with filing the return on time. His first contact with HMRC was when he sent the return on 21 September 2006. The Appellant’s actions were not those of a prudent tax payer having proper regard for his responsibilities under the Tax Acts. 
10.	The Tribunal holds on the facts found that the Appellant has not established on the balance of probabilities a reasonable excuse throughout the period of default for his failure to file the 2004/05 return by 31 January 2006. The Tribunal, therefore, dismisses the Appeal and confirms the penalty in the sum of ₤120.47.
11.	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: 22 FEBRUARY 2011