[2011] UKFTT 236 (TC)

TC01101

Appeal number: TC/2010/06421

Flat rate penalty~ return of land transactions

FIRST-TIER TRIBUNAL

TAX 

	MANOR HOUSE SURGERY (GLOSSOP AND HADFIELD)	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	FIONAGH GREEN (TRIBUNAL JUDGE)									

The Tribunal determined the appeal on 2 November 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 4 August 2010 and the HMRC’s Statement of Case submitted on 20 September 2010 and the Appellant’s Reply dated 20 October 2010.

© CROWN COPYRIGHT 2011
DECISION

1.	This is an appeal dated 4 August 2010 against the flat-rate penalty of £100 each  imposed for the failure to submit the return of land transaction within the 30 days allowed.
The Law
The legislation in so far as is relevant here is found in:
Finance Act 2003
(i) Section 44
(5)A contract is “substantially performed” when –
(a)	the purchaser takes possession of the whole, or substantially the whole, of the subject-matter of the contract or
(b)	a substantial amount of the consideration is paid or provided
(ii)Section 76
(1)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 30 days after the effective date of the transaction
(iii)Section 77
(1) This section specifies what land transactions are notifiable.
(2)The grant of a lease is notifiable if –
(a) The lease is for a contractual term of seven years or more and is granted for chargeable consideration, or
	(b)The lease is for a contractual term of less than seven years and either –
(i)  the chargeable consideration consists or includes a premium in respect of which tax is chargeable at a rate of 1% or higher, or
(ii)  the chargeable consideration consists of or includes rent in respect of which tax is chargeable at a rate of 1% or higher
	or, in either case, in respect of which tax would be so chargeable but for a relief
(3) Any other acquisition of a major interest in land is notifiable unless it is exempt from charge under Schedule 3
(4) An acquisition of a chargeable interest other than a major interest in land is notifiable if there is chargeable consideration in respect of which tax is chargeable at a rate of 1% or higher, or in respect of which tax would be so chargeable but for a relief.
 Section 97
(1) For the purposes of this Part a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the Inland Revenue may allow.
(2)Where a person had a reasonable excuse for not doing anything required to be done for the purposes of this Part-
		(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. 
 Section 117
	Meaning of major interest in land
(i)References in this Part to a “major interest” in land shall be construed as follows.
	(ii)In relation to land in England or Wales, the references are to-
		(a)an estate in fee simple absolute, or
		(b)a term of years absolute,
		whether subsisting at law or in equity…..
 Section 119 (1)
		Meaning of “effective date” of a transaction
(i) Except as otherwise provided, the effective date of a land transaction for the purposes of this Part is the date of completion…..

Schedule 10 paragraph 3
(1) A person who is required to deliver a land transaction return and fails to do so by the filing date is liable to a flat-rate penalty under this paragraph.
		He may also be liable to a tax-related penalty under paragraph 4.
		(2) The penalty is-
(a) £100 if the return is delivered within three months after the filing date, and
		(b)£200 in any other case. 
The evidence

1.	On 27 January 2010 Manor House Surgery, Manor Street, Glossop was purchased by Sir John Oldham. 
2.	On 27 January 2010 Manor House Hadfield, 82 Brosscroft, Hadfield was purchased by Matthew Guy Wilkinson.   
3.	The latest  date by which the land transaction form SDLT1 for both land transactions could be received without incurring a late filing penalty was 26 February 2010. 
4.	The land transaction return form SDLT1 for both transactions was received by HMRC on 18 March 2010, 20 days after the filing date.
5.	On 27 April £100 late filing penalty issued in respect of each transaction.	
6.	On 6 May 2010 an appeal against the penalty was received by HMRC.
7.	On 4 June 2010 HMRC issued its decision to uphold the penalty.
8.	On 4 August 2010 appeal was made to the Tribunals Service. 

The facts
From the evidence I make the following findings of fact
Agreed facts
1.	 The land transactions took place on 27 January 2010.
2.	The land transaction return form SDLT1 for both transactions should have been returned by 26 February 2010.
3.	The land transaction return form SDLT1 for both transactions was received by HMRC on 18 March 2010. 
4.	There was an error in the agent’s, Harrison Townend & Ormeshers Solicitors,  computer system.
5.	Once the non-receipt of the SDLT1 was discovered by the agent, the agent took prompt action to correct the position.
Disputed facts
Whether –
The agent’s computer system failure not being noticed until 18 March 2010 resulting in the SDLT1 not being submitted until 18 March 2010 was a reasonable excuse
The Submissions of the Parties
The Appellants’ submissions-
1.	The failure to deliver the return of the land transaction within the 30 day period was due to the Appellants’ solicitors computer system failed, a condition which was outside of their control.
2.	That the Appellants’ agent was unaware of the problem with their computer system. The SDLT1 had been prepared but not submitted.
3.	That the failure was a reasonable excuse.
4.	That as soon as the reasonable excuse ceased and the computer system was working the SDLT1 was lodged without unreasonable delay.
5.	That there was no tax due on the transactions.
6.	That the penalty should not be required to be paid.

HMRCs submissions- 
1. Successful on-line submission of the SDLT1 results in the immediate issue of the land transaction certificate on-line.
2. There was no reasonable excuse offered by the agent for their delay in realising that there had not been a successful on-line submission and on-line issue of the land transaction certificate.
3. There was no exceptional event beyond the Appellants’ control preventing the completed SDLT1 being submitted by 26 February 2010.
4.  The agents admitted that the reason the returns were late was due to an error within their systems and processes.
5. The agent did not check that there was no on-line submission or issue of the land transaction certificate until 18 March 2010.
6.  The purchaser has an obligation to ensure that a timely return is submitted.
7. The failure by the agent in not filing the SDLT1 until 18 March 2010 was without reasonable excuse and the purchaser has not complied with section 76 (1) Finance Act 2003 and that the flat-rate penalty of £100 each for the late delivery of the returns is payable.
8.  The fact that no tax was due on the transactions does not impact on the penalty charges as they are flat-rate penalty charges and are not tax geared. 
Discussion
9.   There is no dispute between the parties that the SDLT1 was received by HMRC on 18 March 2010 twenty days after the latest date by which the returns could be received without incurring a late filing penalty.
10.  There is also no dispute that the agents were unaware of the problem with their computer system and that once they realised that the SDLT1 had not been received the agent took prompt action to correct the position on 18 March 2010. 
11.  The dispute relates to whether, by not noticing the computer error until 18 March 2010 the Appellants’ had a reasonable excuse in the late filing of the SDLT1.   
Conclusion
12.  Having carefully considered all of the evidence it was decided that the flat-rate penalty for the late filing of the SDLT1 of £100 for each transaction was correctly imposed and that there was no reasonable excuse for the late filing.  There was no exceptional event beyond the Appellants’ control which prevented the SDLT1 from being delivered by the 26 February 2010 the latest date by which the return could be filed without incurring a late filing penalty.
13.   Schedule 10 paragraph 3 Finance Act 2003 provides that a flat-rate penalty is to be charged if a return is submitted outside of the filing period of 30 days.  The SDLT1 was not delivered to HMRC until 18 March 2010,  20 days late.  
14.   The reason for the late submission of the SDLT1 was that the agent was not aware of the problem with their computer system.  The SDLT1 had been prepared but had not been submitted.
15.   The successful on-line submission of the SDLT1 would result in the immediate issue of the land transaction certificate on-line.
16.   It was decided that the agent should have checked and ensured that the SDLT1 had been correctly submitted and the land transaction certificate generated.  The purchaser has an obligation to ensure that a timely return is submitted.  The agent accepts responsibility for the late submission due to the failure of their own systems and processes.  Although no tax was payable on the transactions and the SDLT1 was submitted on 18 March 2010 as soon as the agent realised their mistake this does not change the fact that the agent should have checked their systems earlier.  
17.  It was decided that there is no reasonable excuse for the SDLT1 having been submitted to HMRC 20 days late.  The purchaser has not complied with section 76 (1) Finance Act 2003 and the £100 flat-rate penalty  in respect of the late delivery of the SDLT1is due in accordance with Schedule 10, paragraph 3 (2)(b) Finance Act 2003. 
18.  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.

TRIBUNAL JUDGE
RELEASE DATE: 11 APRIL 2011