[2011] UKFTT 283 (TC)
TC01145
Appeal
number: TC/2011/00672
Appeal
against penalty imposed as a result of the late submission of a P35 return –
reasonable excuse – appeal dismissed
FIRST-TIER TRIBUNAL
TAX
PETER
DONAGHY Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
J. Blewitt (TRIBUNAL JUDGE)
The Tribunal determined the
appeal on 18 April 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 14 January 2011 and HMRC’s
Statement of Case submitted on 11 February 2011.
© CROWN COPYRIGHT
2011
DECISION
1. By
Notice of Appeal dated 14 January 2011 the Appellant appeals against an
employer’s penalty in the sum of £500 imposed as a result of the late
submission of a P35 return for the period 2009/2010.
2. The
imposition of such a penalty is set down by statute; section 98A (2) (a) Taxes Management
Act 1970 applies in this case which provides that a penalty of £100 can be
imposed for each 50 employees for every month (or part thereof) that the return
remained outstanding.
3. The
filing date in this case was 19 May 2010. The return was submitted online on 11
October 2010.
4. On
27 September 2010 a penalty notice in the sum of £400 was issued to the
Appellant which was calculated from 20 May 2010 to 19 September 2010. A final
penalty notice in the sum of £100 was issued on 20 October 2010 in respect of
the period outstanding from 20 September to 11 October 2010.
5. By
letter dated 13 October 2010, Crystal Business Services Ltd, on behalf of the
Appellant, appealed to HMRC against the penalty of £400. The grounds relied
upon were that:
(1)
The Appellant ceased trading on 29 June 2009 and paid all PAYE/NIC up to
the date of cessation; and
(2)
That the Appellant believed that no return was required having paid the
PAYE due and issued the relevant P45s.
6. HMRC
responded by letter dated 8 November 2010 stating that the onus of ensuring all
tax obligations are met lies with the Appellant.
7. The
Appellant’s agent formally requested a review of HMRC’s decision to impose
penalties on 11 November 2010. The letter stated that the penalties are
excessive, unfair and unnecessarily punitive for a taxpayer who ceased trading
over a year ago. The last P45 was issued and copied to HMRC when the company
ceased trading. No P35s were issued to the Appellant by HMRC and that it was
not unreasonable for the Appellant to assume that all PAYE issues had been
addressed. The Appellant received no communication from HMRC from September
2009 until the issue of a penalty notice on 27 September 2010. A penalty for
the same offence was imposed in the sum of £100 which caused further confusion.
There has been no loss to the Revenue, no intention to violate any laws and the
Appellant is unsure as to what he could, or should have done.
8. By
letter dated 23 December 2010, HMRC informed the Appellant that following
review the penalties would be upheld. HMRC took the view that no reasonable
excuse existed on the basis that information is available on the website
explaining what action s required when a business ceases trading. This
information is also available on documents issued throughout the year. HMRC took
the view that a taxpayer, particularly where returns have been filed for
several years, is expected to be familiar with the process. The review letter
states that it is an employer’s responsibility to ensure that all necessary
forms are completed; a P45 only shows tax details and the P35 is required to
account for payments made in respect of employees Tax and National Insurance.
HMRC records indicate that a paper P35 was issued to the Appellant on 16
October 2009 which was never returned. The letter explains the confusion over
penalties; on 27 September 2010 a penalty of £400 was imposed for the period 20
May 2010 to 19 September 2010. The additional £100 was imposed as the P35
remained outstanding until 6 October 2010 and covers the period 20 September to
6 October 2010.
9. On
14 January 2011 Mr Thomson appealed to the Tribunal. The grounds of appeal
relied upon can be summarised as follows:
(1)
That at the time of cessation the last P45s were issued and copies sent
to HMRC. All taxes and NIC were also paid;
(2)
There was no further correspondence from HMRC until the penalty notice
was issued in September 2010;
(3)
The P35 issued by HMRC in October 2009 was not received or would have
been dealt with;
(4)
It was not unreasonable for the Appellant to assume that all PAYE matters
had been addressed;
(5)
There was no intention on the part of the Appellant to benefit in any
way and the £500 penalty is unnecessarily punitive;
(6)
If HMRC wanted specific details they had plenty of opportunity to submit
requests to the Appellant between cessation and issue of the penalty notice.
10. The obligation
to make End of Year Returns prior to the deadline of 20 May following the end
of a tax year is set down by statute by virtue of Regulation 73 of the Income
Tax (PAYE) Regulations 2003 and paragraph 22 of Schedule 4 of the Social
Security (Contributions) Regulations 2001.
11. The penalties
imposed as a result of failure to meet tax obligations are provided for by
statute and this Tribunal has no discretion to mitigate those penalties unless
it is considered that there is a reasonable excuse, in which case the penalties
can be set aside. I do not accept the Appellant’s submission that the amount of
the penalties constitutes a reasonable excuse.
12. The fact that
the company ceased to trade did not negate the Appellant’s obligation to submit
the necessary forms prior to the filing date. I accept HMRC’s contention that
the P36 issued on 16 October 2009 was not returned as undelivered; and there is
also no reason to doubt the Appellant’s assertion that the form was not
received. Whether received or not, it is a well established principle of case
law that the responsibility remains on the taxpayer to ensure that all
obligations are met and ignorance cannot amount to a reasonable excuse for
failing to comply with such obligations. The fact that the Appellant assumed
all PAYE matters were dealt with does not, in my view, amount to a reasonable
excuse.
13. There is no
obligation upon HMRC to issue reminders to taxpayers or notify taxpayers that a
P35 has not been received prior to the issue of penalty notices. There is also
no statutory obligation upon HMRC to issue penalty notices closer to the
deadline date. It is well publicised on HMRC’s website that penalties can be
imposed for the late submission of returns and that a reminder will not
necessarily be sent. I do not accept that the lack of communication with HMRC
can amount to a reasonable excuse.
14. I find as a fact
that whether or not there has been any loss to the Revenue is not a relevant
consideration to the issue of reasonable excuse which must exist in respect of
the failure to submit the return on time.
15. I accept that
the Appellant had no intention to benefit, however this does not constitute a
reasonable excuse.
16. It is submitted
that HMRC had the opportunity to submit requests to the Appellant between
cessation and issue of the penalty notice had they wanted specific information.
The onus of providing the information required by statute rests with the
Appellant; there is no obligation upon HMRC to “chase” information from
taxpayers in these circumstances. I do not accept that this provides the
Appellant with a reasonable excuse.
17. I find as a fact
that the penalties were lawfully imposed and that there is no reasonable
excuse.
18. The appeal is
dismissed and penalties upheld.
19. 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: 3 MAY 2011
