[2011] UKFTT 284 (TC)

TC01146

Appeal number: TC/2011/00394 

Penalty for late return – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	CAROL SHORTELL	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	J. Blewitt (TRIBUNAL JUDGE)									

The Tribunal determined the appeal on 11 April 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 11 January 2011 and HMRC’s Statement of Case submitted on 10 February 2011.

© CROWN COPYRIGHT 2011
DECISION

1.	By Notice of Appeal dated 11 January 2011 the Appellant appeals against a surcharge imposed under Section 59C (3) of the Taxes Management Act (“TMA”) imposed as a result of late payment of tax for the year ended 5 April 2009.
Law
2.	Section 7(1) Part 2 TMA 1970 provides:
Every person who–
(a) is chargeable to income tax or capital gains tax for any year of assessment, and
(b) has not received a notice under section 8 of this Act requiring a return for that year of his total income and chargeable gains, 
shall, subject to subsection (3) below, within six months from the end of that year, give notice to an officer of the Board that he is so chargeable.
3.	By virtue of Section 9 (1) TMA 1970, every return should contain a self assessment, unless the return falls within Section 9(2) of the Act; in the latter case HMRC make the calculation.
4.	The due date of payment by a taxpayer is set out in Section 59B:
59B(3) In a case where the person–
(a) gave the notice required by section 7 of this Act within six months from the end of the year of assessment, but
(b) was not given notice under section 8 or 8A of this Act until after the 31st October next following that year,
 the difference shall be payable or repayable at the end of the period of three months beginning with the day on which the notice under section 8 or 8A was given.
59B(4) In any other case, the difference shall be payable or repayable on or before the 31st January next following the year of assessment
5.	The penalties of failing to meet the payment deadline are provided for by Section 59C:
59C(2) Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid tax.
59C(3) Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent of the unpaid tax.
6.	Section 59C provides that where, on appeal, it appears to the Tribunal that the taxpayer had a reasonable excuse for not paying the tax throughout the period of default, the surcharge may be set aside.
Facts
7.	The Appellant notified HMRC on 10 March 2010 of a chargeability from a Capital Gain in respect of land sold in the year ended 5 April 2009. The period during which notification ought to have been given was on or before 5 October 2009 and HMRC therefore deemed this a Failure to Notify. As a result, the due date for payment of the tax owing was 31 January 2010.
8.	The Appellant’s return was filed online on 5 August 2010 and showed a tax liability of £14,403.42. Two surcharges, each in the sum of £720.17, were subsequently imposed; notices being issued by HMRC on 13 August 2010.  The surcharges were imposed as a result of payment not being made in full until 1 September 2010, thereby falling foul of the provisions in Section 59C TMA 1970.
9.	The Appellant’s agent appealed against the surcharges on 31 August 2010 and by letter dated 12 October 2010 HMRC offered a review. The offer of review was accepted by the Appellant on 3 November 2010, following which, by letter dated 15 December 2010, HMRC upheld the surcharges.
10.	In a Notice of Appeal to the Tribunal dated 11 January 2011 the Appellant sought only to appeal the second surcharge. The grounds of appeal state that the Appellant contacted HMRC in March 2010 as she had not heard from them in respect of tax due on the land sold. The Appellant states that she had mistakenly believed that her solicitor would notify HMRC of the sale. Upon speaking to HMRC, the Appellant was informed that there was no record of tax owing and that the relevant forms would be posted to the Appellant. The forms were not received until 21 May 2010, to be completed by 11 August 2010 – which was done. The Appellant states that at no time was she made aware that surcharges would be imposed if the tax was not pad by certain deadlines. The Appellant states that had she received the form without delay then the tax would have been paid prior to the imposition of the second surcharge. The Appellant does not dispute the first surcharge, which arose as a result of her ignorance. 
11.	The Tribunal also had the benefit of correspondence from the Appellant to HMRC dated 3 November 2010, in which the Appellant requested a review and gave further detail as to why the payment was made late. The Appellant stated that she had made a number of attempts to contact HMRC however without success until 10 March 2010. The Appellant stated that she had assumed that her solicitor would have informed HMRC of the sale, however when she did not receive any communication from HMRC, she decided to clarify the situation. Initially incorrect forms were sent by HMRC to the Appellant and she did not receive the correct forms until 21 May 2010 with a letter of apology from HMRC in respect of the delay. The Appellant stated that she was unaware that surcharges may be imposed and that had she been aware, the payment would have been made immediately. The Appellant contended that she ought to have been made aware of the surcharges and that had the correct forms been sent without delay, then the late payment would not have occurred.
Decision
12.	I considered carefully all of the correspondence from the Appellant and will deal with each point raised in turn.
13.	The Appellant submitted that she had attempted to contact HMRC on a number of occasions, to no avail, until 10 March 2010 and that had she received the relevant forms without delay the tax would have been paid on time. I did not consider that this was sufficient to amount to reasonable excuse for the following reasons; it is unknown at what point the Appellant became aware that her solicitors had not passed the relevant information to HMRC, however the Appellant had a period of 12 months from October 2008 to October 2009 in which to notify the chargeability of the capital gain. It is noteworthy that the Appellant noticed that she had not been contacted by HMRC, which in turn led her to make telephone calls to them and by inference, must have been aware that there was a tax liability outstanding. I accept, once late notification had been given, that the delay in receiving the correct forms was not the fault of the Appellant, but note that once received on 21 May 2010, the return was not filed online until 5 August 2010, at which point the full extent of the amount owing was known, as would be the fact that the deadline for payment had passed. Thereafter, the full amount owing was not discharged until 1 September 2010. No explanation is given for the delay in making full payment between 21 May and 1 September 2010 and therefore I do not accept that there was reasonable excuse lasting throughout the period of default.
14.	The Appellant, by her own admission, assumed that her solicitors would have informed HMRC of the sale of land from which the tax liability arose. It is a well established principle that the taxpayer bears ultimate responsibility to ensure that all tax obligations are met. The legal obligation, as set out under Section 7 Part 2 TMA 1970 makes clear that the responsibility rests with the taxpayer and cannot be transferred to an agent acting on the taxpayer’s behalf. I therefore do not accept that this amounts to reasonable excuse.
15.	The Appellant states that she was unaware that surcharges could be imposed, and that had she been so advised, the amount outstanding would have been paid prior to the second surcharge being imposed. The surcharge trigger dates are set by statute. There is no obligation upon HMRC to advise taxpayers as to the consequences of failing to adhere to their legal obligations, or to remind a taxpayer as to the fact that tax is due. Case authorities make clear that ignorance of the law cannot amount to reasonable excuse. 
16.	The surcharge imposed was lawful and I find that there was no reasonable excuse for the late payment of tax.
17.	The appeal is dismissed.
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: 3 MAY 2011