[2011] UKFTT 400 (TC)

TC01255
Appeal number:  TC/2010/00121

Income tax – surcharge for late payment – reasonable excuse – online system appeared to allow for tax to be recovered through PAYE code the following year – other evidence showed that the Appellant was aware of his obligation to pay well before the surcharge deadline – appeal dismissed	

FIRST-TIER TRIBUNAL
TAX

	DEAN NIGHTINGALE	Appellant	

-and-

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS (Income Tax)	Respondents	

TRIBUNAL:	KEVIN POOLE  (TRIBUNAL JUDGE)	

The Tribunal determined the appeal on 29 March 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 23 December 2010,  HMRC’s Statement of Case submitted on 14 February 2011 and the Appellant’s Reply dated 28 February 2011.

© CROWN COPYRIGHT 2011

DECISION

1.	This appeal relates to a default surcharge of £120.58 for late payment of the balance of the Appellant’s income tax liability for 2008-09.  A summary decision having been released on 30 March 2011, the Appellant has requested full findings of fact and reasons for the decision.
2.	The Appellant filed his 2008-09 tax return online on 8 January 2010.  His return contained both employment income and significant amounts of interest income.  After taking account of the tax deducted at source by UK banks and building societies and through the PAYE system, the Appellant owed a further amount of £2,411.70 in tax.  He carried out this calculation himself and entered that amount in his return.  The online filing system also calculated the amount due, which tallied with the Appellant’s self-calculation.
3.	The online system allowed the Appellant to reply “yes” to a question asking if he wanted HMRC to collect the outstanding tax through his PAYE code for the following year.  This should not have been permitted, as the deadline date for this had already passed; both the paper tax return notes and the online information available stated clearly that outstanding tax could only be dealt with in this way if it was less than £2000 and the return was filed by 30 December 2009.  The Appellant points out that this option was still available the following year and it is extremely unfortunate that HMRC’s system gives the appearance of allowing a facility which is not in fact available. 
4.	In their review letter to the Appellant dated 25 November 2010, HMRC stated: “Furthermore, you checked box 2 on your tax return and therefore did not request that your tax be collected through your tax code.”  Without fuller explanation, I am unable to make sense of this statement and I therefore discount it.
5.	If there had been no further evidence, I would have had no difficulty in finding that the online filing system was sufficiently confusing to afford a reasonable excuse to the Appellant for his late payment.
6.	However, there was further evidence before me.  In particular, there was an abbreviated note produced by HMRC from their systems of a telephone conversation with the Appellant on 2 February 2010.  The note in full reads:
“TP to Call Back – Mr Nightingale (TP) to cb by 05/02/2010.  Mr Nightingale will cb. Will cb to discuss TTP arrngmnt.  WLAI.”
7.	I take this note to mean that the Appellant had called in to discuss a time to pay arrangement in connection with his outstanding tax liability.  Clearly there would be no need for him to do so if he was expecting the liability to be collected through his tax code over the following year.  
8.	The Appellant stated in his notice of appeal that:
“when checking the change of code by phone, I discovered that I was mistaken or misled by the online SA system.  As the amount was around £2,000, I enquired about spreading the sum over a longer period.”  
9.	I take it that this statement refers to the telephone conversation with HMRC on 2 February 2010 noted above.
10.	The Appellant went on to say in his notice of appeal: 
“At this point I was re-directed to another department, only to discover later that further interest would accrue.  Therefore I made provision to pay the whole amount electronically, but the delay caused by the original mis-information and further phone calls resulted in the payment being received 2 days late.  I think it extremely unreasonable and unfair that I am penalised in these circumstances.”
11.	In an earlier letter date 23 June 2010, the Appellant had said:
“In mid-February 2010, I received a Notification of Coding.  It did not show the amount to be collected from the SA, so I called the relevant office to see if another coding would be sent.  At this point, I discovered that the outstanding amount would not be collected through my coding.  I made several calls to other departments in an attempt to arrange payment by instalments, but this became too difficult with contradictory information received from the departments involved and I elected to pay the whole amount by direct transfer.”
12.	Thus the Appellant’s account of the history, though slightly changeable, fits in broadly with HMRC’s note of his telephone call on 2 February (apart from the date of that call, on which point I prefer the contemporaneous written evidence of HMRC).  However, the Appellant avoids the question of the extent of his understanding, following the 2 February telephone conversation, of his obligation to pay the full amount – he makes general comments about the delay being caused by the original misinformation and compounded by poor communication, but he does not address the central point that HMRC’s note of the conversation on 2 February points clearly towards him having full knowledge on that date that he would have to pay the outstanding tax liability rather than have it collected through his PAYE code.  Indeed, in saying that he was attempting to arrange instalment payments, the Appellant is tacitly accepting that he knew he had to pay the amount due.
13.	I therefore find as a fact that the Appellant knew, no later than 2 February 2010, that his outstanding 2008-09 tax liability would not be collected through an adjustment to his PAYE code and he was therefore required to pay it.  Whilst I am quite prepared to accept that he may have experienced difficulties in communications with HMRC over the following few weeks in attempting to arrange payment by instalments, I do not consider that those difficulties can afford him a reasonable excuse for failing to pay  his outstanding liability by 28 February 2010.  He clearly took the decision to pay the outstanding amount just before the end of February, no doubt hoping to avoid a surcharge, but left it just a little too late and the payment was not received by HMRC until 2 March 2010.  
14.	It follows that I find the Appellant does not have a reasonable excuse for the delay in payment of the outstanding balance of his 2008-09 tax liability.  The appeal therefore fails and the surcharge must be confirmed.
15.	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.

KEVIN POOLE
TRIBUNAL JUDGE
RELEASE DATE: 21 JUNE 2011