[2013] UKFTT 205 (TC)
TC02620
Appeal number:
TC/12/10558
CIS Scheme late submission
of returns – whether appeal made on time – No - Whether reasonable excuse for
late appeal – No - Appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
|
|
J D SEALANTS
& CO LTD
|
Appellant
|
|
|
|
|
|
|
- and -
|
|
|
|
|
|
|
|
THE
COMMISSIONERS FOR HER MAJESTY’S
|
Respondents
|
|
|
REVENUE &
CUSTOMS
|
|
|
TRIBUNAL:
|
PRESIDING MEMBER: PETER R SHEPPARD, FCIS, FCIB, CTA
KENNETH MURE, QC
|
|
|
|
Sitting in public at Wellington House, 132-134 Wellington Street, Glasgow on Friday 15 February 2013
John Dempsey for the Appellants
and William Kelly, HMRC Officer, for the Respondents
© CROWN COPYRIGHT
2013
DECISION
1. This was
an appeal against six penalties imposed by the Respondents between 2007 and 2012.
The appeal which was dated 16 November 2012 was lodged in respect of
the following penalty notifications:
|
Date of Penalty
|
Year
|
Reason
|
Amount of
penalty
|
|
22 August 2007
|
End of year 2006/07
|
P35return 51 days late
|
£ 200 (2 months @ £100)
|
|
24 September 2007
|
End of year 2006/07
|
CIS 36 returns
|
£ 400 (4 months @ £100)
|
|
28 January 2008
|
End of year 2006/07
|
CIS 36 returns
|
£ 400 (4 months @ £100)
|
|
26 May 2008
|
End of year 2006/07
|
CIS 36 returns
|
£ 400 (4 months @ £100)
|
|
4 November 2008
|
End of year 2007/08
|
P35 return 95 days late
|
£ 400 (4 months @ £100)
|
|
12 November 2012
|
End of year 2011/12
|
P11D form late
|
£ 400 (4 months @ £100)
|
|
|
|
Total
|
£2,200
|
2. Following
lodgement of the appeal the Respondents cancelled the penalty dated
12 November 2012.
3. At the
hearing the Respondents advised that they considered that the penalties dated
22 August 2007, 24 September 2007 and
4 November 2008 had all been paid. This puzzled Mr Delaney who had
said until the week prior to the hearing he had only been aware that the
12 November 2012 penalty had been cancelled. In particular he had no
recollection of paying the penalty dated 24 September 2007.
4. This left
two amounts each of £400 outstanding. These were both for failure to submit
forms CIS36. Under the CIS scheme rules in force at the time nil returns were
required. The penalties were for failure to provide eight monthly nil returns.
5. Mr Delaney
openly accepted that he had not understood that nil returns were required under
the CIS scheme and accepted that returns had not been submitted and that
penalties were due. However, he argued that in 2009/10 he had got into
difficulties with his business affairs and had entered into a payment plan with
HMRC to pay off all outstanding monies. He had kept to the arrangements and as
he thought had paid everything off. He had not appreciated that the CIS
penalties had not been included.
6. He said that
he first “got wind” that all was not right towards the end of
August 2012. He said he first understood that the problem was outstanding
penalties on 27 September 2012. This had surprised him as he thought
his tax arrears had been sorted out. It was only the week before the hearing
when he received papers that showed him the arrears were £800 being entirely penalties
for late CIS returns. On 10 October 2012 the Appellants wrote to HMRC
appealing against the penalty decisions. In a letter dated
1 November 2012 HMRC wrote to the Appellants advising them that the
appeals against the 2007 and 2008 penalties were out of time but that they could
appeal to the Tribunal to see if they would accept a late appeal. It indicated
that he should show he had reasonable excuse for the lateness of the appeal.
Legislation
Section 559-567 Income and Corporation Taxes Act 1988
The Income Tax (Sub-Contracts in the Construction
Industry) Regulations 1993 (S.I.1993 No. 743) Regulation 40A
The Tax Management Act 1970 Sections 31A and 98A
Tribunal Procedure (First-tier Tribunal) (Tax Chamber)
Rules 2009
Case Law
The Respondents referred the Tribunal to the following
cases:
Advocate General for Scotland v General Commissioners
for Aberdeen City (2006) STC 1218
Former North Wiltshire District Council v HMRC
(TC/00/714)
7. Mr Kelly
for the Respondents referred to Section 31A of the Taxes Management Act 1970
which provides that a notice of appeal must be given
(a) in
writing
(b) within
30 days after the specified date
(c) …
8. The
specified dates in this case were the dates of determination of the penalties.
Thus the appeals against the two penalties remaining in dispute should have
been made by 27 February 2008 for the penalty dated
28 January 2008 and by 25 June 2008 for the penalty dated
26 May 2008. Mr Kelly submitted that not only was the appeal dated
16 November 2012 late, it was excessively late. In the respondents
skeleton argument they submit it is unfair to “piggy back” appeals which are
excessively late on the back of an appeal which is in time. Mr Kelly
submitted that it was not in the interests of natural justice to allow appeals
which are so late unless there is a reasonable excuse for the lateness. He
considered that no reasonable excuse had been given in this case and he
referred in particular to Lord Drummond Young’s opinion in the case
of the Advocate General for Scotland v General Commissioners for Aberdeen
City [2006].
9. Mr Kelly
said the time to pay arrangements probably would not have included the CIS
penalties as these are dealt with by a separate department of HMRC. They would
not have been included unless the taxpayer had requested it. Mr Delaney
was clearly under the impression that everything was included.
10. When the Respondents are
dealing with a large corporate taxpayer or a professional tax adviser it seems
to the Tribunal that the approach of the Respondents is understandable.
However, this was not the case here. The Appellant is a small company which
does not employ a tax adviser. When such a taxpayer approaches the Respondents
to settle all outstanding monies the Tribunal considers that this approach is
less satisfactory. HMRC should be pro-active in ensuring that all outstanding
monies are included.
11. The penalties remaining in
dispute are dated 28 January and 26 May 2008. Mr Delaney’s excuse for not
appealing concerned a payment plan made with the Respondents in respect of the
2009/10 tax year. By that time any appeals were already well over a year out
of time. No explanation was offered for that delay. The burden of proof is on
the taxpayer in these cases to demonstrate he had reasonable excuse. In the
absence of evidence to the contrary the Tribunal must assume that the Appellant
received the penalty notifications.
12. It is understandable that
Mr Delaney had considered the payment plan covered all outstanding monies
due. When he learned that the penalties from 2007/08 remained outstanding in
2012, this had surprised him. However this has no bearing on his failure for well over
a year to lodge an appeal against them before the payment plan was put into
place.
13. The Tribunal considered the opinion
of Lord Drummond Young in Advocate General for Scotland v General
Commissioners for Aberdeen City [2006] STC wherein he suggests five
considerations that are relevant when considering late appeals. “First is
there a reasonable excuse for not observing the time limit”. In the Tribunal’s
view the Appellant failed to establish a reasonable excuse for not observing
the time limit in the period from the issue of the penalties in January and
May 2008 until the payment plan for the period 2009/10 was entered into. The
Appellant submitted that his belief that the payment plan in 2009/10 had paid off
all monies outstanding was a reasonable excuse for the failure to pay the
outstanding penalties after that plan had been agreed. However it does not
provide reasonable excuse for the failure to appeal against the penalties in
the approximately two years prior to that. It could be argued that the Appellant
in entering the agreement to pay all monies outstanding had agreed to the
penalties and was not at that time intending to appeal against them.
14. The further four suggested
considerations made by Lord Drummond Young are “Secondly, once the excuse has
ceased to operate…….have matters proceeded with reasonable expedition?” The
Tribunal considers that this does not apply because no reasonable excuse has
been established for the long period prior to the payment plan.
15. “Thirdly is there prejudice
to one or other party if a late appeal is allowed to proceed.” The Respondents
argued it is unfair to “piggy back” appeals which are excessively late on the
back of an appeal which is in time. Mr Kelly submitted that it was not in
the interests of natural justice to allow appeals which are so late. In the
Tribunal’s view allowing such a late appeal to proceed would prejudice the
Respondents.
16. Fourthly, are there considerations
affecting the public interest if the appeal is allowed to proceed , or if
permission is refused? The public interest may give rise to a number of issues.
One is the policy of finality in litigation and other legal proceedings;
matters have to be brought to a conclusion within a reasonable time, without
the possibility of being reopened. That may be a reason for refusing leave to
appeal where there has been a very long delay.” In the Tribunal’s view there
has been a very long delay in this case.
17.
Fifthly has the delay affected the quality of the evidence that is
available? Whilst some documentation was not available this would not have
affected the Tribunal’s ability to determine the case.
18. Having reviewed the five
suggested considerations and considered the presentations given by both parties
the Tribunal has concluded that it is not prepared to allow this very late
appeal for the reasons stated in relation to each.
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.
PETER R SHEPPARD, FCIS,
FCIB, CTA
TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 27 March 2013
