[2013] UKFTT 624 (TC)
TC03011
Appeal number: TC/2012/05188
TYPE OF TAX – PAYE – late
submission of Employer’s Annual Return – whether scale of penalty is
reasonable, and whether penalty is unfair and should be reduced - Decision of
Upper Tribunal in Hok Ltd applies. Whether reasonable excuse for late
submission of return - No.
FIRST-TIER TRIBUNAL
TAX CHAMBER
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GANTHOLME CO
LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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PRESIDING MEMBER
PETER R. SHEPPARD FCIS FCIB CTA AIIT
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The Tribunal determined the
appeal on 28 August 2013 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 25 April 2012 with
enclosures, and HMRC’s Statement of Case submitted on 21 June 2013 with
enclosures. The Tribunal wrote to the Appellant on 1 July 2013 indicating that
if they wished to reply to HMRC’s Statement of Case they should do so within 30
days. No reply was received.
© CROWN COPYRIGHT
2013
DECISION
1. Introduction
This considers an appeal against a penalty of £600 levied
by HMRC for the late filing by the appellant of its Employer Annual Returns (forms
P35 and P14) for the year 2010 – 2011. By a direction of the Tribunal dated 9
May 2012 the appeal was stood over until 60 days after the issue of its
decision by the Upper Tribunal (Tax & Chancery Chamber) in the matter of
Hok Ltd. That decision was released on 23 October 2012.
2. Legislation
Income Tax (PAYE) Regulations 2003, in particular Regulations
73 and 205.
Social Security (Contributions) Regulations 2001 in
particular Schedule 4 Paragraph 22.
Taxes Management Act 1970, in particular Section 98A(2)
and (3); Section 100; Section 100B; and Section 118 (2).
3. Case
law
HMRC v Hok Ltd. [2012] UKUT 363 (TCC)
4. Facts
Regulation 73(1) of Income Tax (PAYE) Regulations 2003
and Paragraph 22 of Schedule 4 of Social Security (Contributions) Regulations
2001 require an employer to deliver to HMRC a complete Employer Annual Return
(Forms P35 and P14) before 20 May following the end of the tax year. In respect
of the year 2010-2011. The appellant failed to submit Forms P35 and P14 until 8
November 2011. On 26 September 2011 HMRC sent the appellant a late filing
penalty notice for £400 for the 4 month period 20 May 2011 to 19 September
2011. On 11 November 2011 HMRC sent the appellant a final late filing penalty
notice for £200 for the period 20 September 2011 to 8 November 2011.
5. In the
Notice of Appeal and correspondence provided the appellant says that on 7 April
2011, ie well in time, they attempted to file the Employers Annual Return and
were not aware it had not gone through. The appellant filed a P38A on that date
to accompany the P35 and this was successful.
6. They say
older members of the public find working online particularly difficult and
stressful. They did not know to expect a response message.
7. The
appellant says they acted in good faith and that there is ample evidence to
show there was no intent file in a tardy manner. They say they have always
filed and paid on time in the past and in the light of that HMRC is being
unnecessarily harsh.
8. They say
they found it almost impossible to get help on the telephone. They complain
that it took such a long time for HMRC to notify them of the failure.
9. HMRC say
that as soon as they receive an Employer’s Annual Return online it is checked
against the HMRC quality standard. A message is issued usually within one
minute, letting the filer know whether HMRC has accepted or rejected the
return. If accepted an acceptance message to acknowledge a submission will be
generated. They say the absence of a message should have alerted the appellant
that the submission had not gone through.
10. HMRC point out that there is
a wealth of guidance on their website about submission and completion of
forms. They say the fact that a mistake was made when submitting the return
cannot be considered a reasonable excuse
11. The level of the penalty and
whether HMRC’s failure to send a prompt reminder was unfair are all covered in
the decision of the Upper Tribunal in the case of Hok Ltd. That decision also considers
whether the jurisdiction of the First-tier Tribunal includes the ability to
discharge a penalty on the grounds of unfairness. At Paragraph 36 of that
decision it states “…the statutory provision relevant here, namely TMA s 100b,
permits the tribunal to set aside a penalty which has not in fact been
incurred, or to correct a penalty which has been incurred but has been imposed
in an incorrect amount, but it goes no further. ……………… it is plain that the
First-tier Tribunal has no statutory power to discharge, or adjust a
penalty because of a perception that it is unfair.”
12. The level of the penalties has
been laid down by parliament. The only other consideration that falls within
the jurisdiction of the First-tier Tribunal is whether or not the appellant has
reasonable excuse for his failure as contemplated by the Taxes Management Act
1970 Section 118(2).
13. The appellant’s error whilst
attempting to submit a return on time is most unfortunate especially for a
taxpayer who has previously had an excellent record for filing and paying on
time. In these circumstances it is understandable that the appellant finds
HMRC’s actions harsh. HMRC has applied the legislation correctly and calculated
the amount of the penalties accurately for the periods 20 May 2011 to 19
September 2011(£400) and 20 September 2011 to 8 November 2011 (£200). As
indicated in paragraph 9 above the Tribunal has no statutory power to adjust
the penalty.
14. The Tribunal accepts that
the appellant acted in good faith and had no intention to submit the P35 form
late. Unfortunately a simple error whilst attempting to file a return on an
unfamiliar system does not establish a reasonable excuse for the late
submission of the Employer’s Annual Return (Forms P35 and P14). The absence of
an acceptance message following submission should have alerted the appellant to
the possibility that the submission had not gone through. The appeal is therefore
dismissed.
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.
PETER R. SHEPPARD
TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 24 October 2013
