DECISION

Introduction

1. This is an appeal by Stephen Pariser (“the Appellant”) against the imposition by the Respondents’ (“HMRC”) of 14 penalties of £100 (i.e. a total of £1,400.00) for the late submission of land return forms. The penalties were imposed under paragraph 3 Schedule 10 Finance Act 2003 (set out below).

The Issue

2. The issue in this case is essentially whether it can be shown that the letter was actually posted and/or whether there was a reasonable excuse.

3. As this is a case involving penalties we remind ourselves that the onus is on HMRC to show that the circumstances for the imposition of the penalty are fulfilled in the first instance but that the evidential burden then shifts to the taxpayer. For example, it is for the taxpayer to show there is a reasonable excuse.

4. It is also important to consider whether the SDLT was due and whether there was a notifiable transaction.

5. Other questions arise including the following:

(1) Has it been proved that the letter and form were posted on 2 June 2009?

(2) Were the individual returns received more than 30 days after the date but within three months of it?

(3) Is there any reason why the penalty provisions are not engaged such as there being a reasonable excuse?

(4) How many notifiable transactions were involved?

(5) Should any penalty be further mitigated?

(6) These matters are considered below.

The Law

6. The legislation, in so far as is relevant here, is found in Part 4 Finance Act 2003.

7. By section 42 FA 2003 Stamp Duty Land Tax (“SDLT”) is charged in accordance Part 4 FA 2003 on “land transactions” which are “chargeable transactions”.

8. The phrase “Land transactions” is defined in section 43 FA 2003. Subsection (1) provides “In this Part a “land transaction” means any acquisition of a chargeable interest”.

9. Section 48 FA 2003 defines “Chargeable interests”. It provides:

“(1) In this Part “chargeable interest” means—

(a) an estate, interest, right or power in or over land in the United Kingdom, or

(b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power,

other than an exempt interest[1]”.

10. By section 49 FA 2003 “A land transaction is a chargeable transaction if it is not a transaction that is exempt from charge”. Schedule 3 provides for certain transactions to be exempt from charge[2].

11. It was not disputed that there were chargeable transaction(s) here.

12. FA 2003 requires certain returns to be made by the purchaser of a chargeable interest.

13. Section 76 FA 2003 is headed “Duty to deliver land transaction return”. It provides:

“(1) In the case of every notifiable transaction the purchaser must deliver a return (a “land transaction return”) to the Inland Revenue before the end of the period of 30 days after the effective date of the transaction….”

14. By Section 44 (3) FA 2003”If the transaction is completed without previously having been substantially performed, the contract and the transaction effected on completion are treated as parts of a single land transaction. In this case the effective date of the transaction is the date of completion”. This is the case here and it was accepted as common ground that the effective date was the date of completion.

15. “Notifiable transactions” are defined in section 77 FA 2003. This provides:

“(1) A land transaction is notifiable if it is—

(a) an acquisition of a major interest in land that does not fall within one or more of the exceptions in section 77A…[3]”.

16. The meaning of “major interest” in land is given in section 117 FA 2003 which reads:

“(1) References in this Part to a “major interest” in land shall be construed as follows.

(2) In relation to land in England or Wales, the references are to—

(a) an estate in fee simple absolute, or

(b) a term of years absolute,

whether subsisting at law or in equity…”[4]

17. It was not argued that there were not major interests in land involved here.

18. Special provision is made for “Loss or destruction of, or damage to, return etc” by section 82 FA 2003 which reads:

“(1) This section applies where—

(a) a return delivered to the Inland Revenue, or

(b) any other document relating to tax made by or provided to the Inland Revenue,

has been lost or destroyed, or been so defaced or damaged as to be illegible or otherwise useless.

(2) The Inland Revenue may treat the return as not having been delivered or the document as not having been made or provided.

(3) Anything done on that basis shall be as valid and effective for all purposes as it would have been if the return had not been made or the document had not been made or provided.

(4) But if as a result a person is charged with tax and he proves to the satisfaction of the tribunal having jurisdiction in the case that he has already paid tax in respect of the transaction in question, relief shall be given, by reducing the charge or by repayment as the case may require”.

19. We note (it not having been argued before us) that section 7 Interpretation Act 1978 is headed “References to service by post” and provides:

“Where an Act authorises or requires any document to be served by post (whether the expression “serve” or the expression “give” or “send” or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post”[5].

20. Section 76 FA 2003 provides that “… the purchaser must deliver a return (a “land transaction return”)” so that section 7 of the Interpretation Act could be engaged. However, this is subject to contrary intention appearing.

21. We consider that sections 82 and 84 provide sufficient contrary intention such that section 7 Interpretation Act does not apply.

23. Even if it did then it is still necessary to prove the letter was posted before section 7 Interpretation Act 1978 is engaged. Even if section 7 Interpretation Act 1978 was engaged then it would be defeated by section 82 FA 2003 set out above.

24. Paragraph 3 Schedule 10 FA 2003 imposes a fixed rate civil penalty for late filing of a land transaction return. This is the provision under which the penalties in question in this appeal were imposed. It provides:

”(1) A person who is required to deliver a land transaction return and fails to do so by the filing date is liable to a flat-rate penalty under this paragraph.

He may also be liable to a tax-related penalty under paragraph 4.

(2) The penalty is—

(a) £100 if the return is delivered within three months after the filing date, and

(b) £200 in any other case”.

25. The meaning of filing date and delivery of return is set out in Paragraph 2 Schedule 10 FA 2003 which reads:

“2—(1) References in this Part of this Act to the filing date, in relation to a land transaction return, are to the last day of the period within which the return must be delivered.

(2) References in this Part of this Act to the delivery of a land transaction return are to the delivery of a return that—

(a) complies with the requirements of paragraph 1(1) (contents of return)…^”

22. Section 97 FA 2003 headed “Power to allow further time and reasonable excuse for failure” is also relevant in this context. It provides:

“(1) For the purposes of this Part a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the Inland Revenue may allow.

(2) Where a person had a reasonable excuse for not doing anything required to be done for the purposes of this Part

(a) he shall be deemed not to have failed to do it unless the excuse ceased, and

(b) after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased”.

23. Paragraph 5 Schedule 14 FA 2003 deals with “Appeal against penalty determination”. The Tribunal’s jurisdiction is set out in subparagraph (4) which reads:

“(4) On an appeal under this paragraph that is notified to the First-tier Tribunal, the tribunal]¹ may—

(a) if it appears … that no penalty has been incurred, set the determination aside;

(b) if the amount determined appears … to be appropriate, confirm the determination;

(c) if the amount determined appears to them to be excessive, reduce it to such other amount (including nil) as appears to them to be appropriate;

(d) if the amount determined appears to them to be insufficient, increase it to such amount, not exceeding the permitted maximum, as the First-tier Tribunal considers appropriate…”

The Evidence

24. We were provided with a volume of documentation. . The documents were all admitted in evidence no objection having been taken to any of the documents.

25. No witness statements were produced.

The Facts

26. From the evidence we make the following findings of fact.

(1) The Appellant purchased 14 properties in one lot at an auction.

(2) The purchase of each of the 14 Properties was completed on 18 May, 2009. This was the Effective Date for SDLT purposes. This would require the returns to be submitted by 17 June, 2009. This was common ground.

(3) The Appellant produced a copy letter dated 2 June 2009 which said it enclosed a land transaction return for the 14 properties.

(4) No evidence was led to show and/or corroborate that this letter and its enclosure had been posted. Accordingly, we are unable to find that the letter and enclosure were posted on that date as there is no compelling or other evidence on which to base such a finding.

(5) HMRC said they had no evidence of receipt of the 2 June, 2009 letter and its enclosure. We accept this and so find. Consequently we are unable to find that the letter and its purported enclosure were delivered to HMRC.

(6) The Appellant later submitted 14 individual returns, [13] one for? each of the properties. We were told that this was because he had received no reply from HMRC to the 2 June, 2009 letter. This is hardly surprising if it had not been received.

(7) The Land Transaction Return for the purchase of 37 Alford Street, Liverpool was received by HMRC on 21 July, 2009. This was 34 days late.

(8) The Land Transaction Returns in respect of each of the other 13 properties was received by HMRC on 8 July, 2009. This was 21 days late.

(9) We find that the land transaction returns in respect of each of the 14 properties was received more than 30 days after the effective date bucks within three months of the filing date.

The Submissions of the Parties

The Appellant’s Submissions in outline

27. In essence, the Appellant submitted that he had posted the return with the letter enclosing it on to June 2009 but it must have been lost in the post or elsewhere. [If] He had done what was required and so there should be no penalty.

28. Even if there were to be a penalty it should only be one penalty rather than 14 penalties as only one return for one lot bought at auctions was involved.

29. At any rate as the Appellant had done all he reasonably could in the circumstances he had a reasonable excuse and the penalty regime should not apply.

HMRC’s Submissions in outline

31. In essence, HMRC submitted that:

(1) There was no proof of posting of the letter containing the return;

(2) The copy letter was just that – it was not proof of posting;

(3) Even if there were any proof of posting the position is governed by section 82 FA 2003 which allows HMRC to treat the return as not having been delivered or the document as not having been made or provided;

(4) Accordingly, the penalty provisions were engaged and applied unless a reasonable excuse could be shown;

(5) No reasonable excuse had been shown;

(6) There were 14 land transactions and so 14 land transactions were notifiable. None had been within time so there were 14 failures and so 14 penalties.

(7) Consequently, the appeal must be dismissed.

Discussion

32. This case requires a number of questions to be considered in order to decide it. They include the following.

(1) Has it been proved that the letter and forms were posted on 2 June 2000?

(2) Were the individual returns received more than 30 days after the date but within three months of it?

(3) Is there any reason why the penalty provisions are not engaged such as there being a reasonable excuse?

(4) How many notifiable transactions were involved?

(5) Should any penalties be further mitigated?

Posting proved?

33. There was no evidence led that showed that the letter dated 2 June 2009 had actually been posted. It was asserted but not shown that it had been posted. A copy letter purportedly enclosing the relevant form was produced. However, this is not evidence of posting.

34. We accept that HMRC had no evidence of receipt and we so find.

35. In the circumstances we find that it has not been shown that the latter had been posted. We do so reminding ourselves that the standard of proof is the civil standard of balance of probabilities. However, applying that standard we still consider that it has not been shown that the letter had been posted on 2 June 2000 and we so find.

36. There was no evidence led to show that the letter had been mislaid by the Royal mail or by HMRC and we so find.

37. Even if it had been shown (which is not the case here) the position would have been covered by section 82 FA 2003. This allows HMRC to treat a return as not having been delivered if it has been lost or destroyed.

38. We answer the question in the negative i.e. it has not been shown that the letter and form were posted.

Receipt of individual returns more than 30 days after date

39. It was not disputed that the individual returns were received by HMRC more than 30 days after the date.

40. Accordingly, if there is no reasonable excuse the penalty provisions are engaged.

Reason why the penalty provisions are not engaged

41. There was no argument that the penalty provisions were not engaged in respect of the individual returns other than reasonable excuse. Given that we have found that it has not been shown that the letter of 2 June was posted it is hard to see how there could be a reasonable excuse in the present circumstances for not posting the letter. Even if contrary to our finding it had been posted then it would be necessary for the Appellant to prove reasonable excuse. We find that the Appellant has not discharged this burden. Even if contrary to our finding there was some reasonable excuse it did not exist throughout the relevant period and we so find.

42. Accordingly no reasonable excuse been shown and no reason has been shown why the penalty provisions should not apply.

How many notifiable transactions were involved?

43. As 14 different titles were involved there were 14 acquisitions of chargeable interests. It was not argued these were not major interest. Accordingly we find that there were 14 notifiable transactions within section 77 FA 2003. We decide that there were 14 notifiable transactions that were not notified within 30 days of the effective date. Accordingly the penalties were properly imposed and we so find.

Should any penalties be further mitigated?

44. We consider that the penalties imposed were reasonable and proportionate and we so find. We see no reason to alter them even if we could as they are flat rate penalties. We consider the amount determined to be appropriate and confirm the determination

Conclusion

45. We have found that:

(1) it has not been proved that the first letter has been posted or mislaid. Even if it had been shown (which it was not) section 82 Finance Act 2003 covers the position;

(2) the individual returns were received more than 30 days after the effective date as the Appellant [extracts] ? so the penalty provisions were engaged;

(3) no reasonable excuse has been shown;

(4) the penalties were reasonable and proportionate and should be confirmed.

46. Accordingly, the Appeal is dismissed.

47. 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.

ADRIAN SHIPWRIGHT

TRIBUNAL JUDGE

RELEASE DATE: 30 September 2010

[4] As to rent charges being Estates or interests in land see section 1 Law of Property Act 1925 ("LPA") and section 7 (1) LPA added by the Scheduled to the Law of Property (Amendment) Act 1926 as amended and the Rent Charges Act 1977

[5] We also considered the case of Wing Hung Lai v Bale (Inspector of Taxes) [1999] STC (SCD) 238.

in this context but did not find it assisted us.

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents