[2012] UKFTT 619 (TC)
TC02295
Appeal number:
TC/2011/10133
INCOME TAX – self
assessment – penalties and surcharges – late submission of return –
difficulties with on-line registration and filing – use of accountant not
officially appointed as agent – reliance on that accountant – further delay
before paper return eventually submitted and tax paid – whether reasonable
excuse continuing throughout period of default – on facts, held no such
continuing excuse and not absolved from responsibilities by appointment of a
third party – penalties and surcharges confirmed and appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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DR GABRIELLA SAS
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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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JUDGE JOHN CLARK
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The Tribunal determined the
appeal on 29 May 2012 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 27 November 2011 (with
enclosures), and HMRC’s Statement of Case submitted on 30 January 2012 (with
enclosures).
© CROWN COPYRIGHT
2012
DECISION
1.
As indicated above, this appeal was considered on the papers on 29 May
2012. A short form decision was released on 15 June 2012. The Appellant, Dr
Sas, has indicated that she wishes to apply for permission to appeal to the
Upper Tribunal, and has therefore requested full written findings of fact and
reasons for the decision.
2.
Dr Sas appeals against two fixed penalties for the late submission of
her 2009-10 self assessment return and two surcharges for late payment of her
tax for 2009-10. The details are set out below.
3.
The first paragraph of the short form decision was as follows:
“The Tribunal decided that there was no continuing
reasonable excuse throughout the period of default for the late submission of
the Appellant’s self-assessment return for the year ending 5 April 2010, that
the first and second penalties for late submission of that return should be
confirmed, that the initial and second surcharges for late payment of tax
should be confirmed, and that the appeal should be dismissed.”
The facts
4.
On 23 September 2010, the Respondents (“HMRC”) issued a Notice to File
to Dr Sas. The filing date for the self-assessment return was 31 December 2010
for a paper return, or 31 January 2011 if filed on line.
5.
The adviser whom Dr Sas consulted in relation to her 2009-10 return was
a Mr Jasani, based in St Albans. Dr Sas stated in her letter to HMRC dated 14
March 2011 appealing against the first penalty that she had first visited Mr
Jasani on 20 January 2011 “when presenting him with most of the paperwork he
needed for my tax return of 09/10”. Her next visit to him had been on 26
January 2011 when presenting Mr Jasani with more paperwork which he had
requested earlier.
6.
There was no evidence to show on what date Dr Sas had enrolled to use
the Self Assessment service through the Government Gateway. The letter to her
from the Government Gateway containing the activation code was dated 27 January
2011. Dr Sas stated in her 14 March 2011 letter to HMRC that she had received
the Government Gateway letter on 2 February 2011. Although this gave 28 days
within which the service could be activated, she had sent the code to Mr Jasani
in a text message on the same day. I accept Dr Sas’s evidence as to the date of
receipt of the activation code, and the sending of that code by text message to
Mr Jasani.
7.
On 15 February 2011 HMRC issued a penalty determination to Dr Sas for failure
to submit her return by the due date. There was no evidence as to the date when
she received this notice.
8.
As Dr Sas had had no news from Mr Jasani as to the progress of
submission of her return on line, she contacted him by telephone on 23 February
2011. She arranged an appointment with him for the evening of 1 March 2011,
after her working hours. (This allowed for travel from her home in Essex.)
9.
She arrived for the appointment at around 7.30 pm. Mr Jasani explained
to her that he had not been able to access her on-line account. He told her
that he had spoken to an HMRC officer at about 6 pm, and had been advised that
he should call HMRC again after the meeting with Dr Sas, but before the service
closed for the day. Although he attempted to call shortly before 8 pm, the
office was shut.
10.
Dr Sas called HMRC at 1.18 pm on 2 March 2011. The officer indicated
that Dr Sas had not been registered under the number which she had quoted, and
that this was the reason for the issue of the penalty determination dated 15 February
2011.
11.
Immediately afterwards Dr Sas telephoned Mr Jasani, who promised her
that he would on that day register her under a new enrolment, explaining to her
that she should be given another code from the Government Gateway in around
seven days’ time.
12.
She had tried to contact Mr Jasani a few times during the period from 2
March to 23 March 2011, as she had not received her new code. She had no
further information as at the latter date concerning the process of submission
of her return.
13.
In her initial penalty appeal letter she explained that on 3 March 2011 she
had paid £350 to Mr Jasani for his services. She commented that this meant that
he was the person who had been given the right and responsibility to deal with
her tax return and therefore should be contacted if any trouble was
encountered. She argued that she was not responsible for the penalty, and
therefore appealed against it.
14.
On 8 April 2011 HMRC responded to Dr Sas’s appeal letter, explaining
that the appeal could not be considered until her return had been received, and
giving HMRC’s general views on the question of reasonable excuse.
15.
On 13 April 2011 Dr Sas emailed Mr Jasani to forward a new activation
code received from the Government Gateway in a letter to her dated 29 March
2011. Mr Jasani replied stating that he had to check whether this was the
correct one, as it should have come to his address. As she had not heard from
him, she emailed him again on 17 April 2011 emphasising the urgency for him to
complete the filing. He responded that he had not heard anything from HMRC
concerning web filing. He had tried to contact them twice, but they would not
talk too much to him as he was not officially her agent; to make him her agent
she would need to fill in a form “68-4” (ie a form 64-8), which he would have
arranged ages ago if they had known that HMRC were “going to give us such a
hassle”.
16.
In an email exchange between Dr Sas and Mr Jasani dated 26 April 2011,
Mr Jasani stated that he had made a fresh application as an emergency measure
to push for a response from HMRC with all new codes, “as we have too many old
ones and their system seems to be rejecting them”.
17.
On 21 June 2011 HMRC considered again Dr Sas’s appeal against the
initial penalty. HMRC did not consider that she had had a reasonable excuse for
not sending in her return on time. The officer commented:
“You have stated that the responsibility for
ensuring your tax return was correctly filed lies with your accountant because
you have provided them with all the relevant information and paid for their
services. I must advise you that the sole responsibility for ensuring that your
tax return is filed correctly and on time lies with yourself. You do not have a
reasonable excuse.”
18.
On 7 July 2011 Dr Sas emailed Mr Jasani to ask about the dates on which
he had tried contacting HMRC and asked for new codes. She referred to various
points concerning the contractual position between her and Mr Jasani. She
requested him to co-operate and get in touch with her as soon as possible.
19.
On 8 July 2011 Dr Sas requested a review of HMRC’s decision. She
referred to her previous appeal letter and also attached details of email
correspondence between her and Mr Jasani between 12 April 2011 and 7 July 2011
(extracts from which are set out above). She stated:
“Mr Jasani (the accountant) took over my corresponding
address with HMRC to his address with my permission in order to make him
eligible to apply for new registration code and complete my tax returns he
calculated yet in January! For some reason he was not able to succeed with the
registration/authentication - failed on a few occasions. This is entirely out
of my control at this stage and I really would like to have it sorted out
myself!”
20.
On 31 August 2011 HMRC’s Appeals and Reviews Unit issued their review
conclusion letter rejecting Dr Sas’s appeal. They considered that the decision
in the letter dated 21 June 2011 should be upheld. The reason was that the
2009-10 tax return remained outstanding. They enclosed a duplicate form for Dr
Sas to complete, and explained that if no tax was due, the penalty would be
reduced to nil. They commented again that the responsibility for filing the
return lies with the individual and that this responsibility cannot be passed
to a third party. They commented:
“The actions of dilatory agent [sic] do not
relieve a taxpayer from his legal obligation to ensure his returns are filed on
time. To do so would be unreasonable and unfair to taxpayers who do adhere to
this same obligation. It is essential that taxpayers who adhere to their obligations
feel confident the system does not reward non compliance. Each taxpayer is
responsible for dealing with and adhering to their obligation to ensure they
file their personal tax returns by their due date - this obligation cannot be
transferred to another person. Even if someone engages someone to assist with
that obligation, the responsibility for submitting the personal tax returns
rests squarely on the shoulders of the taxpayer.”
21.
Dr Sas responded in her letter dated 22 September 2011 that the lateness
of the return had been due to technical issues on HMRC’s side (complications
and subsequent failure on a number of occasions to get an authentication code
working) and that therefore resolving this matter on time had been completely
out of her control. She explained that a different accountant would not have
been in a position to complete the on-line return process. She supplied further
copies of her most recent correspondence with Mr Jasani “as further evidence of
my intention of sorting this matter out as soon as possible.” She had received
the paperwork from him the previous day for her to sign, and enclosed it with
her 22 September letter.
22.
On 31 October 2011 HMRC wrote to her to tell her that the return had
been processed, but also advising her that the decision to uphold the late
filing penalty still stood; if she did not agree with the appeal review
decision, she should refer the appeal to the Tribunals Service as explained in
the review conclusion letter.
23.
On 1 November 2011 HMRC issued an initial notice of surcharge, as no
payment had been received by 31 January 2011. On 1 November 2011 HMRC also
issued a second notice of surcharge, as the amount of tax due for 2009-10
remained unpaid at 30 July 2011. Subsequently, on 9 November 2011, HMRC issued
a Self Assessment Statement to Dr Sas. This showed first and second fixed
penalties of £100 each for late submission of the 2009-10 return, and first and
second surcharges for 2009-10 of £121.20 each.
24.
As Dr Sas had not contacted HMRC within the deadline (ie within 30 days
of 31 August 2011, the date of the review letter), Miss Walsh of HMRC wrote to
Dr Sas on 5 November 2011 to explain that as the appeal had not been notified
to HM Courts & Tribunals Service within the time limit, Dr Sas’s appeal was
now treated as settled under s 54(1) of the Taxes Management Act 1970 (“TMA
1970”). The penalties had been released for collection and were now due and
payable.
25.
Dr Sas replied on 12 November 2011, giving details of the history of the
matter which she had discussed on 9 November 2011 with an officer on HMRC’s
free helpline number. Dr Sas requested Miss Walsh to reconsider the matter.
26.
On 24 November 2011 Ms C McMichael, another HMRC Appeals and Review
Officer, responded. She noted the points in Dr Sas’s letter but explained that
the review of the appeal had now ended and the Appeals Review Unit had no
further involvement in Dr Sas’s case. Ms McMichael apologised for HMRC’s
provision to Dr Sas of an incorrect telephone number for HM Courts &
Tribunals Service, and stated that the Tribunals Service might accept a late
appeal but that Dr Sas needed to raise this when contacting them. The appeal
was settled under s 54(1) TMA 1970.
27.
In her Notice of Appeal, Dr Sas set out the reasons for the delay in
submitting her return and making payment during November 2011 of the tax due
(without the penalties or the surcharges). There was no specific reason given
for the late notification of the appeal to HM Courts & Tribunals Service.
Arguments for Dr Sas
28.
The arguments put by Dr Sas in her Grounds of Appeal and in her reasons
for late notification of the appeal are as set out above. She also referred to
her financial position, and to various difficulties following the loss of her
sole and regular income in May 2011.
Arguments for HMRC
29.
A taxpayer appealing against a penalty was required to have a reasonable
excuse which existed for the whole period of default. A reasonable excuse was
normally an unexpected or unusual event, either unforeseeable or beyond the
person’s control, which prevented him from complying with an obligation when he
otherwise would have done. It was necessary to consider the actions of the
taxpayer from the perspective of a prudent taxpayer exercising reasonable
foresight and due diligence, having proper responsibility for their
responsibilities under the Taxes Acts.
30.
If the event could reasonably have been foreseen, whether or not it was
beyond the person’s control, HMRC would expect the person to take steps to meet
their obligations.
31.
If there was a reasonable excuse, it must exist throughout the period of
default. This was defined at s 93(10) TMA 1970. The period of default in Dr
Sas’s case was from 31 January 2011 to 26 September 2011, ie 236 days (the
latter date being that on which HMRC received her return).
32.
The first notification by HMRC to Dr Sas that the return had not been
received had been early in March 2011, yet the return had not been filed until
26 September 2011, over six months later. She could have contacted HMRC herself
to request a paper return as soon as it had become apparent at the time of her
meeting with Mr Jasani on 1 March 2011 that there was going to be a delay in
filing. While HMRC recognised that Dr Sas was in communication with Mr Jasani,
it was ultimately her responsibility to ensure that the return was filed by the
deadline.
33.
The activation code had been issued on 27 January 2011 and received by
Dr Sas on 2 February 2011. The letter clearly stated that the account must be
activated within 28 days. However, Mr Jasani had only tried to use the code for
the first time on 1 March 2011, which was after the 28 day time limit. He had
them had to apply for a new activation code. HMRC’s records showed that further
activation codes had been requested on 28 March 2011 and 26 April 2011.
34.
It was not clear why it had not been possible for Dr Sas or Mr Jasani to
register successfully with the activation codes issued as a result of these
requests. However, there were no records of any further calls to the on-line
filing helpdesk about any difficulties encountered. Neither Dr Sas nor Mr
Jasani had stated in any of the correspondence provided exactly what action had
been taken when they faced difficulties in using the activation codes issued.
Dr Sas had said that these technical difficulties were totally out of her
control, but had not taken any action to seek advice as to what alternative
course of action she could take.
35.
The last email between Dr Sas and Mr Jasani had been on 7 July 2011, and
yet the return had not been filed until 26 September 2011. In HMRC’s view, it
would appear that the late filing of the return had been mainly due to the
delay by the agent in acting on the instruction of his client.
36.
HMRC requested that the Tribunal to find that there had been no
continuing reasonable excuse throughout the period of default, to dismiss the
appeal and to confirm the penalty surcharges and penalty determination.
Discussion and conclusions
37.
Dr Sas’s Notice of Appeal to HM Courts & Tribunals Service was not
given until 27 November 2011. In the letter dated 6 January 2012 acknowledging
receipt of the Notice of Appeal, Dr Sas was informed that if HMRC objected to
her application for permission to appeal out of time or the Judge was unwilling
to give permission, she would be given the opportunity to make further representations
before a final decision on the application was made. HMRC made no objection to
her application. My view, which I did not explicitly state in the short form
decision, was that it was in the interests of justice for her appeal to be
considered despite the late notice.
38.
The Notice to File was issued to Dr Sas on 23 September 2010. This gave
her two options. The first was to complete a paper return; the latest date by
which this could have been filed without incurring any penalty was 31 December
2010. The second option was to file on line; the time limit for this was 31
January 2011.
39.
Dr Sas did not (at least initially) take up the first option. She
therefore put herself in the position that her return had to be filed by 31
January 2011 if penalties were to be avoided. As stated above, there is no
evidence to indicate when she applied to enrol for on-line filing. There is no suggestion
in any of the correspondence that there had been any undue delay between her
application and the date of the Government Gateway letter dated 27 January 2011
containing the activation code. I therefore find, on the balance of
probabilities, that her application for enrolment must have been submitted no
earlier than a week or so before 27 January 2011. In Dr Sas’s letter to HMRC
dated 14 March 2011 she referred to Mr Jasani’s explanation that a new
registration would result in a new code being sent by the Government Gateway
“in around 7 days time”.
40.
Thus Dr Sas had in excess of three months to apply for enrolment for
on-line filing, but left it until about two weeks before the filing date. She
provided Mr Jasani with “most of the paperwork” required for her return on 20
January 2011, and further paperwork on 26 January 2011. This gave little margin
for any delay in completing the on-line filing. The activation code letter was
dated 27 January 2011, but Dr Sas did not receive it until 2 February 2011,
which was after the filing date. Thus, even if the activation code had worked,
it would not have been possible for Dr Sas’s return to be filed on line by the
due date. 27 January 2011 was a Thursday; 2 February 2011 was the following
Wednesday. There is no evidence to show whether the Government Gateway letter
was sent by first class post or second class post. I am therefore unable to make
any finding either way. However, the time allowed by Dr Sas for the whole
process of enrolment for on-line filing, activation of her account, the
completion of her return from the materials provided to Mr Jasani and the
intended on-line filing appears to have been very limited, thus increasing any
risk of failure to complete the process by the due date.
41.
On HMRC’s website, under the heading “What counts as a reasonable excuse
for filing an online return late?”, HMRC give some examples of what may constitute
a reasonable excuse. (I must emphasise that these views are HMRC’s, and do not
necessarily represent the views which may be held by particular Tribunals on
the basis of the facts of the cases before them.) One example is: “you
registered for HMRC Online Services but didn't get your Activation Code in time”.
HMRC continue with the following qualification:
“Remember, these are just examples. They can only
apply if the problem actually prevented you from filing your return on time
when you otherwise would have done. Each case is unique and will be considered
on its own merits. You should still always send your tax return as soon as you
can.
HMRC will not accept an excuse where you haven't
made a reasonable effort to meet the deadline. For example, you:
• found the online system too complicated to follow
• left everything to your accountant to do and they
let you down
...”
42.
I am not satisfied that the time allowed for enrolling for self
assessment and the obtaining of the necessary activation code was sufficient to
justify treating the late receipt of the activation code as amounting to a
reasonable excuse in the particular circumstances of Dr Sas’s case. However, assuming
for the present that it would in principle have amounted to a reasonable
excuse, this is not sufficient to decide the matter. Section 93(8) TMA 1970
provides:
“(8) On an appeal against the determination
under section 100 of this Act of a penalty under subsection (2) or (4) above
that is notified to the tribunal, neither section 50(6) to (8) nor section
100B(2) of this Act shall apply but the tribunal may—
(a) if it appears that, throughout the period of
default, the taxpayer had a reasonable excuse for not delivering the return,
set the determination aside; or
(b) if it does not so appear, confirm the
determination.”
43.
The requirement is that the taxpayer had the reasonable excuse
throughout the period of default. The activation code was received on 2
February 2011, but the return was not submitted until Dr Sas submitted it in
paper form as an enclosure to her letter dated 22 September 2011, over seven
months afterwards. Thus the delay in receiving the activation code after having
registered before the filing date did not constitute a reasonable excuse which
continued throughout the period of default.
44.
Dr Sas provided the activation code to Mr Jasani by text message on the
date of receipt, ie on 2 February 2011. There is nothing included in the
evidence to indicate that he took any action in relation to the code before 1
March 2011, the date of Dr Sas’s evening meeting with him. The expiry date for
the code was 28 days from 27 March 2011; on my calculations, this period would
have expired on 23 February. Whether coincidentally or otherwise, this was the
date on which Dr Sas telephoned Mr Jasani to arrange a meeting in order to try
to resolve the process of submitting her return.
45.
The copy record of the unsuccessful attempt to access her account, which
does not carry a date but was emailed by Mr Jasani to her on 12 April 2011,
shows the name “Gabrielle Sas” at the top. Throughout the email correspondence,
Mr Jasani referred to her as “Gabrielle” rather than by her correct name
“Gabriella”. It is possible that this difference in her user name could have
given rise to the errors when seeking to access her account. The error message
in the copy record does not specifically give the reason for the failure; it
states:
“ERROR: The details you have entered are either
incorrect or you may have already enrolled for this service. If the problem
persists please contact the HM Revenue & Customs Online Services Helpdesk
or select ‘Back’ to return to Your Services.”
46.
As there is no evidence of any attempt by Mr Jasani up to 23 February
2011 to use the activation code which had been relayed to him by text on 2 February
2011, the late receipt of the code cannot be regarded as amounting to a
continuing reasonable excuse, whether or not it amounted initially to a
reasonable excuse. I accept that Dr Sas put the task of completing and
submitting her return into the hands of Mr Jasani, and paid him for that task.
However, his attempts to carry it out were not successful, and the exercise
continued for a considerable period until the return was submitted in paper
form in September 2011. (I have not attempted to record in full detail the
additional email correspondence between Dr Sas and Mr Jasani which led
eventually to the submission of the return; not all the emails were included in
the evidence, and it appears that there were also exchanges of text messages,
which were also omitted from the evidence.)
47.
Although there were records of telephone calls to HMRC requesting
further activation codes, there were no further records of calls to the on-line
filing desk about any difficulties encountered. If Dr Sas had contacted HMRC as
soon as practicable following the meeting with Mr Jasani on 1 March 2011, she
could have told them that there were further difficulties in accessing her
on-line account, and could have requested a paper return at that stage. Direct
contact in this way might have resulted in HMRC deciding not to pursue penalty
liabilities, although this would have been a matter for their discretion rather
than a definite outcome.
48.
As shown by one of the email messages referred to above, Mr Jasani was
not officially a tax agent for Dr Sas. She was dealing with matters by
permitting him to use the activation code for her on-line HMRC self assessment
account. There is no indication in the papers before me that this in itself
would have resulted in technical problems, but it appears that repeated
attempts to enrol and activate accounts by reference to Dr Sas’s Unique
Taxpayer Reference may have prevented the process from operating as it should
have done.
49.
If Dr Sas could have arranged a telephone conversation with the HMRC
Online Services Helpdesk at a time when she was in a meeting with Mr Jasani,
the problem of his lack of tax agent status could have been overcome by her
giving authority to the Helpdesk to speak to Mr Jasani. Again, this might have enabled
the position to be resolved. Unfortunately no such conversation took place.
50.
The correspondence shows that Dr Sas considered the responsibility for
ensuring the correct filing of her tax return to lie with Mr Jasani. I find
that, whatever contract there may have been between Dr Sas and Mr Jasani, it
could not have the effect of absolving Dr Sas from her obligations to file her
return and to ensure payment of her tax by the due date. In general, reliance
on another person does not constitute a reasonable excuse for failure to comply
with those obligations; there is nothing in Dr Sas’s case to suggest that there
are any grounds for exception from that general principle. In correspondence
and in their Statement of case, HMRC commented that they do not consider a
dilatory agent as a reasonable excuse. There is insufficient evidence to enable
me to decide whether Mr Jasani’s behaviour was dilatory, although there are
quite a few factors tending to point in that direction.
51.
The question whether Mr Jasani had properly fulfilled his obligations
under his contract with Dr Sas is not a matter within this Tribunal’s
jurisdiction. In the same way, although I have commented that the period in
question given was very limited, I am unable to express a firm view as to
whether Dr Sas had given Mr Jasani adequate time to enable him to assist her in
complying with her obligations to file her return and pay her tax by the due
date.
52.
In the light of my findings above, I do not consider that there were any
exceptional continuing circumstances preventing Dr Sas and Mr Jasani from
fulfilling her filing and payment obligations by the due date. Thus there was
no reasonable excuse for the late filing of the return, or for the late payment
of the tax.
53.
Following the issue of the notices of surcharge on 1 November 2011 Dr
Sas referred, in her Notice of Appeal sent to HM Courts & Tribunals
Service, to her financial position from May 2011 onwards. I sympathise with her
position, but must emphasise that inability to pay the tax is not, in itself, a
reasonable excuse for delay in payment. Further, if the filing and payment had
been dealt with on a timely basis, this would have been before these financial
difficulties arose.
54.
As the return was not filed until 26 September 2011 and the tax had not
been paid by the end of July 2011, I find that the penalties and surcharges were
properly imposed by HMRC. In the absence of any reasonable excuse, the
penalties and surcharges must be confirmed and the appeal must be dismissed.
55.
Dr Sas is seeking to apply for permission to appeal. In considering the
making of an application, she needs to be aware of the requirements, as set out
in the relevant guidance referred to in the following paragraph, (available
from the HMC&TS website), in particular that an appeal to the Upper
Tribunal can only be made on a point of law.
Right to apply for permission to appeal
56.
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.
JOHN CLARK
TRIBUNAL JUDGE
RELEASE DATE: 3 October 2012
