[2013] UKFTT 85 (TC)
TC02503
Appeal number:
TC/2012/09776
CAPITAL GAINS TAX – late
payment - first and second surcharges – section 59C Taxes Management Act 1970 –
taxpayer allegedly misled by telephone advice from HMRC - whether reasonable
excuse – no – appeal dismissed.
FIRST-TIER TRIBUNAL
TAX CHAMBER
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VERITY
BRUCCIANI
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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 GUY BRANNAN
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RICHARD THOMAS
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Sitting in public at Bedford Square , London on 11 January 2013
Peter Sudlow, Sapienter
Wealth Management, for the Appellant
Gloria Orimoloye, Advocate,
for the Respondents
© CROWN COPYRIGHT
2013
DECISION
1.
This is an appeal against first and second surcharges charged under
section 59C Taxes Management Act 1970 ("TMA") in respect of the late
payment of capital gains tax for the tax year ended 5 April 2009.
The facts
2.
The appellant, prior to the tax year ended 5 April 2009, was not subject
to income tax and therefore was not within the self-assessment regime.
Accordingly, HMRC would not have issued a self-assessment tax return.
3.
The appellant's tax liability of approximately £23,000 arose in respect
of the sale of shares in that tax year.
4.
Following that disposal, the appellant should have notified HMRC of her
liability to capital gains tax within six months of the end of the tax year
ended 5 April 2009 (section 7 TMA) i.e. by 5 October 2009. The appellant
failed to notify HMRC.
5.
On 4 January 2010, the appellant's husband telephoned HMRC in relation
to his wife's tax return. An HMRC officer returned the call on the same day
and advised him to download HMRC Form SA 1. This Form allows a taxpayer, who
needs a tax return, to register for self-assessment and receive a unique taxpayer
reference ("UTR").
6.
HMRC received Form SA 1 completed by the taxpayer on 18 January 2010.
7.
HMRC informed us that the hearing that it takes between 3 to 6 weeks
from receipt of Form SA1 for an activation code to be sent to a taxpayer
enabling the taxpayer to complete a self-assessment tax return online. There
was no dispute about this time period.
8.
It is not clear when the UTR was issued by HMRC to the appellant, but
presumably it was at some time after 31 January 2010.
9.
The taxpayer was liable to pay her capital gains tax liability by 31
January 2010. It was accepted by both parties that payment was not made by
that date. In fact, as we shall see, the tax was paid on 6 April 2011.
10.
In June 2010 the appellant first asked Mr Sudlow to advise in relation
to the return and payment of the capital gains tax liability for the year ended
5 April 2009. Form 64–8, the form by which a taxpayer authorises HMRC to deal
with his/her agent, was submitted by Mr Sudlow on behalf the appellant in July
2010 but, for reasons which were not explained, was sent back by HMRC in
October 2010. It was not until January 2011 that Mr Sudlow was informed that
he had been accepted by HMRC as authorised to act on behalf the taxpayer.
11.
The first surcharge (section 59C(2)) TMA became due following the expiry
of 28 days from the due date i.e. 1 March 2010. The second surcharge (section
59C(3) TMA) became due following the expiry of six months from the due date, i.e.
31 July 2010. In each case, the surcharge was an amount equal to 5% of the
unpaid tax i.e. an amount of £1181.82 in respect of each surcharge.
12.
It was not suggested by Mr Sudlow that the crystallisation of the second
surcharge on 31 July 2010 was caused by HMRC's delay in processing his
authorisation to act on behalf of the appellant.
13.
Once it became clear to Mr Sudlow in January 2011 that HMRC accepted
that he was authorised to act on behalf of the appellant he telephoned HMRC to
discuss the appellant's outstanding capital gains tax liability and spoke to a
Mr Bampton in HMRC's Portsmouth office on 8 February 2011.
14.
There are different versions of exactly what was said in this telephone
conversation.
15.
HMRC's notes of the telephone conversation were as follows:
"08/02/2011 – agent called re CG on share sale
in 08/09. Record was set up specifically for this but itr09 [income tax return
for the year ended 5 April 2009] was never issd. Manual iss now as LATE ISSUE
with 3 mnth deadline after checking with tech."
16.
Mr Sudlow's notes of the conversation were as follows:
"Spoke to Paul Bampton (in Portsmouth) who
indicated it looked like everything had been done which should have been done,
apart from the Tax Return being issued. It will be treated as a Late Return
because the problem is on HMRC's side. A Return will be issued to the Client
which ought to be processable online. The deadline will be three months from
31 January 2011 to submit and pay."
17.
HMRC argue that, according to their notes of this conversation, nothing
was said about the date for payment of the tax. Mr Sudlow states that a
three-month deadline for filing and payment was agreed. The return and the tax
were respectively filed and paid within this time limit. Although, for reasons
which we shall explain below, we believe that nothing turns on this dispute, we
consider it more likely that Mr Sudlow's version of the conversation is
correct. He had been charged with the responsibility of sorting out the
appellant's capital gains tax liability. It seems to us improbable that he
would have discussed with HMRC only the question of the date by which the late
return should be submitted. Instead, we think it more probable that he would
have discussed the deadline for the filing of the return and the payment of the
tax. In any event, there appears to have been no explicit reference to
surcharges by either party in their respective notes of the conversation.
18.
We should add that we have been sent a copy of letter from Mr Sudlow to
HMRC written after the hearing requesting a copy of the transcript of the
conversation under the Freedom of Information Act. We have accepted Mr Sudlow’s
account of that conversation and, for that reason, there seems no reason for us
to delay our decision in this appeal.
19.
Mr Sudlow criticised the subsequent conduct of HMRC, including (from the
appellant's viewpoint) an unsuccessful review process, for failing to honour
the agreement reached with Mr Bampton i.e. a recognition by Mr Bampton that
HMRC had been at fault for not issuing a return and that, in his view, matters
would be settled by a return being issued and the payment of tax being made
within three months from 31 January 2011.
20.
There was a further telephone conversation with Mr Marsden of HMRC on 9
September 2011 which Mr Sudlow says (based on his notes of the conversation)
contained an assurance by HMRC that the appeals against a surcharge as had been
allowed. HMRC's version of this telephone conversation (based on listening to
a recording of the conversation which was not produced to us but which is
recorded in a review letter dated 20 September 2012) is that the HMRC officer
concerned confirmed that the surcharges on the appellant's self-assessment
statement of account were shown as "suspended and were reduced to nil”.
However, HMRC state that in the latter part of the conversation Mr Marsden made
it clear to Mr Sudlow that he did not know whether the reference to the fact
that the surcharges had been suspended meant that they were permanently
suspended or that collection had been postponed.
21.
HMRC point out that in a letter to Mr Sudlow dated 3 July 2011 HMRC
advised him that the surcharges remained payable until an appeal was settled
even if it was shown on the appellant's account as "collection
suspended."
22.
On balance we consider it more probable that HMRC's fuller version of
this conversation is correct. Nonetheless, we do not think that this
conversation has a material bearing on the outcome of this appeal.
The legislation
23.
We set out below the relevant statutory provisions, so far as is
material.
24.
Section 7 TMA provides:
"(1) Every person who—
(a) is chargeable to income tax or capital gains tax
for any year of assessment, and
(b) has not received a notice under section 8 of
this Act requiring a return for that year of his total income and chargeable
gains,
shall, subject to subsection (3) below, within six
months from the end of that year, give notice to an officer of the Board that
he is so chargeable."
25.
Section 59B TMA provides:
“(1) Subject to subsection (2) below, the difference
between—
(a) the amount of income tax and capital gains tax
contained in a person's self-assessment under section 9 of this Act for any
year of assessment, and
(b) the aggregate of any payments on account made by
him in respect of that year (whether under section 59A of this Act or
otherwise) and any income tax which in respect of that year has been deducted
at source,
shall be payable by him or (as the case may be)
repayable to him as mentioned in subsection (3) or (4) below ….
(3) In a case where the person—
(a) gave the notice required by section 7 of this
Act within six months from the end of the year of assessment, but
(b) was not given notice under section 8 or 8A of
this Act until after the 31st October next following that year,
the difference shall be payable or repayable at the
end of the period of three months beginning with the day on which the notice
under section 8 or 8A was given.
(4) In any other case, the difference shall be
payable or repayable on or before the 31st January next following the year of
assessment.”
26.
Section 59C TMA (since repealed) provided:
"(1)
This section applies in
relation to any income tax or capital gains tax which has become payable by a
person (the taxpayer) in accordance with section 55 or 59B of this Act.
(2)
Where any of the tax
remains unpaid on the day following the expiry of 28 days from the due date,
the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid
tax.
(3)
Where any of the tax
remains unpaid on the day following the expiry of 6 months from the due date,
the taxpayer shall be liable to a further surcharge equal to 5 per cent of the
unpaid tax.
(4)
Where the taxpayer has
incurred a penalty under section 93(5) of this Act, Schedule 24 to the
Finance Act 2007 or Schedule 41 to the
Finance Act 2008, no part of the tax by reference to which that penalty was
determined shall be regarded as unpaid for the purposes of subsection (2) or
(3) above.
(5)
An officer of the Board may
impose a surcharge under subsection (2) or (3) above; and notice of the
imposition of such a surcharge—
(a)
shall be served on the
taxpayer, and
(b)
shall state the day on
which it is issued and the time within which an appeal against the imposition
of the surcharge may be brought.
(6)
A surcharge imposed under
subsection (2) or (3) above shall carry interest at the rate applicable under section 178 of the
Finance Act 1989 from the end of the period of 30 days beginning with the day
on which the surcharge is imposed until payment.
(7)
An appeal may be brought
against the imposition of a surcharge under subsection (2) or (3) above within
the period of 30 days beginning with the date on which the surcharge is
imposed.
(8)
Subject to subsection (9)
below, the provisions of this Act relating to appeals shall have effect in
relation to an appeal under subsection (7) above as they have effect in
relation to an appeal against an assessment to tax.
(9)
On an appeal under
subsection (7) above that is notified to the tribunal section 50(6) to (8) of
this Act shall not apply but the tribunal may—
(a)
if it appears … that,
throughout the period of default, the taxpayer had a reasonable excuse for not
paying the tax, set aside the imposition of the surcharge; or
(b)
if it does not so appear …,
confirm the imposition of the surcharge.
(10)
Inability to pay the tax
shall not be regarded as a reasonable excuse for the purposes of subsection (9)
above.
(11)
The Board may in their
discretion—
(a)
mitigate any surcharge
under subsection (2) or (3) above, or
(b)
stay or compound any
proceedings for the recovery of any such surcharge,
and
may also, after judgment, further mitigate or entirely remit the surcharge.
(12)
In this section—
“the
due date”, in relation to any tax, means the date on which the tax becomes due
and payable;
“the
period of default”, in relation to any tax which remained unpaid after the due
date, means the period beginning with that date and ending with the day before
that on which the tax was paid."
27.
It is worth noting that section 59C(9)(a) TMA requires that a reasonable
excuse must be demonstrated throughout the period of default, and that term is
defined in section 59C(12) and in this case means the period from the due date
(31 January 2010) to the date on which the tax was paid (6 April 2011).
Discussion
28.
In our view the appellant has failed to establish a reasonable excuse
within the meaning of section 59C(9) TMA.
29.
As noted above, the reasonable excuse must exist throughout the period
of default i.e. from 31 January 2010 to 6 April 2011.
30.
It is not disputed that the appellant should have notified her liability
to capital gains tax for the year ended 5 April 2009 by 5 October 2009 and
should have paid the outstanding tax liability by 31 January 2010. It is also
accepted by both parties that she failed either to notify the liability or pay
the tax by those respective dates.
31.
There is no evidence, in our view, that HMRC misled or in any way
prevented the appellant from paying her tax liability by 31 January 2010, or by
the trigger dates for the two surcharges. If the appellant had complied with
her obligation under section 7 TMA to notify HMRC of her tax liability by 5
October 2009, it would have been perfectly possible for HMRC to have issued a
UTR and a self-assessment tax return in time for the appellant to file a return
and pay the tax by 31 January 2010.
32.
By filing Form SA 1 on 18 January 2010, the appellant left HMRC insufficient
time to issue a UTR and an activation code for her self-assessment tax return
for the relevant year. In any event, as HMRC pointed out at the hearing, there
was nothing to prevent the taxpayer making a payment of the capital gains tax
due before 31 January 2010 even without a UTR. Moreover, the appellant could
have requested and filed a paper return prior to 31 October 2009 – there is no
obligation in the case of an individual self-assessment return for the return
to be filed on-line (at least prior to 31 October following the end of the
relevant tax year).
33.
There was, therefore, no reasonable excuse for the late payment of tax
from 31 January 2010 to, at least arguably, 8 February 2011 i.e. the date of
the telephone conversation between Mr Sudlow and Mr Bampton. That telephone call
cannot in our view establish a reasonable excuse for the failure of the
appellant to discharge her liability to capital gains tax prior to the date of
that conversation. It may well be that HMRC, in that conversation, admitted a
failure to send out a self-assessment tax return but HMRC are not pursuing the
appellant for penalties in respect of a failure to submit a return by 31
January 2010.
34.
We have found that it is more likely than not that HMRC, in that
conversation, also required that tax should be paid within three months from 31
January 2011. That does not mean, however, that they accepted that tax should
not been paid by the due date 31 January 2010. In any event, the liability to
the first and second surcharges had already crystallised many months before.
35.
Mr Sudlow argued that there was a contract created by Mr Bampton in the
telephone conversation. He says that HMRC offered a waiver of the surcharges
on the basis of the officer's assessment of the case from the information to
hand, in return for the filing of the tax return within three months of 31
January 2011 and payment of the tax by that date. He says that he accepted
this offer on behalf of the appellant who duly submitted the return on 21 March
2011 and made the payment of tax on 6 April 2011.
36.
In our view, this cannot be the correct analysis. There was no
indication from the records of the conversation maintained by HMRC or Mr Sudlow
that HMRC had agreed to waive the surcharges. Moreover, the agreement of the
appellant to make a payment of tax by a date which was already over 12 months
overdue in circumstances where the appellant was under a statutory obligation
to pay that tax on 31 January 2010 cannot possibly constitute good
consideration as a matter of contract law.
37.
In short, the conversation of 8 February 2011 came too late to
constitute a reasonable excuse for the failure of the appellant to pay the tax
on the due date and came after the first and second surcharges had already
crystallised. The same is true as regards the conversation with Mr Marsden.
38.
It is clear from the decision of the Upper Tribunal in HMRC v HOK
Limited [2012] UKUTT 363 (TCC) that this tribunal has no inherent judicial
review function in relation to tax appeals – its jurisdiction is purely
statutory (although we might add that that jurisdiction must be interpreted, so
far as it is possible to do so, in a manner consistent with a taxpayer’s Convention
rights). If Mr Sudlow's complaint is that HMRC's insistence on charging
surcharges has been maintained after the telephone conversation with Mr Bampton
on 8 February 2011 is Wednesbury unreasonable, then that is an issue
over which, in the ordinary case, this tribunal has no jurisdiction. The
appellant's recourse, if any, would be to either to make an application for
judicial review or to make a complaint to the Adjudicator’s Office.
Decision
39.
For the reason given above, we dismiss this appeal.
40.
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.
GUY BRANNAN
TRIBUNAL JUDGE
RELEASE DATE: 30 January 2013
