[2010] UKFTT 507 (TC)

TC00762

Appeal number: TC/2009/16141

Contractors’ returns — Income Tax (Sub-contractors in the Construction Industry) Regulations 1993 — late submission of return — sections 98A and 118 Taxes Management Act 1970 — amendment to section 98A from 6th April 2007 — reasonable excuse

FIRST-TIER TRIBUNAL

TAX 

	MR CRAIG LAWTON
(TRADING AS C B LAWTON DRYWALL AND PLASTERING CONTRACTORS)
Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

TRIBUNAL:  Ms Rachel Perez (Judge)

The tribunal determined the appeal without a hearing pursuant to rule 26 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 having first read the documents listed at the annex to this decision

© CROWN COPYRIGHT 2010

DECISION

The tribunal—

(1)	extended time for making the appeal (if such extension were needed); and 

(2)	found—

(a)	that the returns for the years ended 5th April 2006 and 5th April 2007 were not rendered in time; and 

(b)	that the appellant did not have a reasonable excuse for not rendering them in time or that, if he did, the excuse ceased and he did not render the returns without unreasonable delay after the excuse ceased.

The appeal is dismissed and the revised total penalty determination of £1,758.86 confirmed.

FULL FINDINGS AND REASONS

1.	This was an appeal against penalty determinations imposed under section 98A of the Taxes Management Act 1970 (“the TMA”). They were imposed on the ground that the appellant had failed, contrary to the requirements of the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993 (S.I. 1993/743, “the 1993 regulations”), to make on time returns relating to sub-contractors for the years ended 5th April 2006 and 5th April 2007.  For the reasons set out below, I find that the return for the year ended 5th April 2006 was due by 19th May 2006, and that the return for the year ended 5th April 2007 was due by 19th May 2007.  It was common ground, and I find, that the returns were received by HMRC on 3rd July 2009.

2.	The penalties were imposed at a rate of £100 per month under section 98A(2)(a) and (3)(a) of the TMA.  A penalty of £1,200 was initially imposed in respect of each of the two returns (apparently penalising only the first twelve months’ delay).  This resulted in an initial total penalty of £2,400.  But the penalty for the second return, the one for the year ended 5th April 2007, was reduced to £558.86.  HMRC’s statement of case does not say whether this was done pursuant to an HMRC concession (eg. ECM21020), or whether it was done in the belief that the reduction was required by section 98A(2)(b).  As I received no submissions as to the correctness or otherwise of that reduction, I do not propose to interfere with it.  The total penalty now under appeal is therefore £1,758.86 (£1,200 for the return for year ended 5th April 2006 plus £558.86 for the return for year ended 5th April 2007).
Preliminary

3.	It is clear from HMRC’s letter of 16th October 2009 (the letter containing the decision under appeal) and from HMRC’s statement of case, that the penalties were imposed on the ground of late return of a contractor’s returns.  It is clear too from that letter that HMRC alleged the lateness to be a breach of the 1993 regulations (S.I. 1993/743).  Although that letter refers to reasonable excuse for “not submitting the Employers End of Year Return by the due date”, it also says—

-	“prior to 6th April 2007, a contractor was required to make a return of payments made to subcontractors after the end of each tax year…not later than 44 days after the end of the tax year i.e. 19th May”;

-	“it is the Contractor’s statutory obligation under S.I. 1993 No. 743…to make a return of payments made to subcontractors after the end of each tax year..”; and

-	“I wish to advise you that the penalties have been issued for your failure to make Contractor returns for the years ending 2006 and 2007 not as you claim in your letter for non submission of a P35.  You are not set up as an Employer and therefore have nothing to return under the Pay As You Earn Scheme.”. [emphasis added]

(It appears that the third of those passages may have been included to correct a statement in HMRC’s letter of 27th August 2009 that “you continued to ‘employ’ subcontractors”.)

4.	Those references in the letter of 16th October are followed up in HMRC’s statement of case by references throughout to a “Contractor’s CIS End of Year Return”.  But that statement of case does also refer to the Income Tax (PAYE) Regulations 2003 and the Social Security (Contributions) Regulations 2001.  The reference to those two sets of regulations appears erroneous, given that HMRC’s case is about late making of a contractor’s return.

5.	That erroneous reference has not in my judgment prejudiced the appellant’s ability to make his case.  I so find for three reasons.  First, the statutory instrument number relied on by HMRC was cited in their letter of 16th October 2009.  Second and more importantly, it was clear in my judgment, both from that letter and from HMRC’s statement of case read as a whole, that the case is about late return of a contractor’s return, and not of an employer’s return.  Third, in any event, I had before me (among other documents) the appellant’s letters of 28th June 2009 and 16th September 2009, both of which preceded HMRC’s statement of case.  In both letters, the appellant addresses the case not only in relation to HMRC’s mistaken reference to an employer’s return, but also in relation to HMRC’s detailed contentions that he had failed to make contractor’s returns as required by the 1993 regulations.  I was therefore able to take into account the appellant’s response to HMRC’s contention that he had failed to make on time contractor’s returns under the 1993 regulations.

Introduction - penalties – general legislative framework

6.	Section 98A of the TMA made provision for a person to be liable to a penalty or penalties for failure to make a return.  

7.	Section 118(2) of the TMA makes provision for when a failure to make a return will be deemed not to be a failure—

“(2)     For the purposes of this Act, 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 Board or the tribunal or officer concerned may have allowed; and where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and, 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.”.

8.	Section 100 of the TMA provided, both before 6th April 2007 and on and after that date, for HMRC to impose penalties.  It provided, so far as relevant—

“an officer of the Board [ie. of HMRC] authorised by the Board for the purposes of this section may make a determination imposing a penalty under any provision of the Taxes Acts [this includes the TMA] and setting it at such amount as, in his opinion, is correct or appropriate.”.    

9.	Section 100B of the TMA provides for an appeal to this tribunal against the penalties.  It provides so far as relevant—

“100B  Appeals against penalty determinations
(1)     An appeal may be brought against the determination of a penalty under section 100 above and, subject to sections 93 and 93A of this Act and the following provisions of this section, the provisions of this Act relating to appeals shall have effect in relation to an appeal against such a determination as they have effect in relation to an appeal against an assessment to tax, except that references to the tribunal shall be taken to be references to the First-tier Tribunal.

(2)     Subject to sections 93(8) and 93A(7) of this Act on an appeal against the determination of a penalty under section 100 above section 50(6) to (8) of this Act shall not apply but—
(a)     in the case of a penalty which is required to be of a particular amount, the First-tier Tribunal may—
(i)     if it appears . . . that no penalty has been incurred, set the determination aside,
(ii)     if the amount determined appears . . . to be correct, confirm the determination, or
(iii)     if the amount determined appears . . . to be incorrect, increase or reduce it to the correct amount,”.

10.	In view of section 100B(2)(a), the tribunal has to ask itself:  (1) has a penalty been incurred? and (2) if so, is it of the correct amount?  Whether a penalty was incurred in the present case depends on whether the appellant was required to render a contractor’s return for each of the two years in question, whether either of those returns was late, and if it was late, can it be deemed not to be late by virtue of section 118(2) (reasonable excuse).  Whether the penalty was of the correct amount is to be ascertained by finding by how many months the returns were late, whether there were more than fifty persons in respect of whom particulars should be included in each of the two returns, and whether the number of months’ lateness has been multiplied by the correct monthly amount. 

(1) Were penalties incurred in the present case?

11.	I find that penalties were incurred, for the reasons set out below.

Requirement to render returns

12.	I found above that the appellant was required to render the return for the year ended 5th April 2006 by 19th May 2006, and that he was required to render the return for the year ended 5th April 2007 by 19th May 2007.  I so found for the following reasons.

13.	Regulation 40A of the 1993 regulations required a contractor to render a return, not later than 44 days after the end of the year, containing the particulars specified in that regulation.  By virtue of regulation 2(3) of those regulations, “year” had the same meaning as in the Income Tax (Employments) Regulations 1993 (S.I. 1993/744); “year” therefore meant “year of assessment” (being the meaning given by regulation 2 of S.I. 1993/744).  The year of assessment 2005 to 2006 ended on 5th April 2006.  44 days after the end of that year was therefore 19th May 2006.  The year of assessment 2006 to 2007 ended on 5th April 2007.  44 days after the end of that year was therefore 19th May 2007. So, by virtue of regulation 40A of the 1993 regulations, a contractor to whom those regulations applied was required to render a return for the year ended 5th April 2006 by 19th May 2006, and for the year ended 5th April 2007 by 19th May 2007.

14.	The appellant has not disputed that, in the years of assessment in question, he made payments to which section 559 of the TMA applied.  Nor has he suggested that he was not a contractor to whom those regulations prima facie applied, or raised any ground which would expressly exempt him, under the 1993 regulations, from the requirements of regulation 40A.  Indeed, it appears to be common ground (see appellant’s letter of 16th September 2009) that he rendered a contractor’s return for the year 2004 to 2005, that is, the year preceding the years in question.  I find that the appellant rendered such a return for the year 2004 to 2005.  And it is common ground that he rendered, on 3rd July 2009, a contractor’s return for each of the years 2005 to 2006 and 2006 to 2007.  I find therefore that the appellant was required by regulation 40A of the 1993 regulations to render a return for the year ended 5th April 2006 by 19th May 2006 and for the year ended 5th April 2007 by 19th May 2007.

Failure to render required returns on time

15.	I found above that the returns for the years ended 5th April 2006 and 5th April 2007 were not received until 3rd July 2009.   They were therefore prima facie late, and so would attract a penalty as explained below, unless I can find under section 118(2) of the TMA (reasonable excuse) that they are to be treated as not having been rendered late.  I return at paragraph 27 below to the question of reasonable excuse.   

Penalties for failure to render required returns on time

16.	Penalties for late rendering of a contractor’s returns are governed by section 98A of the TMA.   As in force (on 5.4.06, 5.4.07 and on the dates on which the penalty determinations were made) in relation to payments made before 6th April 2007 under contracts relating to construction operations, section 98A provided, so far as relevant—

“98A—(1)	…regulations under section 566(1) (sub-contractors) of the principal Act may provide that this section shall apply in relation to any specified provision of the regulations.

(2)     Where this section applies in relation to a provision of regulations, any person who fails to make a return in accordance with the provision shall be liable—
(a)     to a penalty or penalties of the relevant monthly amount for each month (or part of a month) during which the failure continues, but excluding any month after the twelfth or for which a penalty under this paragraph has already been imposed, and

(b)     [not relevant].

(3)     For the purposes of subsection (2)(a) above, the relevant monthly amount in the case of a failure to make a return—

(a)     where the number of persons in respect of whom particulars should be included in the return is fifty or less, is £100, and

(b)     [not relevant].

(4)	[not relevant].”.

17.	By virtue of section 118(1) of the TMA, “the principal Act” means the Income and Corporation Taxes Act 1988 (“ICTA”).  So section 98A(1) of the TMA (as in force in relation to payments made before 6th April 2007 under contracts relating to construction operations) referred to regulations under section 566(1) of the Income and Corporation Taxes Act 1988.  The 1993 regulations were made under that section 566.

18.	As in force prior to 6th April 2007, regulation 40A(16) of the 1993 regulations provided—

“(16)  Section 98A of the Management Act [ie, the TMA, by virtue of regulation 2(1)] shall apply to the provisions of this regulation requiring a return to be made.”.  (There is similar provision in regulation 4(12) of the 2005 regulations.)

19.	By the above route therefore, section 98A made provision for the imposition of penalties for late rendering of a contractor’s return which was required to be made by the 1993 regulations.

Imposition of penalties under section 98A after 5th April 2007

20.	It is not disputed, and I find, that (as stated in HMRC’s statement of case) all but the first of the penalty determinations in this case were issued after 5th April 2007.  (The first was issued on 12th March 2007.)

21.	Section 98A was amended from 6th April 2007 to provide, so far as relevant—

“(1)     … regulations under section 70(1)(a) or 71 of the Finance Act 2004 (sub-contractors) may provide that this section shall apply in relation to any specified provision of the regulations. [emphasis added]

(2)     Where this section applies in relation to a provision of regulations, any person who fails to make a return in accordance with the provision shall be liable—

(a)     to a penalty or penalties of the relevant monthly amount for each month (or part of a month) during which the failure continues, but excluding any month after the twelfth or for which a penalty under this paragraph has already been imposed, and

(b)     [not relevant].

(3)     For the purposes of subsection (2)(a) above, the relevant monthly amount in the case of a failure to make a return—

(a)     where the number of persons in respect of whom particulars should be included in the return is fifty or less, is £100, and

(b) [not relevant].

(4)     [repealed].”.

22.	The one difference between the above two versions of section 98A, so far as relevant to this appeal, is the replacement of the reference to regulations under section 566(1) ICTA with a reference to regulations under section 70(1)(a) or 71 of the Finance Act 2004.  But that amendment was limited, by section 77(1) of the Finance Act 2004, to apply only in relation to payments made on or after 6th April 2007 under contracts relating to construction operations.  So that amendment does not prima facie apply to the present case; instead, section 98A(1), for the purposes of the present case, retains its reference to regulations under section 566(1) ICTA.

23.	From that same date (ie. 6th April 2007), the 1993 regulations were revoked and replaced by the Income Tax (Construction Industry Scheme) Regulations 2005 (S.I. 2005/2045, “the 2005 regulations”).  But, by contrast with the amendment of section 98A, that revocation of the 1993 regulations was not expressed to be limited to payments made on or after 6th April 2007 under contracts relating to construction operations (the transitional provisions in paragraphs 1 to 8 of Schedule 1 to the 2005 regulations are not expressed in those terms).  So the requirement in regulation 40A of the 1993 regulations to render the return was revoked by the 2005 regulations from 6th April 2007.  The revocation of the 1993 regulations also means that the application of section 98A by regulation 40A(16) of those regulations was revoked from 6th April 2007.  

24.	The revocation of the 1993 regulations is catered for by a transitional provision in paragraph 9 of Schedule 1 to the 2005 regulations—
“9.	These Regulations have effect in relation to sums liable, under the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993, to be deducted or accounted for in respect of payments made before the appointed day as if the sum had been liable to be deducted or accounted for under these Regulations.”.

25.	In view of the contrast mentioned at paragraph 23 above, and the transitional provision mentioned at paragraph 24 above, it might be asked which of the two versions of section 98A HMRC should have used to impose all of the penalties except the first one (the first one was imposed prior to 6th April 2007).  That is:  should they have used the pre-6th April 2007 or the post 5th April 2007 version?  It is not clear which version they used.  But it does not matter in my judgment which version they used.  Both versions provided for a penalty of £100 per month (or part month) for the first twelve months’ lateness in a case where the number of persons in respect of whom particulars should be included in the return was fifty or less.

26.	In view of the above, I find that penalties were imposable under section 98A in relation to the late rendering of each of the two returns, unless the appellant is assisted by the reasonable excuse provisions in section 118(2) of the TMA.  

Reasonable excuse

27.	I find for the following reasons that the appellant is not assisted by section 118(2).

28.	Section 118(2) of the TMA provides, so far as relevant—

(2)     …where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and, 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..”.

29.	I found above that the return for the year ended 5th April 2006 was due on 19th May 2006 and that the return for the year ended 5th April 2007 was due on 19th May 2007.  And I found above that both returns were received on 3rd July 2009.

30.	I find that the appellant had no reasonable excuse for the returns not having been received by the due date, but that, if he had such an excuse, the excuse ceased and he did not render the returns without unreasonable delay after the excuse ceased.  I so find for the following reasons.

31.	I had before me the following documents from the appellant: his letter of 28th June 2009, his request for review dated 16th September 2009, his letter dated 16th September 2009 and his notice of appeal dated 6th November 2009.

32.	In his letter dated 28th June 2009, the appellant says that he has decided to appeal “due to”—

“1)	I have never employed any person’s in the years ending 05-04-2006 and 05-04-2007.
2)	after speaking to the CIS and being told that I am all up to date and there is no problem.
3)	it was never explained about submitting P35/CIS36, plus I never received these forms, as I do my own accounts.
4)	after getting advice from the Employers helpline, being told that a mistake had been made and I should appeal against these fines.
5)	P35/ CIS 36, do not exist anymore.
6)	I feel that, I have been unfairly treated, almost bullied by all departments of the H M Revenue and Customs.”.

33.	The grounds for the request for review are set out in the appellant’s letter dated 16th September 2009—

“Why I do not accept HMRC’s view:-

As I submitted 2004-05 CIS 36 on time, proves if CIS 36 forms for 2005-06 and 2006-07 were sent to my address, I would have submitted them on time.
As I was operating as a Contractor only, and I was never required to complete P35 forms, why was/ am being fined for not submitting them.
As Relevant forms and reminders were not received, the advice from the Employers/ CIS helpline, say that a mistake had been made.  Now you are telling me the Employers/ CIS helpline would only been able to give advice regarding the new system which started April 2007 and spending countless hours/ days on the phone too various Departments in the HM Revenue & Customs and coming up against Brick walls, unfair treatment and bullying, for your mistakes.
The fact that I had to phone the HMRC five times too get the right forms to submit for the 2008-09 returns, only proves this.”.

34.	The notice of appeal dated 6th November 2009 sets out the following grounds of appeal—

“Please see letter from CB Lawton Drywall Contractors too HMRC.”

“I feel the fines are unjustly.  Plus with the way I have been treated by the HMRC as a whole, (as a criminal).

I think the decision should been, the penalties are dropped and I can get on with my life.”.

35.	The appellant’s grounds of challenge to the penalties appear therefore to be—

(1)	that he did not receive the forms to complete;

(2)	that it was “never explained [to him] about submitting P35/CIS36”;

(3)	that he was told by HMRC that he was “all up to date and there was no problem”;

(4)	that he was told by the employers’ helpline that a mistake “had been made and that he should appeal against these fines”;

(5)	that “P35/ CIS 36, do not exist anymore”; and

(6)	that he has been unfairly treated, and bullied, and treated as a criminal by HMRC, and that the penalties are unjust.

36.	The appellant also set out grounds relating to employer’s returns.  But HMRC accept that the appellant was right to say that he was not an employer and did not have to submit employer’s returns; and he has not been penalised for non-submission of employer’s returns (see paragraphs 3 to 5 above.).  I have not therefore addressed the appellant’s grounds so far as they relate to employer’s returns.

37.	I now deal in turn with each of the appellant’s grounds of appeal relating to contractor’s returns.

Ground (1) - The appellant says he did not receive the forms to complete

38.	Non-receipt of the forms (or reminders) did not in my judgment amount to a reasonable excuse for not rendering the returns on time.  I so find for the following reasons.

39.	HMRC say that they sent the appellant the forms on 16th January 2006 (for the year ended 5th April 2006) and on 14th January 2007 (for the year ended 5th April 2007) (HMRC letter 16th October 2009).  They say too that they issued reminders “in the following March each year” (statement of case page 3).  I make no finding as to whether or not the appellant received these forms or the reminders.  Whether he received them or not, he was I find required to render a return for each of those two years.  

40.	I so find for two reasons.  First, the requirement to render returns was imposed by regulation 40A of the 1993 regulations.  Regulation 40A was not expressed to be conditional upon HMRC issuing a notice to the appellant to render the returns.  Although the form of the return was required by regulation 40A to be in such form as HMRC may approve or prescribe, that did not in my judgment mean that HMRC had to issue a notice requiring the return to be rendered at all.  If the appellant did not receive a notice informing him of what form the return should take, and if he did not already know what form it should take, he should in my judgment have enquired as to that in advance of the date the return was due.  Second, even if I am wrong on that, I find that the appellant knew or should have known that the return was required to be rendered, and the date by which it was required to be rendered.  I so find in view of the appellant’s acceptance (his letter dated 16th September 2009), and my finding, that he rendered a contractor’s return on time for the year 2004 to 2005.

41.	Even if I am wrong in my findings at paragraphs 38 to 40 above, in other words, if a failure to receive the forms and reminders from HMRC did constitute a reasonable excuse, I find that that reasonable excuse ceased, for each return, at the time when the appellant received the first penalty notice in relation to non-submission of that return.  I find too that he did not render the returns without unreasonable delay after that excuse ceased.  I make these two findings for the following reasons.

42.	The appellant has not disputed receiving a penalty notice issued (according to HMRC’s statement of case) on 12th March 2007 in relation to the return due for the year ended 5th April 2006.  And he has not disputed receiving a penalty notice issued (according to HMRC’s statement of case) on 24th September 2007 in relation to the return due for the year ended 5th April 2007.  I find that those penalty notices were issued on those dates.  There is no suggestion that they were not received in the normal course of post.  I find therefore that the appellant received them no later than a week after they were each issued. So the first penalty notice for the return relating to the year ended 5th April 2006 was, I find, received by the appellant at the latest on Monday 19th March 2007;  and the first penalty notice for the return relating to the year ended 5th April 2007 was, I find, received by the appellant at the latest on Monday 1st October 2007.

43.	I find that none of the appellant’s documents before me explains satisfactorily why the return for the year ended 5th April 2006 was not received by HMRC until 3rd July 2009, despite his having received, by 19th March 2007, the first penalty notice relating to that return.  Similarly, I find that none of the appellant’s documents before me explains satisfactorily why the return for the year ended 5th April 2007 was not received by HMRC until 3rd July 2009, despite his having received, by 1st October 2007, the first penalty notice relating to that return.  I make these two findings (a) because none of the appellant’s documents before me (see paragraphs 31 to 34 above) expressly sets out what he did once he had received those two penalty notices, and (b) because of my findings below in relation to the appellant’s other grounds of appeal.

44.	The first of the appellant’s grounds relating to a contractor’s returns must therefore fail in my judgment.

Ground (2) - The appellant says it was “never explained [to him] about submitting P35/CIS36”

45.	My findings and reasoning in relation to the first ground (paragraphs 39 to 43 above) apply equally to this second ground.  So this second ground cannot succeed either in my judgment.

Ground (3) – The appellant says he was told by HMRC that he was “all up to date and there was no problem”

46.	The content of the appellant’s documents before me is cited at paragraphs 32 to 34 above.  It can be seen from those citations that the appellant has not said in those documents whether he alleges that HMRC told him he was “all up to date and there was no problem” before each of the returns in question was due.  I do not therefore have sufficient evidence on which to find that the appellant’s failure to render the returns on time was due to what he was told by HMRC.  For these reasons, the appellant’s third ground relating to a contractor’s returns must fail.

Ground (4) - The appellant says that he was told by the employers’ helpline that “a mistake had been made” and that he “should appeal against these fines”

47.	It appears from what the appellant says in relation to this fourth ground that he alleges that HMRC made this statement after the penalties were imposed.  A statement by HMRC made after the penalties were imposed is not, I find, a ground on which the legislation permits the penalties to be set aside.  Section 98A sets out when a penalty is incurred, and makes no reference to statements by HMRC.  Section 100B sets out the grounds on which the tribunal may set aside the penalty, ie if it appears to the tribunal that no penalty has been incurred.  But there is no provision in or under section 98A or section 100B which permits the tribunal to find that it appears no penalty has been incurred on the ground of a statement made to the appellant after the penalties were imposed. 

48.	This tribunal is not therefore the forum for relying on HMRC’s statement to challenge the penalties.  The appellant’s fourth ground relating to a contractor’s returns must therefore fail before this tribunal.

Ground (5) - “P35/ CIS 36, do not exist anymore”

49.	The appellant does not appear, in this fifth ground, to be saying that HMRC told him that CIS 36 does not exist any more prior to either of the due dates for submitting the returns in question.   Nor does he say whether he was told this (if at all) before 3rd July 2009.  I cannot therefore find that the appellant’s belief that CIS 36 does not exist any more gives him a reasonable excuse for the returns not having been received until 3rd July 2009.  This fifth ground must therefore fail.

Ground (6) – The appellant says he has been unfairly treated, and bullied, and treated as a criminal by HMRC, and that the penalties are unjust

50.	It is clear that the appellant feels genuinely aggrieved at HMRC and at the imposition of these penalties.  I sympathise with that.  This tribunal is not however the forum in which to rely on the appellant’s sixth ground as a reason to set aside the penalties.  There is no provision in tax appeals legislation, in particular in or under section 98A or section 100B (set out above), to allow the penalties to be set aside by this tribunal on the ground of unfairness or bullying.  This sixth ground must therefore fail too.

51.	Given my findings on all six grounds, I find that the appellant had no reasonable excuse for failing to render the two returns on time, or that, if he did, the excuse ceased and he did not after it ceased render the returns without unreasonable delay.  Section 118(2) of the TMA cannot therefore assist the appellant.

(2) Were the penalties of the correct amount?

52.	The penalty imposed in relation to the return for the year ended 5th April 2006 was in my judgment of the correct amount.   It appears to be common ground that the number of persons in respect of whom particulars should be included in the return was not greater than fifty.  So the penalty amount which HMRC were required to impose under section 98A(2)(a) and (3)(a) for each month’s or part month’s lateness was £100.  HMRC have I find correctly calculated that that return was at least 12 months late.  I find therefore that they have correctly imposed a penalty of £100 for each month’s lateness for the first twelve months, amounting to a total penalty for that return of £1,200.

53.	The penalty imposed in relation to the return for the year ended 5th April 2007 was in my judgment not greater than the amount which HMRC were required to impose under section 98A(2)(a) and (3)(a).  HMRC initially imposed a penalty of £100 per month for the first twelve months’ lateness for this return.  They were correct in my judgment to do so; they have I find correctly calculated that that return was at least 12 months late.  They then however reduced the penalty so as not to exceed the amount outstanding.  As I said at paragraph 2 above, it is not clear whether they did this pursuant to a published concession, or whether they did this in the belief that section 98A(2)(b) applied.  As I received no submissions on this point, I do not propose to interfere with that reduction.

54.	I therefore confirm the penalty determination of £1,200 for late rendering of the return for the year ended 5th April 2006.  And I confirm the revised penalty determination of £558.86 for late rendering of the return for the year ended 5th April 2007.

55.	The appeal is dismissed.

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.

Miss Rachel Perez 
TRIBUNAL JUDGE

RELEASE DATE: 15 October 2010

© CROWN COPYRIGHT 2010
Annex to decision in TC/2009/16141 
Mr Craig Lawton
t/a C B Lawton Drywall and Plastering Contractors

Papers read by tribunal
[Page numbers are those given to judge’s bundle]

-	Appellant’s letter 28.6.09 – p.8
-	HMRC letter to appellant 27.8.09 – p.16
-	Request for review 16.9.09 – p.9
-	Appellant’s letter 16.9.09 – p.10
-	HMRC letter to appellant 16.10.09 – p.18
-	Website extract headed “ECH14500 – Construction Industry Scheme: CIS – Until 5 April 2007 – Contractor Returns” – p.20
-	Notice of appeal dated 6.11.09 – p.11
-	Tribunals Service letter to appellant 30.11.09 – p.22
-	HMRC statement of case 11.12.09 – p.4
-	Tribunals Service letter to appellant 16.12.09 – p.2